>> 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.

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.

http://www.wired.com/wiredenterprise/wp-content/uploads/2013...

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?

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.

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!

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).

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

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.

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?

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).

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.

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'?

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.

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

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.

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.

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.