4 ms·

So they saved next to nothing? Their yearly operating expenses are in the order of $1.3B, which doesn't even include cost of revenue. $75M savings versus $2600M

So they saved next to nothing? Their yearly operating expenses are in the order of $1.3B, which doesn't even include cost of revenue. $75M savings versus $2600M operating expenses over those 2 years comes out to about 2.8% savings.

peteradio 6y ago
Whats their margin? If they have any competition at all, 2.8% savings could be fat.
datavirtue 6y ago
Good point. How much did they increase payroll and contracting services to do this?
technologia 6y ago
If you see it from the perspective of being able to retain staff or hiring new employees, it definitely seem worth it.
- post_break 6y ago
  Except now you have to hire a staff to maintain and manage hardware, batteries, generators, buildings, security?
  - us0r 6y ago
    Or you can just use a regular colo company and not even think about batteries, generators, buildings, security. Hell they'll even rack your gear for you.
  - H8crilA 6y ago
    Yup, exactly. What's your new R&D spend going to be going forward, now that you have to maintain an edge in so many new areas? It really is a mediocre saving for a company this big.
  - bbarnett 6y ago
    No. That is factored into the new costs, which with all of those things, plus initial / ongoing hardware buys, saved that $75M.
Dragonai 6y ago
That's objectively still a lot of money that can pay for a lot of things.
- piker 6y ago
  Given 2323 employees in 2019[1], that's an average of a $32k bonus if paid out to the employees. [1] https://en.wikipedia.org/wiki/Dropbox_(service) https://en.wikipedia.org/wiki/Dropbox_(service)
whimsicalism 6y ago
> So they saved next to nothing? Their yearly operating expenses are in the order of $1.3B, which doesn't even include cost of revenue. Wow thank god some of y'all aren't running these businesses. It still surprises me every time I see failures to think marginally.
- H8crilA 6y ago
  ~3% boost to margins is very welcome for a cloud company (would be amazing for a retailer). But what about the risks? What if you need to scale down the operation? What if your hardware team ends up costing more? In particular, the R&D department (cloud providers depreciate hardware over 2-3 years, which matches the progress of technology and the speed at which things become obsolete). $35M per year only pays about 50-100 salaries. What if your setup turns out not as good as expected? You can't easily jump ship once you sink in the capex. And I don't think that already big (in terms of revenue) startups should be adding much to their risk profile. It could also be that there's just no other way to cut anything from their enormous opex (for example fire people or buy less ads). I find this hard to believe but may be true. One very good strategic reason to do this, I think, would be to gain independence from cloud providers, who unfortunately happen to be your major competitors.
  - mbesto 6y ago
    > One very good strategic reason to do this, I think, would be to gain independence from cloud providers, who unfortunately happen to be your major competitors. All of the questions you asked before (risks, capex, etc.) all would have been answered during an assessment period. It's almost as if you assumed that none of that was done and that their sys admin group just through together a proposal to move to a colo and their executive management made a decision to do so. That's not how this works. The number one priority of this type of initiative was cost and reliability. Going exclusively cloud is not a silver bullet for every company - that trope needs to die.
- ehsankia 6y ago
  That's assuming the numbers shown fully take into account all the tangential cost related to the transition, and not just "cost before vs cost after". If you spent 500M in developer hours doing the migration, that just wiped like 10 years worth of savings. Also it's not clear if in 2 years you really get to see the cost of maintenance and breakages. One big breakage could wipe off that 75M very quickly. Of course Cloud also has its fair share of down time, so you'd have to compare longer term to get a better sense.
mbesto 6y ago
> $75M savings versus $2600M operating expenses over those 2 years comes out to about 2.8% savings 2.8% of a big number is still a bigger number than 2.8% of a small number. Not sure what point you're trying to make here...
- oblio 6y ago
  Opportunity cost plus the risks of this migration.
detinho 6y ago
In the long run "small" improvements adds up. The margin will never beat time.
mrlala 6y ago
Even if you want to argue they saved next to nothing (which is silly to say, $75m is $75m).. they also have CONTROL over what they are doing and are not dependent on other services. That is a huge advantage. So even if it were a wash financially, it's still a huge plus.

