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VMware Cloud on AWS Pricing: Is It Really Cheaper Than AWS?

With VMware Cloud on AWS now generally available after VMware first announced it in the fall of 2016, we can finally see how it compares in price with standard AWS. VMware has provided a price comparison showing that VMware Cloud on AWS pricing is roughly the same as standard AWS pricing. But the assumptions in that analysis appear stacked in favor of VMware. Through its own analysis, RightScale has found that, if you optimize both options, standard AWS will be significantly cheaper than VMware Cloud on AWS. There may still be reasons for enterprises to use VMware Cloud on AWS instead of standard AWS, but price is not likely to be one of them.        

For certain use cases, a seamlessly integrated hybrid offering between VMware and AWS, the world’s largest cloud provider, has its benefits, especially to operations teams familiar with VMware on-premises environments. VMware on AWS Cloud enables enterprises to leverage the VMware suite of services directly on AWS infrastructure for a simplified migration path from their private data centers to the public cloud. It also enables the use of existing VMware management tools while letting applications access the broad portfolio of AWS cloud services.

But the benefits of VMware Cloud on AWS may not be worth the cost for some enterprises when compared to standard AWS. Using the recently announced pricing, we evaluated several different use cases and compared the costs.

VMware Cloud on AWS Is Not the Same As AWS

First, it’s important to understand that VMware Cloud on AWS (VMC) doesn’t look much like the AWS you know. It provides a complete VMware stack (ESXi, vSAN, NSX, and vCenter) provisioned and managed by VMware that runs on top of dedicated hosts provided by AWS. Your accounts for VMC are completely separate from your standard AWS accounts, and you can’t use the AWS console to manage them. Pricing is set by VMware, and your bill will come from VMware. You can integrate to other AWS services (like Relational Database Service) that are running in your standard AWS accounts, and these services will be billed on your normal AWS bill.

An Hourly Per-Host Pricing Model

With VMC, you pay an hourly price for each host you use. And there is currently only one host size and one region (Oregon), with a minimum of 4 hosts and a maximum of 16 hosts allowed. The number of hosts and regions allowed is expected to expand in the future. You need to provision the hosts through an API or on the VMware Cloud on AWS console. To add or remove hosts, you repeat the process because there is no auto-scaling. 

The hourly on-demand price per host is $8.36, which nets out to $71,000 per year per host. This includes hardware, the VMware stack, and support from VMware. If you commit to the minimum of 4 hosts for a full year, you can get a 30 percent discount and bring the baseline cost to $207,948 per year. Commit for 3 years and the 4-host minimum will run $145,821 per year, a 50 percent discount. Of course, extra hosts will cost more. Enterprises should (and will) likely hold off on long-term commitments until they’ve had a chance to vet the platform. 

The VMware Hybrid Loyalty Program can provide an additional rebate of up to 25 percent on VMware Cloud AWS. This discount does not require you to transfer licenses, but rather every 2 CPU licenses you have on-prem for vSphere, vSAN, or NSX will give you a 10 percent discount on 2 CPUs for that same service on VMware Cloud on AWS.

Customers pay for VMware Cloud on AWS using credits from the VMware Subscription Purchasing Program (SPP) or Hybrid Purchasing Program (HPP).

Comparing VMware Cloud on AWS Hosts with Standard AWS Dedicated Hosts

To start the analysis, we compared the cost of a single dedicated host from VMware Cloud on AWS vs. a dedicated host from AWS. The specs for the VMC host match most closely to the AWS i3 dedicated host, with the VMC version offering about 5 percent more memory and the AWS version offering about 6 percent more local storage. Since VMC pricing includes support, we included an additional 10 percent for AWS Enterprise support in the standard AWS costs.

In this model, you are paying 39 percent more for VMC at On-Demand rates and a 54 percent or 63 percent premium for VMC with a 1-year or 3-year commitment. If you are able to gain the maximum of 25 percent discount on hybrid use, you potentially could narrow the premium paid for VMC to a range of 14 to 38 percent. However, many VMware users don’t use all of the services (such as vSAN or NSX) on-prem, so they would not be eligible for the discount on those services in VMC.

