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But it's insane that running a for-higher data center is considered a high-margin business. (And testament that the customers are VC-gorged price-unconcious bab

But it's insane that running a for-higher data center is considered a high-margin business. (And testament that the customers are VC-gorged price-unconcious baby gremlims.) In a sane economy, data centers for higher would be a fully-commoditized barely-profitable common carrier with little natural monopoly.

dodobirdlord 6y ago
Reliability concerns make datacenters resilient to commoditization. A datacenter that’s available 90% of the time is worth vastly, vastly less than 90% as much as one that 99.95% of the time. Commodity businesses are largely built on presumptions of linearity. Produce 90% as much corn/iron/wood/widgets as you expected and you’ll probably make something like 90% of the money you expected. Produce a 90% available datacenter and you’ll have a hard time finding anyone willing to pay you anything. And that’s just availability, not to mention data durability, which is even more critically nonlinear.
- echelon 6y ago
  Then you should be able to sue your provider for breaches in SLA. 0.5% downtime should void the bill. I think presently the providers are getting all the upside. High margin, perpetual lock-in, and no consequences.
  - freeone3000 6y ago
    You can sue your provider for breaches in SLA. The rebate you automatically get likely exceeds what you'd otherwise recover. (Which is why they grant one). SLA payouts are usually very generous - I've gotten credit for the entire month for a one-hour outage of a service. I don't know where this idea that cloud providers and other DCs don't pay out for SLA agreements is, but they absolutely do.
- dnautics 6y ago
  > A datacenter that’s available 90% of the time is worth vastly, vastly less than 90% as much as one that 99.95% of the time. That depends on your workload and the nature of the loss of availability. Is the completed work still there but just unreachable for an hour every few months? That might be okay for some folks. Is your data center always available mon-fri but constantly has scheduled downtime on weekends? Might still be okay.
makapuf 6y ago
Not nitpicking but I had trouble understanding one thing: for higher should be spelled for hire I guess
- Ericson2314 6y ago
  Sorry! Wish I could edit but it's too late.
jasode 6y ago
>But it's insane that running a for-higher[sic] data center is considered a high-margin business. (And testament that the customers are VC-gorged price-unconcious baby gremlims.) Your analysis is incomplete which is why it looks like insane high-profit margins. Amazon AWS (and MS Azure, Google Cloud) also sell high-value services on top of raw datacenters. It's not just commodity rack servers. Amazon keeps iterating on new value-added services (e.g. see new announcements at annual AWS re:invent conference[1]). E.g. AWS DynamoDB service was announced in 2012 and Netflix is one of the customers that use it. In contrast, other datacenter companies that don't have the same higher value-added portfolio like Rackspace and DigitalOcean are losing money[2] or not even profitable yet[3]. Yes, the lower-tier datacenters are also adding value-added services but the breadth of their product portfolio is not in the same league as AWS/Azure/GCP. Rackspace was losing so much business to AWS that they're trying to sell the idea of customers paying their RS employees to manage AWS.[4] >(And testament that the customers are VC-gorged price-unconcious baby gremlims.) Most of the revenue comes from non-VC businesses. A lot of old Fortune 1000 companies where IT is a cost center shrank their self-run datacenters and moved the workload to the cloud vendors. Another example is AWS winning the big $600 million contract from the CIA. [1] https://www.youtube.com/results?search_query=amazon+re%3Ainvent+2012+2013+2014+2015+2016+2017+2018+2019+keynote https://www.youtube.com/results?search_query=amazon+re%3Ainv... [2] https://www.google.com/search?q=rackspace+%22net+loss%22 https://www.google.com/search?q=rackspace+%22net+loss%22 [3] https://www.sdxcentral.com/articles/news/digitalocean-inhales-another-50m-toward-profit-quest/2020/05/ https://www.sdxcentral.com/articles/news/digitalocean-inhale... [4] https://www.rackspace.com/managed-aws https://www.rackspace.com/managed-aws
- fakedang 6y ago
  Recently I just began using cloud services. I started with Firebase, thought it was super cool, then moved to GCP, which was super inflexible (and super shit support). So I decided to try Azure, since we used that at a previous startup, but it was too complicated to even get started. So I decided to give Jeff my money (or rather avail of his free tier), and started using AWS. While it's super complicated to use compared to Firebase, it was relatively easy to learn from scratch due to huge amount of support online and what they have on offer. But what honestly stumped me was the HUUUUUUUGE amount of services they have, and the pricing on that. DynamoDB was half the price of Cloud Firestore, the free tier on most services was half that of GCP, and the offerings were insane. Need to host a website? Cloud Front. Launch an app? Lightsail. Satellite connection? Covered. Streaming Data? Kinesis. Queried Database? Elasticsearch. And that's just scratching the surface, I know. Honestly, in a few years, I think we'll see Google forced to exit this space, Azure and AWS competing on price for big name corporate contracts, while others such as Digital Ocean being crumpled, simply because the AWS offering is so vast and widely supported online. And AWS' lock-in is pretty damn good. The only solution to break out of such a duopoly would be for tech oriented companies to stop being lazy and start building out their own cloud infra.

