
Why Some Startups Say the Cloud Is a Waste of Money - 127001brewer
http://www.wired.com/wiredenterprise/2013/08/memsql-and-amazon/
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bluedino
>> That’s $324,000 a year. But for just $120,000, the company could buy all
the physical servers it needed for the job

What about power, cooling, rent in the building for the room you're keeping
them in, backup generator, internet connectivity, administration costs (setup,
repairs, installation), etc?

>> “The public cloud is phenomenal if you really need its elasticity,”
Frenkiel says. “But if you don’t — if you do a consistent amount of workload —
it’s far, far better to go in-house.”

Yup.

~~~
snowwolf
And how many extra 'DevOps' people has the company now had to employ to manage
these physical servers, and what is their annual salary? This never seems to
be factored into the calculations.

~~~
beat
That was my first thought, too. Physical hardware == more staff. Also consider
the risk management of keeping your security up to date, and the opportunity
costs of making it easy to use for developers. Spend some time in old-school
enterprise, and you'll see just how much pain and grief can happen.

Remember, Amazon built its cloud not for the public, but for itself! The cloud
gave them a clean separation of duties and cost management between application
development and operations. That sort of thing can save large amounts of money
and bureaucratic headache. They started selling AWS to the public only after
they had a stable system that could produce excess capacity, which could then
be resold.

~~~
purple_horse
With modern tools like Fully Automatic Install and Ansible/Puppet it shouldn't
be any more than for a Cloud service.

~~~
beat
But once you have a legacy system, getting the modern tools in there can be a
real pain.

Instant snowflake, just add expensive and archaic enterprise middleware.

~~~
purple_horse
True, but the article is talking about a startup building from scratch.

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awjr
Basically the Cloud is a stepping stone on your way to greater things. You may
outgrow the cloud or you may find you have economies of scale where the cloud
is becomes the expensive option. Recognise it and change your set up.

TBH you should be doing this with all aspects of the business. Start in a
room/garage, move to serviced offices, then rent your own building, then buy
your own building (should it become financially viable).

I think this is basic Return On Investment analysis.

~~~
area51org
It's a stepping stone for _some_ companies. For many others, it's not (e.g.
Netflix, Heroku).

I see a false dichotomy here: start off with the cloud, then move to bare
metal servers. If you've got an OLTP database that demands high-performance,
you may need bare metal. Many companies don't, though.

I've been a consultant to companies who've over-extended themselves on EC2 and
ended up with huge monthly bills they didn't anticipate; in every instance, it
was because they hand-built servers, cloned them, and then hand-modified them.
The result was a set of servers they would _like_ to be able to destroy (when
they didn't need them) and then respawn (when they did), but couldn't because
of the modifications. So, yeah, you can get in trouble with cloud services.
But that doesn't mean you can't use it cost-effectively on a permanent basis.
Like anything else, it requires planning.

Switching to bare metal? Sure: as hypervisors to your private cloud. Projects
like OpenStack, an EC2 clone supported by Rackspace and Red Hat (among others)
make it straightforward and compelling to virtualize your environment.

edit: content

~~~
Spooky23
Netflix is fundamentally a different business than most. Their whole business
model is a tenant relationship - they control nothing. Demand for their
services can only be met by licensing deals, which also happen to generate
demand for their service. All components of their business (IT infrastructure,
network transit, end-user networks) are owned by competitors.

Content owners can and do screw Netflix with hardball negotiation tactics.
Unlike cable companies, Netflix doesn't have a utility billing regime or local
monopoly on services. So at any time, the need for large swaths of their IT
infrastructure can disappear.

So what do you do? Put lots of liabilities on your books (datacenters,
computers, SANs, etc)? Or rent it from someone?

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7Figures2Commas
[http://www.wired.com/wiredenterprise/wp-
content/uploads/2013...](http://www.wired.com/wiredenterprise/wp-
content/uploads/2013/08/memsql-no-shoes.jpeg)

I guess "casual dress code" at startups these days means exposed feet on the
table, right where your co-workers can see (and perhaps smell) them.

And why does he have a roll of toilet paper under his monitor?

