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Cost-wise, AWS makes a lot of sense when growth is not easy to project, happens rapidly, or varies (seasonally, randomly, etc).

Of course, some of this has to do with your team's skill level, but I've had clients run up $100k+ monthly bills at AWS with a relatively small build-out. (and, wow, VPC migrations..)

For fixed or predictable growth patterns on a mature app/platform, a slow build-out on real iron will generally be significantly less expensive, all other things being equal.

However, there are other advantages to AWS that gets lost in this story, such as pre-built, highly scalable datastores. Comparing EC2 to real iron misses most of the real story on why the cloud is changing everything.

One of the hardest things I have to tell clients is not to build their own datastore/database in house or at EC2; sometimes the case is clearcut, and sometimes not so much, but if you have a datastore at AWS that gives you 80% of what you need, use it instead of rolling your own. (source: IAMA AWS Growth Architect)




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