dodobirdlord 6y ago

Reliability concerns make datacenters resilient to commoditization. A datacenter that’s available 90% of the time is worth vastly, vastly less than 90% as much as one that 99.95% of the time. Commodity businesses are largely built on presumptions of linearity. Produce 90% as much corn/iron/wood/widgets as you expected and you’ll probably make something like 90% of the money you expected. Produce a 90% available datacenter and you’ll have a hard time finding anyone willing to pay you anything. And that’s just availability, not to mention data durability, which is even more critically nonlinear.

echelon 6y ago
Then you should be able to sue your provider for breaches in SLA. 0.5% downtime should void the bill. I think presently the providers are getting all the upside. High margin, perpetual lock-in, and no consequences.
- freeone3000 6y ago
  You can sue your provider for breaches in SLA. The rebate you automatically get likely exceeds what you'd otherwise recover. (Which is why they grant one). SLA payouts are usually very generous - I've gotten credit for the entire month for a one-hour outage of a service. I don't know where this idea that cloud providers and other DCs don't pay out for SLA agreements is, but they absolutely do.
dnautics 6y ago
> A datacenter that’s available 90% of the time is worth vastly, vastly less than 90% as much as one that 99.95% of the time. That depends on your workload and the nature of the loss of availability. Is the completed work still there but just unreachable for an hour every few months? That might be okay for some folks. Is your data center always available mon-fri but constantly has scheduled downtime on weekends? Might still be okay.

makapuf 6y ago

Not nitpicking but I had trouble understanding one thing: for higher should be spelled for hire I guess

Ericson2314 6y ago
Sorry! Wish I could edit but it's too late.

jasode 6y ago

>But it's insane that running a for-higher[sic] data center is considered a high-margin business. (And testament that the customers are VC-gorged price-unconcious baby gremlims.) Your analysis is incomplete which is why it looks like insane high-profit margins. Amazon AWS (and MS Azure, Google Cloud) also sell high-value services on top of raw datacenters. It's not just commodity rack servers. Amazon keeps iterating on new value-added services (e.g. see new announcements at annual AWS re:invent conference[1]). E.g. AWS DynamoDB service was announced in 2012 and Netflix is one of the customers that use it. In contrast, other datacenter companies that don't have the same higher value-added portfolio like Rackspace and DigitalOcean are losing money[2] or not even profitable yet[3]. Yes, the lower-tier datacenters are also adding value-added services but the breadth of their product portfolio is not in the same league as AWS/Azure/GCP. Rackspace was losing so much business to AWS that they're trying to sell the idea of customers paying their RS employees to manage AWS.[4] >(And testament that the customers are VC-gorged price-unconcious baby gremlims.) Most of the revenue comes from non-VC businesses. A lot of old Fortune 1000 companies where IT is a cost center shrank their self-run datacenters and moved the workload to the cloud vendors. Another example is AWS winning the big $600 million contract from the CIA. [1] https://www.youtube.com/results?search_query=amazon+re%3Ainvent+2012+2013+2014+2015+2016+2017+2018+2019+keynote https://www.youtube.com/results?search_query=amazon+re%3Ainv... [2] https://www.google.com/search?q=rackspace+%22net+loss%22 https://www.google.com/search?q=rackspace+%22net+loss%22 [3] https://www.sdxcentral.com/articles/news/digitalocean-inhales-another-50m-toward-profit-quest/2020/05/ https://www.sdxcentral.com/articles/news/digitalocean-inhale... [4] https://www.rackspace.com/managed-aws https://www.rackspace.com/managed-aws

fakedang 6y ago
Recently I just began using cloud services. I started with Firebase, thought it was super cool, then moved to GCP, which was super inflexible (and super shit support). So I decided to try Azure, since we used that at a previous startup, but it was too complicated to even get started. So I decided to give Jeff my money (or rather avail of his free tier), and started using AWS. While it's super complicated to use compared to Firebase, it was relatively easy to learn from scratch due to huge amount of support online and what they have on offer. But what honestly stumped me was the HUUUUUUUGE amount of services they have, and the pricing on that. DynamoDB was half the price of Cloud Firestore, the free tier on most services was half that of GCP, and the offerings were insane. Need to host a website? Cloud Front. Launch an app? Lightsail. Satellite connection? Covered. Streaming Data? Kinesis. Queried Database? Elasticsearch. And that's just scratching the surface, I know. Honestly, in a few years, I think we'll see Google forced to exit this space, Azure and AWS competing on price for big name corporate contracts, while others such as Digital Ocean being crumpled, simply because the AWS offering is so vast and widely supported online. And AWS' lock-in is pretty damn good. The only solution to break out of such a duopoly would be for tech oriented companies to stop being lazy and start building out their own cloud infra.