The cost of cloud, a trillion dollar paradox (2021)

Interesting to see this article again since it was the trigger of starting a homelab for me. After realizing cloud services are putting a major dent in my pocket to get a lousy startup idea off the ground, I started to wonder if there&#x27;s &quot;The Cheapest&quot; way? (I&#x27;m not cheap but I&#x27;m very frugal)<p>Nowadays internet speed is great to do self hosting. I have a business line internet at home with ~1gb up&amp;down! Bought couple of 6-7 year old enterprise Dell servers (2x12core xeon, 128gb ram each) and no longer pay any cloud provider ... i&#x27;m also hosting 2 backend solutions for mobile apps with decent traffic for friends&#x27; startups!<p>The learning experience has been tremendous! It has actually gotten a lot better and easier with new solutions coming out for homelabs. Get started with Proxmox clusters and go from there...

This post, along with this Simon Wardley thread, <a href="https:&#x2F;&#x2F;twitter.com&#x2F;swardley&#x2F;status&#x2F;1088780650860158978?s=20" rel="nofollow noreferrer">https:&#x2F;&#x2F;twitter.com&#x2F;swardley&#x2F;status&#x2F;1088780650860158978?s=20</a>, attracted me to finops as an engineering problem. Consumption based pricing is really tough for a lot of orgs to handle at the $1M+ range, so much so that it requires dedicated software to line things up.<p>I started helping maintain <a href="https:&#x2F;&#x2F;ec2instances.info" rel="nofollow noreferrer">https:&#x2F;&#x2F;ec2instances.info</a> in my spare time and the code base is literally full of IF statements to paper over AWS billing quirks. Later, I joined Vantage, one of the companies linked in the article.<p>It&#x27;s a little bit undecided whether finops will have the growth that devops did but the problem is seemingly felt very acutely.

Back in 2007ish the CEO of Parallels&#x2F;SWSoft (the company behind Virtuozzo a very popular hypervisor used back in the day) stood on the stage of the keynote of HostingCon and said that the Cloud (AWS) was going to eat the WebHosting Industry&#x27;s lunch. His entire keynote was very doom and gloom. Fast forward to 2015ish it totally it did. The days of VPS and Dedicated hosting being the only options for deploying your stuff for the Internet to consume were killed by the big three cloud providers.<p>In one hand I am very thankful that this caused a boom of innovation and tooling to make engineering operations easier and more accessible to our industry as a whole. If I had the tools I have now, managing 50+ racks in my old datacenter would have been so much easier.<p>But in the other hand, the promises the Cloud providers have shoved down our throats have been used against our Industry with raised prices, reduce freedoms on what providers you can choose, and consolidation of duties on Engineering staff. The average developer has to do more work, across many different domains to get paid well. The war waged to kill off Systems Administration as a core job responsibility and using the DevOps movement to kill FTE count for specialized work on bare metal or datacenter infra keep us locked into using Cloud APIs to do our jobs. I think this really sucks.<p>I do think this article hits home on some points I have been seeing over the past few years. The costs are too high for the goods provided in comparison to getting a couple of racks in few datacenters and DIY which can for sure work for the right kinds of companies at the right stage of growth. I also think Hybrid deployments of Cloud + Bare Metal in a datacenter is so much more of a viable option for less mature companies. The pendulum is starting to slowly swing back to doing things on Bare Metal.<p>I am excited for the next 10 years of progress and I hope the Cloud still remains a powerful tool in our toolbox, but it isn&#x27;t used for everything. The cost savings are too real as this article points out when you don&#x27;t use the cloud and you&#x27;d be surprised how much easier it is these days to get some bare metal deployments going in your eng org.

Look - if you can optimise your workload over a capital cycle cloud is not for you. Especially if you are a technology company and have the bandwidth to deal with servers and ISV&#x27;s properly.<p>If you are a changing, growing, non-technology company then cloud is the place you should be. You will get screwed by Oracle, you will get screwed by Accenture. You will not be able to optimise your workload and you may as well get screwed by aws&#x2F;azure&#x2F;gcp and not think about infrastructure that much instead.

I think it&#x27;s a bit nutty that folks always use Dropbox as the example of &quot;cost savings by doing it yourself&quot;.<p>I mean, Dropbox itself <i>is</i> essentially a provider of cloud storage. It seems like owning their own data centers was obvious from the beginning: Use AWS initially to scale, but given the size of Dropbox it obviously doesn&#x27;t make sense to have another middleman in the mix.<p>I just point this out because Dropbox is so unlike your average enterprise user of the cloud. I&#x27;d like to see some better examples than Dropbox of enterprises saving more (or innovating as quickly) by going on their own.

Martin Casado is one of the smartest people I&#x27;ve met in my career in IT (AWS, VMware, etc).<p>This phrase is key:<p>&quot;You’re crazy if you don’t start in the cloud; you’re crazy if you stay on it&quot;<p>Perhaps I&#x27;d say that &quot;you&#x27;re crazy if you keep all your IT on it, as you scale&quot;.<p>There&#x27;s still a case to be made for a small % of your workloads in the cloud. The flexibility is priceless. But for everything else, there&#x27;s a well managed on-prem.<p>Side note: interesting how, after Mark Andreessen&#x27;s disastrous post on techno-optimism a few days ago, I approached the reading of this article with rolled eyes and low expectations. Seeing Marting Casado as the author immediately changed it, however.

I&#x27;ve always thought the mysterious bit was that cloud doesn&#x27;t seem like it ever gets cheaper while the cost difference between cloud and own infra and profit associated with AWS suggest it could be. Is there something structurally wrong with competition in cloud?