~~~
jared314
> And why does he have a roll of toilet paper under his monitor?

For use as facial tissues.

~~~
7Figures2Commas
At the risk of sounding facetious, there's an app for that: facial tissues.

Having a roll of toilet paper on your desk is incredibly tacky.

~~~
reverius42
While we're criticizing this guy, he also has his headphones on backwards. I
don't know how anyone could listen to music like that.

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Spooky23
This all comes down to "do things that make sense to your situation".

I live in New York. If I go to the West coast 2-3 times a year for a few days,
I rent a car by the day. It costs like $120/day because I don't book in
advance.

If instead I fly to the west coast every month for a week or more, it may
actually be more cost effective to rent the car by the month OR lease one and
park it in California. By committing to a full month of use, I can actually
save money versus paying the day rate for 7-12 days.

If I move to California, I move my car, or buy a car there.

If you have limited funds and aspirational goals, renting IT infrastructure
from Amazon makes alot of sense... you pay as you go and reduce your upfront
overhead. If you have a solid customer/utilization base, it may be cheaper to
build your own.

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techtime77
I think it really depends on your solution and what you are trying to
accomplish. The cloud can offer levels of redundancy, speed and security at a
much lower cost than if you needed to build it yourself. The process to scale
requires less engineering and resources. The ability to link to globally
distributed networks and a multitude of technologies with the "flip" of a
switch will never be replaced by hardware. I think it takes a combination of
the two to architect rock solid infrastructure. Just choose your providers
wisely!

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bcoates
Well, yeah, an in-memory database company is going to be underwhelmed by EC2.
Their RAM pricing isn't competitive. The Amazon sweet spot tends more towards
storage and internal I/O bandwidth.

The article completely ignores this point, but if you're comparing a cloud
offering to colo or building a datacenter, the extent to which the cloud
system corresponds to the nature of your workload is critical. Cloud gives you
one sort of flexibility (size-over-time and provisioning) and takes away
another (physical architecture design).

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manishsharan
AWS abstracts IT infrastructure and as programmers , we have to love it for
that. A server becomes an object that you can play with instead of a scary
Linux baremetal box; you don't worry about configuring NGINX as a Loadbalancer
or setting up IPTables. YOu don't worry about configuring SAS drives and H/W
RAID cards -- which is hairy scary stuff. With Cloud, you can be up and
running with an IT insfrastructure with having a specialized/dedicated admin.
edit- typos

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jandrewrogers
The high cost aside, which can make sense up to a point because it saves on
operations costs at small scales, the other big problem with the cloud is that
for many types of applications the virtualization, storage and network
topology destroys the performance. Some types of server engines in particular
do not play well with these cloud environments and it is not a defect in the
server engine design.

This is the main reason we stopped using the cloud and built our own server
infrastructure. We could get 2-3x performance out of the same hardware simply
by taking control of the physical machines and the network topology. The
combined performance loss and high markup made it difficult to justify the
cloud price performance relative to our own clusters.

There is no panacea for infrastructure. Every company needs to consider their
own requirements.

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sergiotapia
When you're just starting out the cloud is significantly cheaper. When you're
growing, it's good to have that support network. When you get large enough,
it's more cost effective to actually own hardware.

My question is, how large is large enough to warrant owning your own hardware?
What's the breaking point?

