Hacker News Reader

Comment by antonvs | Hacker News Reader

> This is basically also why the cloud business was thriving even when on-prem is much cheaper in monetary terms

On-prem is almost always much more expensive "in monetary terms" when you take into account the cost of staffing the operation needed to maintain those on-prem systems, especially if a company has e.g. compliance requirements etc.

The idea that cloud is obviously more expensive is not actually supported by the economics. If it was, we'd see people leaving the cloud in droves, for competitive reasons.

There are of course cases where it can make sense for a company to do on-prem. But they're about as common as the cases where it makes sense for a company to generate its own electricity instead of using the local grid.

View on HN

I'd say it's more of a rent vs buy situation, in that there is a particular company-specific scale at which the TCO's cross over. For smaller companies, public clouds absolutely make more sense, but at larger scales on-prem is much cheaper (see e.g. BaseCamp's recent shift with numbers.)

The reason I say that a primary driver is a focus on core competencies because there are a surprisingly high number of companies with 10M+ public cloud spends... and even they sometimes complain about being treated as small potatoes. (For reference BaseCamp's spend was 3.2M/year when they decided to switch back.) Plus there are reports showing that much of these cloud deployments are at abysmally low levels of utilization (like 30% at best!)

So not only are there many companies at the scale where on-prem would make sense, they are likely even wasting a significant % of their cloud spend, yet they continue and even expand their usage.

Rather than attributing this to widespread corporate incompetency, a more rational explanation is that they have a sensible calculus that is based on more than solely financial numbers, i.e. the organizational distration is more expensive than the $$$ cloud premium.

I am not convinced by that. What are you defining as "cloud" here? If you mean SaaS I interpreted GP as meaning the likes of AWS which still leaves you doing a lot of the expensive stuff.

> The idea that cloud is obviously more expensive is not actually supported by the economics. If it was, we'd see people leaving the cloud in droves, for competitive reasons.

You are assuming that 1) the people making the decisions have perfectly aligned incentives 2) that they have got the economics right and 3) its a significant part of their cost base. In reality it is often the case that something like AWS is the CYA choice (if an AWS data centre is down its their fault, if on-prem is down its your fault), its the shareholder's money, and its cheap compared to the rest of your costs. If something is 0.5% of your fixed costs no one is going to notice that it could be 0.1%.

You will still need as many people to manage these systems, that's the biggest lie in Saas solution.

Reply on news.ycombinator.com