4 ms·

I'm really struggling to understand fly.io's path to profitability considering the relatively low margins for SMB/hobby clouds. They could have the whole world

by styren 3y ago

I'm really struggling to understand fly.io's path to profitability considering the relatively low margins for SMB/hobby clouds. They could have the whole world on their free tier but what happens when it's time for EQT to cash out? Can they build enough features to make fly.io a serious option for companies? I just can't see myself using it or pushing for it at any of the companies I've worked for unless it's a <5 person team with no need to scale in sight.

mrkurt 3y ago
I don't want to sound flippant, because this is hard as fuck, but the profitability path for us is reasonably simple: have good unit margins, attract customers, help them grow. We have good unit economics. The riskiest, most terrifying thing we've done is start with our own hardware. For dev focused infrastructure, what we need to do is attract a lot of devs, get them to take us to work, and then help their employers build better stuff over a long period of time. This takes _forever_ because companies-with-procurement-processes are designed to not buy critical infrastructure from startups. It's working for us so far, even if it's not for you yet.
- tptacek 3y ago
  I was hoping Kurt was going to do an extended spiel on hardware margins and bandwidth pricing. You should keep needling him for this, because it's super interesting.
  - kasey_junk 3y ago
    I want my ip address blog post!
  - wferrell 3y ago
    Please Kurt!
- Dwolb 3y ago
  If your customers are really SMBs it’d make sense to partner with low-code/no-code platforms. Those things are so slow (for reasons which escape my small brain).
  - toyg 3y ago
    Probably because they build their margins by overcharging to run the resulting apps on oversubscribed AWS instances.
    - Dwolb 3y ago
      Its tough when revenues are costs are mismatched.
- jacobsenscott 3y ago
  How hard is it to hire people who understand how a physical server even works these days? Probably most engineers under 40 have never touch a physical machine, under 30 maybe have never seen an ethernet cable...
  - veave 3y ago
    I suppose you are being facetious because what you said sounds absurd.
    - jacobsenscott 3y ago
      I am generalizing for a few lulz. But I've also worked with people who have never seen a physical server - they've told me. And mac dropped the ethernet port from their laptops years ago. I've worked in offices where everything is on wifi. So I'm sure you could find quite a lot of younger devs who have literally never seen an ethernet cord. Fwiw I've never seen token ring hardware.
- electroly 3y ago
  The part I don't understand is the combination of these statements you posted today: > there's a market price for this stuff and we don't have pricing power. > We couldn't raise prices for VMs even if we wanted to > the profitability path for us is reasonably simple: have good unit margins How do these square up? How can you reliably maintain good margins if your competitors set your prices? And your competitors have the scale to, for instance, design and manufacture their own hardware rather than buying off-the-shelf chips. I would think the key would be not to accept being a commodity whose prices can be directly compared with other hosters.
- styren 3y ago
  I'vve consulted for companies of all shapes and in many different industries and when it comes to container orchestration there are many hard requirements that platforms like Heroku or Render don't address. If you can carve out a niche for SMBs then great. Maintaining that lead in such a competitive segment with price sensitive customers is hard. I have no doubt that fly.io is a market leader right now just judging just by optics, but I think it is hard to maintain that lead in this segment just as I think it may be difficult to go upmarket with this type of product.
  - esafak 3y ago
    What are the biggest unaddressed concerns?
- Shakahs 3y ago
  I'm genuinely curious, how does the hardware investment make sense for a SaaS platform when bare metal can be leased as a service from Equinix and such? It the difference in TCO between bare metal you own and bare metal you lease really that large after factoring in the cost of all the logistics and labor?
bishopsmother 3y ago
"We make decent margins right now" - Funding and longevity [0] (a post from July 2021). [0] https://community.fly.io/t/funding-and-longevity/1957 https://community.fly.io/t/funding-and-longevity/1957
SantaCruz11 3y ago
If this market was profitable, why Salesforce removed free tier Heroku?
- hooch 3y ago
  Eliminating all the policing work to prevent malicious actors exploiting the free tier must be a pretty good reason?

by styren 3y ago

mrkurt 3y ago

I don't want to sound flippant, because this is hard as fuck, but the profitability path for us is reasonably simple: have good unit margins, attract customers, help them grow. We have good unit economics. The riskiest, most terrifying thing we've done is start with our own hardware. For dev focused infrastructure, what we need to do is attract a lot of devs, get them to take us to work, and then help their employers build better stuff over a long period of time. This takes _forever_ because companies-with-procurement-processes are designed to not buy critical infrastructure from startups. It's working for us so far, even if it's not for you yet.

tptacek 3y ago
I was hoping Kurt was going to do an extended spiel on hardware margins and bandwidth pricing. You should keep needling him for this, because it's super interesting.
- kasey_junk 3y ago
  I want my ip address blog post!
- wferrell 3y ago
  Please Kurt!
Dwolb 3y ago
If your customers are really SMBs it’d make sense to partner with low-code/no-code platforms. Those things are so slow (for reasons which escape my small brain).
- toyg 3y ago
  Probably because they build their margins by overcharging to run the resulting apps on oversubscribed AWS instances.
  - Dwolb 3y ago
    Its tough when revenues are costs are mismatched.
jacobsenscott 3y ago
How hard is it to hire people who understand how a physical server even works these days? Probably most engineers under 40 have never touch a physical machine, under 30 maybe have never seen an ethernet cable...
- veave 3y ago
  I suppose you are being facetious because what you said sounds absurd.
  - jacobsenscott 3y ago
    I am generalizing for a few lulz. But I've also worked with people who have never seen a physical server - they've told me. And mac dropped the ethernet port from their laptops years ago. I've worked in offices where everything is on wifi. So I'm sure you could find quite a lot of younger devs who have literally never seen an ethernet cord. Fwiw I've never seen token ring hardware.
electroly 3y ago
The part I don't understand is the combination of these statements you posted today: > there's a market price for this stuff and we don't have pricing power. > We couldn't raise prices for VMs even if we wanted to > the profitability path for us is reasonably simple: have good unit margins How do these square up? How can you reliably maintain good margins if your competitors set your prices? And your competitors have the scale to, for instance, design and manufacture their own hardware rather than buying off-the-shelf chips. I would think the key would be not to accept being a commodity whose prices can be directly compared with other hosters.
styren 3y ago
I'vve consulted for companies of all shapes and in many different industries and when it comes to container orchestration there are many hard requirements that platforms like Heroku or Render don't address. If you can carve out a niche for SMBs then great. Maintaining that lead in such a competitive segment with price sensitive customers is hard. I have no doubt that fly.io is a market leader right now just judging just by optics, but I think it is hard to maintain that lead in this segment just as I think it may be difficult to go upmarket with this type of product.
- esafak 3y ago
  What are the biggest unaddressed concerns?
Shakahs 3y ago
I'm genuinely curious, how does the hardware investment make sense for a SaaS platform when bare metal can be leased as a service from Equinix and such? It the difference in TCO between bare metal you own and bare metal you lease really that large after factoring in the cost of all the logistics and labor?

bishopsmother 3y ago

"We make decent margins right now" - Funding and longevity [0] (a post from July 2021). [0] https://community.fly.io/t/funding-and-longevity/1957 https://community.fly.io/t/funding-and-longevity/1957

SantaCruz11 3y ago

If this market was profitable, why Salesforce removed free tier Heroku?

hooch 3y ago
Eliminating all the policing work to prevent malicious actors exploiting the free tier must be a pretty good reason?