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vidarh
Owning your hardware? Quite high. Renting dedicated servers rather than paying
by the hour for cloud servers? That's cheaper pretty much from day 1.

~~~
bsenftner
false.

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nissimk
The 1/3 rule applies well: If you are only using the server one third of the
time then AWS is a good deal. That could mean 8 hours per day or 10 days per
month or 4 months per year. In those cases AWS/public cloud is more efficient
and convenient than buying servers, but there are additional exceptions.

Certain applications with lower uptime requirements (test environments) can be
run on decommissioned older prod server hardware if you have that.

Legacy enterprise applications that rely on extremely fast database access
with large relational databases and poor caching are better suited to bare
metal DB servers than virtual servers of any kind (public or private).

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waxzce
I think Cloud efficiency is about time saving. Is it cost efficient to rent on
AWS expensive hardware with the worse uptime of the market ? Nop But the cloud
is not only that : with a proper solution like PaaS, you can just focus on
what is important for you : your code. The point is : find a provider who is
responsible for your service be up and running and forget about it. At Clever
Cloud we detect the load and adjust resources, we deploy for you, we monitor
for you... This is the real goal of cloud computing : forget about hosting,
it's just working, and focus on your own added value.

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omonra
Linkbait - this is just common sense.

New companies also rent office space but at a certain point they buy/build
their own. Should we say 'Why some companies say office rental is a waste of
money'?

~~~
freyr
I disagree that everybody knows this.

Cloud services are marketed as extremely scalable solutions that grow with
your business. I doubt that everybody starting out realizes that the costs can
grow at a much faster rate than your revenue.

~~~
freerobby
I don't know. Even engineers who don't know right from left seem to grok it.
;)

([http://www.wired.com/wiredenterprise/wp-
content/uploads/2013...](http://www.wired.com/wiredenterprise/wp-
content/uploads/2013/08/memsql-no-shoes.jpeg))

~~~
cnlwsu
spoiler: headphones ... took me awhile

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chris-allnutt
Article Title is sensationalist at best. It explains what most data heavy
startups do. Start in the cloud and move to baremetal. IMO Amazon pricing is
confusing and expensive. Look into Rackspace or Digital Ocean if you want
better pricing and more options. There are also a lot of hybrid cloud options
now too where you could host web heads in a cloud but have your heavy lifters
in baremetal.

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msoad
Renting is of course more expensive than owning, but you have to be Apple,
Google or Facebook to own something like Amazon cloud infrastructure.

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dorfsmay
The right tool for the right workload...

If you only need five servers on the net, VPS' make sense (cheap, easy to spin
new ones, etc...).

If you need 10, physicals (aka dedicated), might make sense. They're cheaper
per Ghz, but take longer and need more skills to bring online.

Nees more? Colo might make sense.

Also, as you expand to physicals and colo, using some of the other options for
specific needs might make sense.

~~~
greendata
This is the correct path. Also, something like Heroku or google app engine
_can_ be a first step if you have only one developer for front/backend/"dev
ops". I prefer a VPS like like Linode as a first step but there is some
specialized knowledge involved in setting up and maintaining a VPS correctly.

For the business person:

\- Heroku first (if your dev hasn't setup a VPS, dedicated server before)

\- Once something like Heroku starts costing you more than $500 a month, it's
time to pay to move it to a VPS like Linode or digital ocean (new than Linode
but cheaper). You can start out with just a server for the app and one for the
DB

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mtkd
There are a lot of hidden costs to the inflexibility of running local
hardware.

With hosted you get:

\- 24h availability of mixed skills sets (e.g. Cisco at 4am)

\- ability to expand if under load/attack

\- costs in proportion to revenue (sales go down you can have lower opex next
month)

\- ability to move resource around the globe in days

Some of this becomes critical if you get to point that SLAs matter.

~~~
nissimk
I don't think anybody is recommending small companies host their own hardware,
just that they own their own hardware. Renting a full cabinet at a premier
datacenter costs under 2k / month and bandwidth there is far less than
bandwidth cost from AWS.

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ksec
Cloud is Expensive. It is a simple Fact. The future is more about Hybrid, I
dont mean Colo. More like OVH. Where you can have you baseline using Dedicated
Servers and use Public Cloud to Scale up and Down during peaks.

That is why i have been asking why all these Cloud Providers dont offer
dedicated machines.