VMware would likely argue that the premium you are paying on VMC is for the VMware stack, so that leaves you to decide on the value you place on that stack vs. native AWS options. If your goal is to dynamically move workloads between on-prem and VMC, the value you derive may offset the higher VMC cost, although currently VMC only supports cold migration of workloads.

Comparing VMware Cloud on AWS VMs with Standard AWS Instances

A more useful comparison is to look at the costs of VMC after you’ve provisioned VMs on the host and compare that to the costs of AWS instances.

In this scenario, we fully utilized the VMC host with a density of eight 8 vCPU VMs. The equivalent AWS instance is an i3.2xlarge. Once again, the VMC instance has slightly more memory and less local disk. And once again, we have added in 10 percent for AWS Enterprise Support since VMC includes support as well.

In this scenario, as before, standard AWS costs less. You are paying 52 percent more for VMC at On-Demand rates, 70 percent more for VMC with a 1-year commitment, and a 50 percent premium for VMC with a 3-year commitment. VMC does allow you the flexibility to change the combination of instance sizes on a host, so we used a 3-year Convertible Reserved Instance for the standard AWS option. There is no 1-year option for an AWS Convertible Reserved Instance, so we used the Standard Reserved Instance — that provides somewhat less flexibility for change since it locks you into a region and instance family.

If you are able to gain the maximum of 25 percent discount on hybrid use, you potentially could narrow the premium paid for VMC to a range of 27 to 45 percent. However, if you don’t use all of the services (such as vSAN or NSX) on-prem, you won’t be eligible for the discount on those services in VMC.

The Impact of Oversubscription

In its calculation of a 3-year total cost of ownership (TCO),  VMware assumes a level of oversubscription — for example, allocating more CPU capacity than physically exists on the host. In order to reach the conclusion that VMC costs about the same as AWS, VMware notes that “actual costs depend on the consolidation ratio that you set to achieve by taking advantage of VMware software capabilities.”

By looking at the 3-year price of a host ($109,366) and the VM price range of $.06 to .$.09 per hour calculated by VMware, we can see that VMware assumed between 46 and 69 VMs per host.

$109,366 / ($.09 per hour * 24 hours * 365 days * 3 year) = 46 VMs

$109,366 / ($.06 per hour * 24 hours * 365 days * 3 year) = 69 VMs

Looking at a reference VM of 2 vCPU (=1 core), we can see that the prices calculated required a 28 to 92 percent continuous oversubscription to the hosts for the entire 3-year term.

The reason that you can oversubscribe on VMware is because, on average, the various VMs are not using all of their provisioned CPU capacity at all times. However, if that is the case, then on standard AWS, you would take similar steps by downsizing instances and/or using auto-scaling. Each time you downsize on AWS, you reduce your cost by 50 percent.

Assuming that you would overprovision when using VMC, but that you would not take the appropriate actions in AWS is comparing apples to oranges and stacks the deck in the comparison. In fact, if appropriate measures are taken on both options (VMC and standard AWS), standard AWS comes out the clear winner on a purely price perspective.

There May Be Reasons (Besides Price) to Use VMware Cloud on AWS

There may be use cases, at least in the short term, where VMC vs. standard AWS makes sense. Assuming that VMware delivers on its goal of providing seamless migration between on-premises environments and VMC, it could be a stepping stone for companies that want to split workloads across private and public clouds or migrate workloads to public cloud with less effort.

However, in the long term, it’s not clear if companies will continue to pay a significant premium for a basic cloud VM that can be more easily and cheaply bought from a variety of public cloud providers. Additionally, once VMC users get a taste of the other add-on services from AWS, it’s likely that their willingness to manage applications and costs across the two distinct and disparate environments will fade. With VMware on AWS Cloud, VMware is kicking the can down the road rather than confronting the existential threat from public clouds, and the company will need to provide a more compelling price point to keep enterprises in the fold over the longer term.

For more on VMware Cloud on AWS pricing, architecture, technical limitations, and benefits, watch our on-demand webinar, Understanding VMware Cloud on AWS.

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