<i>&gt; A billion dollar private software company told us that their public cloud spend amounted to 81% of COR, and that “cloud spend ranging from 75 to 80% of cost of revenue was common among software companies”</i><p>I find that quite hard to believe.<p>I mean, I can see that if you were selling cloud backup services and stored customer data on S3, I can understand S3 costs being a big part of your budget.<p>But for the vast majority of businesses - I&#x27;d expect a supermarket selling a $50 basket of groceries to spend maybe $0.01 on database storage and CPU and whatnot.<p>I don&#x27;t see that a company like Slack, which has revenue of about $8.75&#x2F;user&#x2F;month would need to spend anything like that much on cloud costs.

It cuts the other way, too. A cost for one is revenue for another: In this case, AWS or Microsoft. Your cost of revenue is their revenue!<p>There will be big growth in the &quot;make it easier to manage on prem deployments&quot; sector. Obviously you need capable sysadmin if you are going to move workloads away from cloud but improving the tech (I&#x27;m thinking of Oxide Computer here) will make it palatable for smaller and smaller orgs to consider repatriation, as they can do so with less effort and expertise.<p>This makes me hopeful as well that internet infrastructure will become less centralized. It&#x27;s closer to the spirit of the internet that not every bit of information you see online passes through us-east-1.

It&#x27;s my hardcore held belief that the cloud industry could wildly be disrupted if it was easy enough to order 5 year capacity contracts. Then AWS &#x2F; GCP etc would be left with just the elastic demand, rather than the inelastic profit center.<p>However - this would take a huge amount of upfront investment, have high risks for black swan events against 5y contracts without crypto-style escrow, and I have been unsuccessful pitching this direction in elevators to folks, which makes me think I don&#x27;t have a visceral enough idea.

Previously:<p><i>The cost of cloud, a trillion dollar paradox</i> <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=27401081">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=27401081</a> (June 4, 2021 — 7 points, 2 comments)

Previous<p>May 27, 2021 <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=27306742">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=27306742</a> 207 comments<p>Sept 14, 2022 <a href="https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=32832433">https:&#x2F;&#x2F;news.ycombinator.com&#x2F;item?id=32832433</a> 16 comments

Sub-linear scaling is powerful. Think about how costs scale in relation to use of a service.<p>If you are paying someone else for the service as a package, the costs scale linearly, or some close approximation of that. AWS gives you a small discount if you have larger volumes for some services, but these are essentially a rounding error.<p>If instead you launch a similar service in house, your costs are often dramatically lower per unit the more units you use. You start with a small team supporting a system with some large capacity you&#x27;re not using yet because you need room to grow, and you realize large steps along the way where you can handle tens or hundreds of times the volume you see at each staffing level. Buying hardware or developing custom software gets cheaper at volume. This is sub-linear scaling.

solving a paradox sometimes requires thinking out of the box<p>repatriation is not the global solution, it applies to mature and large companies<p>the dimension to explore is co-ownership of infrastructure by multiple independent companies, both small and large<p>a captive entity - wholly owned by member companies - manages a vast pool of resources achieving both the economies of scale and the flexibility needed by growing companies.<p>you don&#x27;t &quot;rent&quot; somebody elses linux server, you invest and own a share.<p>R&amp;D for evolving the platform is something outsourced to third parties (maybe even current cloud providers)

If moving off the cloud was easy we’d all be doing it. For our org the risk is (unfortunately imo) bigger than the savings. I would love to pay hetzner dedicated boxes rates for compute but the amount of work to migrate everything would be huge.<p>Not to mention the difficulty in hiring people who are actually comfortable with doing the infra work of setting up all our services, with the required multi-AZ config, on bare metal. Its hard enough finding people who can reliably setup services in aws with terraform and keep them alive.

Any discussion of cloud vs. data center vs. on premises that does not discuss employee costs, documentation, and training is not complete.<p>One of the main reasons for using cloud infrastructure is that many people know how to use it, internal documentation requirements are dramatically lessened, and you don&#x27;t need to higher infrastructure IT employees to maintain and monitor it.<p>If cloud only costs double internal IT, it&#x27;s almost certainly cheaper until you reach a billion dollar valuation - or more depending on what your infra needs are.

Dropbox has the pay, clout, and pipeline to have zero problems with recruiting talent.<p>Can the same be said of all F500 companies that may want to basically engineer their own cloud? Because the dev team is almost certainly used to all the convenience of the cloud, so you&#x27;ll need a good infra team.

the benefit of the cloud is the elasticity. People neglect sometimes that businesses had to scale their infrastructure to peak demand before the cloud. If your workloads don&#x27;t have peaks it&#x27;s an easy problem to solve.

So now the trend is away from cloud ?<p>What about a good way to to judge the cost of the cloud - pricing has always been overly complex and arcane and full of gaps in understanding the overhead involved

Worth having a look at DHH&#x27;s leadership on this issue:<p><a href="https:&#x2F;&#x2F;world.hey.com&#x2F;dhh&#x2F;why-we-re-leaving-the-cloud-654b47e0" rel="nofollow noreferrer">https:&#x2F;&#x2F;world.hey.com&#x2F;dhh&#x2F;why-we-re-leaving-the-cloud-654b47...</a>

I&#x27;d say for a lot of companies the Fed wake up call has happened that they have been doing a lot on reducing cloud costs. They did not necessarily move away from cloud but instead sign long term contracts and remove dead or undead services.

I’m leading engineering at a new start up and I’m doing absolutely everything I can to avoid touching the cloud at pretty much any cost.<p>We’re going to be running all of our own dev&#x2F;test GPU servers with only inference hosted outside our cluster.

(2021)

OT: Something on that page is crashing Firefox tabs.

this makes no sense: can individual companies operate computing infrastructure more efficiently than cloud providers?<p>if not, then instead of migrating just negotiate.