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Comment by Agingcoder | Hacker News Reader

The paradox is that in spite of the huge costs, very large companies are still moving to (or using) the cloud.

I've had this discussion many times where I work, and we've refrained from using cloud services since they are extraordinary expensive compared to what we can do internally.

Yet, people seem to be convinced that prices are ok, and that going outside will let them reduce their infrastructure footprint.

For some reason I don't quite understand, people tend to be attracted by the cloud, even when it makes no sense economically whatsoever, and talking sense into them is surprisingly difficult.

So yes, it seems obvious that people will choose the most cost effective solution. However, it seems like they don't!

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People are attracted to it because owning stuff sucks. Renting stuff is more expensive but sucks less. This is why businesses often prefer opex to capex even if it is pretty significantly more expensive. It isn't just an IT phenomenon.

Yep people will pay through the nose to move from capex to opex. It baffled me at first, I think it baffles me less (but still a bit) now. Maybe one day I'll understand.

What about housing? Why do people still buy housing?

Two reasons: 1. For the investment in the land the house sits on (the house itself is a depreciating asset, but the land may be a good investment), and 2. For the ability to control their own destiny, to be able to make improvements and to have a place to live that does not rely on a landlord's willingness to continue signing leases with you. Note that #2 is totally analogous to owning your own server infrastructure. You definitely give up control when you rent rather than buy compute. But I think people are more sensitive to this in their personal lives than businesses (especially small businesses); after all, you're stuck with your personal life, you can't sell it or declare bankruptcy or just shut it down if things don't work out.

The list of things that I don't understand only seems to grow longer, so I'm not sure, sorry.

It's an accounting phenomenon: Deducting expenses reduces income tax, which is levied on net income. It is also beneficial when considering the time value of money – money available at the present time is worth more than in the future due to its earning capacity.

>The paradox is that in spite of the huge costs, very large companies are still moving to (or using) the cloud.

In my experience when a large corporation moves to the cloud it has less to do with pricing and more to do flexibility. It's easier to get a budget from IT and do whatever you want in cloud, then to have to wait weeks/months putting in a PO for hardware, getting access to those machines and installing what you want.

This is true. Where I work a PO was issued several weeks ago for a rack of servers, and delivery will be in about 3 months. If cost were no object, those resouces could be provisioned with a cloud provider today. And getting from requirements to RFQ to PO took another 3-4 months.

Running in house, you need to know what you want, and you need to be pretty accurate in your estimate. And you need to pay today for what you're going to need in six months, a year, three years.

And if you're wrong about those estimates, the costs are real. Overinvested in hardware upfront and your project will never break even. Underinvest, and when the marketing campaign kicks in and you get flattened on cybermonday, there is no limit to how much revenue you might miss out on.

I'm willing to pay more money to reduce the downside of my being wrong. Cloud services offer so much flexibility that I don't even have to make guesses about some things beyond my information horizon.

On prem might be cheaper but it is far from an equivalent service.

You don’t need to be particularly accurate. The cloud is so expensive you have plenty of wiggle room while saving money. Worst case you can still use that hardware on another project. Going the other way adding more hardware 6 months out is generally trivial.

Some companies have terrible IT outsourcing and procurement practices such that getting something comparable to aws infrastructure is effectively not possible, as it would require massive internal change whereas moving to the cloud is easy to get buy in.

Also regular devs don't realize but frequently internal IT departments charge obscene amounts of money for managed services.

Devs look at Digital Ocean or Hetzner VM costing $10 for a ton of RAM, storage and bandwidth when the same thing internally in a bank or other big enterprise can cost $100-150. AND be delivered in 3 months, if it's ever delivered.

Absolutely, bargaining for cheap service fees from these suppliers, only to be charged greatly for simple hardware and anything outside the standard list.

The same reason big companies pay premium for external consultants instead of directly hiring. You don't want to deal with employees, as well as you don't want to deal with HW, data center, and all that comes with it. You know you are paying premium, but you are also delegating tons of headache and responsibilities.

The mining companies I work with often hire equipment semi-permanently instead of buying it. It’s an insane cash crop for the hire companies because the payback time on the equipment is a few months and then it’s pure profit, but apparently a $700/week car rental payment is easier to get through accounts than a one off $50k purchase.

Well I guess by renting they can get the latest and greatest machine available instead of dealing with an old machine bought say 5 years prior. If the machine breaks, well you just get another one. No maintenance cost for the company. I mean it depends. Buy it is not always the best thing to do. Renting may be more convenient sometime.

You'd hope so but these are the same machines on site that have been there for years and they're still paying the same per week for them. It literally just comes down to the capex/opex dilemma, individual caps on expenditure without review, and lack of motivation to improve efficiency if it doesn't land in their pocket from everyone else.

> Yet, people seem to be convinced that prices are ok, and that going outside will let them reduce their infrastructure footprint.

That's where you get it all wrong. It is not about the price, at all. It is all about avoiding large upfront capex with a small periodical opex, and in the process have virtually boundless growth potential.

Think about it: when you happen to need a bit more computational resources to run an app, is it easier to convince your boss the need to pay, say, 100€/month for extra VMs, or is it easier to convince your boss to shelve $2k to buy an extra rack? And how many times are you willing to have that same conversation with your boss whenever you run out of computational resources?

Aren’t the real figures more like $200 vs. $700? Cloud stuff only really makes sense when your resource requirements as super spiky.

100% agree on shifting capex to opex though, capital works teams are super in favour of that, oddly enough.

> Aren’t the real figures more like $200 vs. $700?

No, not really. You can hardly find old used servers for less than 1000$, and you need to use beyond a a1.metal instance with 16vCPU and 32GB of RAM to even come close to that cost

> Cloud stuff only really makes sense when your resource requirements as super spiky.

No, not really. Cloud stuff makes all the sense in the world if all you need is a VM connected to the internet working 24h/day without problems. You can get that for less than 5$ a month, which would require 3 or 4 years to pay back if instead you waste your money on hardware.

Not my experience but ymmv (and clearly has).

> You can hardly find old used servers for less than 1000$

I picked up a second hand Dell PowerEdge 610 with 96GB of RAM for $400 AU, it's overkill by a large factor for what I need but damn. Either I was super lucky or servers aren't (weren't?) expensive.

> You can get that for less than 5$ a month pocket change and host it

Until you actually use it and then it ramps up rapidly to the point where you'd be far better off just buying a server.

Good luck getting spares, patched BIOS/firmware, patched DRAC, or anything else resembling support for that old Dell in a timely fashion.

And good luck selling to enterprises when the vulnerability scanner lights up like a Christmas tree with critical and un-patchable flaws on your switches/routers/UPS/PDUs/storage arrays/servers/door locks/cooling system/fire suppression/cameras. Double for the DR site. Because you need all that stuff, and you have to maintain it all 24x7 which means lots of salaries.

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