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This isn't surprising. At Blekko where I ran operations we did the math not once but twice (once when we got our series C to show that it made sense, and once when we got acquired by IBM to show why moving it into Softlayer was going to be too expensive). If you can build reasonable management tools and you need more than about 300 servers and a bunch of storage, cost wise its a win to do it on your own.

The best win is to build out in a data center with a 10G pipe into Amazon's network so that you can spin up AWS only on peaks or while you are waiting to bring your own stuff up. That gives you the best of both worlds.

So, rent the spike a la hybrid cloud?

Yes. The beauty of it is that building in the capability makes hosting your own even more cost competitive. Because while you might have to plan for 2x or even 3x your average to handle normal peaks if you don't have anywhere else to send traffic, if you can spin up cloud instances to handle spikes you can plan for far higher utilization rates for your own equipment.

Makes a lot of sense for the customer. I just wonder what Amazon could try to do to prevent this model becoming prevalent.

Contrary to what you think, they activately encourage this style of usage.

AWS has a product called Direct Connect [0] to reduce bandwidth costs between AWS and your infrastructure.

[0] https://aws.amazon.com/directconnect/

This is the local data center connection option I was referring to, the Coresite data centers on Stender Way (in Sunnyvale) had this option.

There is a latency spike between local and Amazon infrastructure so it would be critical to build your system so that putting this spike in the mix didn't impact your own flow path.

I had thought a bit about how we might do that at Blekko and I would probably shift crawling into the cloud (user's don't see that compute resource) and move crawler hosts over to the frontend/index side. But I'm sure there would have been a bunch of ways to slice it.

I think it'd be false economy for them to try, as if the customer understands how expensive Amazon is, but still wants to use them for certain things, they're more likely to jump ship than switch fully to AWS if AWS starts pulling any stunts.

They certainly can and likely will respond by tweaking their cost models - bandwidth costs at AWS are completely out of whack - e.g. list prices at AWS per TB are tens of times higher than Hetzner for example; I presume that's based on looking at what customers are most sensitive to. E.g. if you retrieve only a small percentage of your objects every month, it won't matter much. Similarly, if most of your retrievals is from EC2 rather than from the public internet, the bandwidth prices won't be a big deal, and you may not pay attention to how much you actually pay per TB.

The high bandwidth prices hit some niches much more than others, and it may be more expedient for AWS to keep it straight forward for those affected to put caches in front than it is to rattle the cage of other customers. E.g. if you consume huge amounts of bandwidths you'll sooner or later speak to specialized CDN's or start looking at peering anyway.

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