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Why Some Startups Say the Cloud Is a Waste of Money

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Re: Why Some Startups Say the Cloud Is a Waste of Money

#21

Post by snowwolf »

bluedino wrote: post #14

>> 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…

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.

Re: Why Some Startups Say the Cloud Is a Waste of Money

#22

Post by Uchikoma »

sergiotapia wrote: post #2

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?

Usually when you want to have a positive P&L and buying servers is CAPEX while cloud is OPEX (and you have no cashflow problem).

Re: Why Some Startups Say the Cloud Is a Waste of Money

#23

Post by Gravityloss »

csears wrote: post #17
bluedino wrote: post #14

>> 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…

There's also the an opportunity cost to consider if your actual demand turns out to be higher than projected and you're not able to scale up to meet it. I think we'll see more companies using a hybrid model where you can run your steady-state workload level on dedicated gear but with the ability burst into a cloud to handle peaks and flash demand.

You can have considerable reserve capability and it's still cheaper than the cloud.

Also renting dedicated servers can be really fast.

Re: Why Some Startups Say the Cloud Is a Waste of Money

#24

Post by beat »

snowwolf wrote: post #21
bluedino wrote: post #14

>> 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…

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.

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.

Re: Why Some Startups Say the Cloud Is a Waste of Money

#25

Post by bsenftner »

sergiotapia wrote: post #2

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?

I found the break even to be less than 1 complete server. The monthly expense of a dedicated cloud server at RackSpace, the performance one gets from it, versus a single $2400 server with 8 cores realized as 16 cpus placed into a colo... there is no comparison. Colo price to performance buries RackSpace. Equivalent performance from RackSpace requires 4 of their dedicated servers, with no where near the disk space. Difficulty of setup? Pretty much none. After a few months, we bought a hardware firewall due to paranoia. Now we have a full rack of fully paid for servers, with a monthly expense of $600 and actual unlimited bandwidth. (We've had periods where briefly delivered 10 gigs of data to the public per minute from our server rack.) We are 2 geek and 1 biz dev guy. Smart geeks, but still. The cloud is an expensive joke.

Re: Why Some Startups Say the Cloud Is a Waste of Money

#26

Post by bsenftner »

vidarh wrote: post #7
sergiotapia wrote: post #2

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?

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.

false.

Re: Why Some Startups Say the Cloud Is a Waste of Money

#27

Post by hhw »

freyr wrote: post #4
omonra wrote: post #3

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'?

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.

Sure cloud is extremely scalable. What they don't tell you though, is that it's only scalable in one direction, and that direction is down.

Re: Why Some Startups Say the Cloud Is a Waste of Money

#28

Post by 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.

Re: Why Some Startups Say the Cloud Is a Waste of Money

#30

Post by bsenftner »

beachstartup wrote: post #9
sergiotapia wrote: post #2

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?

well, it's actually a very easy thing to quantify, but the cost/benefit analysis is different for every kind of company and computing requirement - the REAL problem is it takes experience in running your own datacenter or at least colocated hardware to perform this analysis, and almost nobody does this because they all work for large internal IT orgs or the cloud providers themselves.

You'd be surprized how fast that experience is gained. Try putting a server in colo and you'll be surprised. There is nothing to it. NOTHING. Don't buy the hype. Try it and see for yourself.
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