peteradio 6y ago

Whats their margin? If they have any competition at all, 2.8% savings could be fat.

datavirtue 6y ago

Good point. How much did they increase payroll and contracting services to do this?

technologia 6y ago

If you see it from the perspective of being able to retain staff or hiring new employees, it definitely seem worth it.

post_break 6y ago
Except now you have to hire a staff to maintain and manage hardware, batteries, generators, buildings, security?
- us0r 6y ago
  Or you can just use a regular colo company and not even think about batteries, generators, buildings, security. Hell they'll even rack your gear for you.
- H8crilA 6y ago
  Yup, exactly. What's your new R&D spend going to be going forward, now that you have to maintain an edge in so many new areas? It really is a mediocre saving for a company this big.
- bbarnett 6y ago
  No. That is factored into the new costs, which with all of those things, plus initial / ongoing hardware buys, saved that $75M.

Dragonai 6y ago

That's objectively still a lot of money that can pay for a lot of things.

piker 6y ago
Given 2323 employees in 2019[1], that's an average of a $32k bonus if paid out to the employees. [1] https://en.wikipedia.org/wiki/Dropbox_(service) https://en.wikipedia.org/wiki/Dropbox_(service)

whimsicalism 6y ago

> So they saved next to nothing? Their yearly operating expenses are in the order of $1.3B, which doesn't even include cost of revenue. Wow thank god some of y'all aren't running these businesses. It still surprises me every time I see failures to think marginally.

H8crilA 6y ago
~3% boost to margins is very welcome for a cloud company (would be amazing for a retailer). But what about the risks? What if you need to scale down the operation? What if your hardware team ends up costing more? In particular, the R&D department (cloud providers depreciate hardware over 2-3 years, which matches the progress of technology and the speed at which things become obsolete). $35M per year only pays about 50-100 salaries. What if your setup turns out not as good as expected? You can't easily jump ship once you sink in the capex. And I don't think that already big (in terms of revenue) startups should be adding much to their risk profile. It could also be that there's just no other way to cut anything from their enormous opex (for example fire people or buy less ads). I find this hard to believe but may be true. One very good strategic reason to do this, I think, would be to gain independence from cloud providers, who unfortunately happen to be your major competitors.
- mbesto 6y ago
  > One very good strategic reason to do this, I think, would be to gain independence from cloud providers, who unfortunately happen to be your major competitors. All of the questions you asked before (risks, capex, etc.) all would have been answered during an assessment period. It's almost as if you assumed that none of that was done and that their sys admin group just through together a proposal to move to a colo and their executive management made a decision to do so. That's not how this works. The number one priority of this type of initiative was cost and reliability. Going exclusively cloud is not a silver bullet for every company - that trope needs to die.
ehsankia 6y ago
That's assuming the numbers shown fully take into account all the tangential cost related to the transition, and not just "cost before vs cost after". If you spent 500M in developer hours doing the migration, that just wiped like 10 years worth of savings. Also it's not clear if in 2 years you really get to see the cost of maintenance and breakages. One big breakage could wipe off that 75M very quickly. Of course Cloud also has its fair share of down time, so you'd have to compare longer term to get a better sense.

mbesto 6y ago

> $75M savings versus $2600M operating expenses over those 2 years comes out to about 2.8% savings 2.8% of a big number is still a bigger number than 2.8% of a small number. Not sure what point you're trying to make here...

oblio 6y ago
Opportunity cost plus the risks of this migration.

detinho 6y ago

In the long run "small" improvements adds up. The margin will never beat time.

mrlala 6y ago

Even if you want to argue they saved next to nothing (which is silly to say, $75m is $75m).. they also have CONTROL over what they are doing and are not dependent on other services. That is a huge advantage. So even if it were a wash financially, it's still a huge plus.