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I've always thought the mysterious bit was that cloud doesn't seem like it ever gets cheaper while the cost difference between cloud and own infra and profit as

I've always thought the mysterious bit was that cloud doesn't seem like it ever gets cheaper while the cost difference between cloud and own infra and profit associated with AWS suggest it could be. Is there something structurally wrong with competition in cloud?

sgt101 3y ago
Yes, massive cross subsidies from core business to cloud business to exclude and destroy competition - aws=books, azure=windows, gcp=search. There are three companies doing monopolistic things, they have got away with it because of that plurality.
- senderista 3y ago
  AWS is vastly more profitable than Amazon's retail business.
  - sgt101 3y ago
    It is now. It wasn't in the past. It wouldn't be if they had to compete with providers that also wanted to compete.
    - calimoro78 3y ago
      AWS was first to market for many years, and their margins were always higher than ecommerce retail (and that's easy to believe, since retail often runs on 1% margins)
    - nine_k 3y ago
      AWS was basically built as an internal product to support the retail business, and then they realized that they can sell it.
      - bcrosby95 3y ago
        There's been several articles posted here over the years from people that worked at Amazon at the time saying this is just a myth.
        senderista 3y ago
        Yes, hence the "MAWS" (Move to AWS) initiative to actually make retail services run on AWS (took many years).
vlovich123 3y ago
I suspect a few factors. * Egress pricing margins ensure lock-in which makes it hard to builds competitors to “commodity” services (eg you can’t spin up your own price-competitive S3 within AWS). Lack of competition means less innovation and more expensive pricing. * While compute costs don’t necessarily come down, the CPUs get more powerful. At scale, this should be the same as prices coming down. However, it’s not exact and cloud provides pocket this difference as profit / R&D investment. * SRE costs are a huge chunk of own infra (managing servers at scale). If you’re small, this is a negligible cost. If you’re a large business this is a huge cost. Cloud providers target large businesses so the savings when you’re smaller are less obvious. * Elasticity is a huge part of cloud capabilities. Most people use dynamic paygo pricing which is more expensive than baseload demand which cloud provides typically discount because baseload revenues can be used for purchasing additional capacity.
jeffbee 3y ago
That's not correct. Cloud costs have steadily declined since ~ever. This is due both to the inevitable march of performance, and inflation. It used to be 1 Ivy Bridge vCPU cost $71/month, in 2014 dollars, or $90 today. But today you can get a machine of the same size class, with a dramatically faster CPU, at $30/month.
- sltkr 3y ago
  The metric we are interested in is cost relative to self-hosting on similar hardware. So you can't factor in things like inflation and hardware performance, which equally made self-hosted solutions cheaper.
  - jeffbee 3y ago
    Good luck trying to write down that number. The cloud has list prices. Colo facilities can and will demand 500% rent increases when it's time to renew. You can't predict it.
    - Boatfaceing 3y ago
      [dead]
- alright2565 3y ago
  Using cpubenchmark.net - a Intel 3770K was released in 2012 for $330 retail, or 20 CPUMark/2012$. - a AMD 7800X3D was released in 2022 for $450 retail ($330 in 2012 dollars), or 105 CPUMark/2012$ or 77 CPUMark/2023$ Looks like consumer performance/price has improved by 5.3x. I'm not sure what exactly the math works out here for cloud hardware, since I don't really have any performance numbers. I'd still expect it to be quite a bit less improvement, since it "feels" like server CPUs have gotten better at cramming more cores on a die, rather than increase each core's performance. Looking at Xeon Platinum 8480+ (2023, MSRP $10k), there's 56 cores@3154 ST CPU Mark, vs. Xeon E7-8890 v2 (2014, MSRP $6.8k) has 15 cores@2175 ST CPU Mark. Assuming your cloud prices are correct, and with these rough performance figures, you're getting a 4.5x cloud performance/price improvement, significantly worse than with real hardware.

sgt101 3y ago

Yes, massive cross subsidies from core business to cloud business to exclude and destroy competition - aws=books, azure=windows, gcp=search. There are three companies doing monopolistic things, they have got away with it because of that plurality.

senderista 3y ago
AWS is vastly more profitable than Amazon's retail business.
- sgt101 3y ago
  It is now. It wasn't in the past. It wouldn't be if they had to compete with providers that also wanted to compete.
  - calimoro78 3y ago
    AWS was first to market for many years, and their margins were always higher than ecommerce retail (and that's easy to believe, since retail often runs on 1% margins)
  - nine_k 3y ago
    AWS was basically built as an internal product to support the retail business, and then they realized that they can sell it.
    - bcrosby95 3y ago
      There's been several articles posted here over the years from people that worked at Amazon at the time saying this is just a myth.
      - senderista 3y ago
        Yes, hence the "MAWS" (Move to AWS) initiative to actually make retail services run on AWS (took many years).

vlovich123 3y ago

I suspect a few factors. * Egress pricing margins ensure lock-in which makes it hard to builds competitors to “commodity” services (eg you can’t spin up your own price-competitive S3 within AWS). Lack of competition means less innovation and more expensive pricing. * While compute costs don’t necessarily come down, the CPUs get more powerful. At scale, this should be the same as prices coming down. However, it’s not exact and cloud provides pocket this difference as profit / R&D investment. * SRE costs are a huge chunk of own infra (managing servers at scale). If you’re small, this is a negligible cost. If you’re a large business this is a huge cost. Cloud providers target large businesses so the savings when you’re smaller are less obvious. * Elasticity is a huge part of cloud capabilities. Most people use dynamic paygo pricing which is more expensive than baseload demand which cloud provides typically discount because baseload revenues can be used for purchasing additional capacity.

jeffbee 3y ago

That's not correct. Cloud costs have steadily declined since ~ever. This is due both to the inevitable march of performance, and inflation. It used to be 1 Ivy Bridge vCPU cost $71/month, in 2014 dollars, or $90 today. But today you can get a machine of the same size class, with a dramatically faster CPU, at $30/month.

sltkr 3y ago
The metric we are interested in is cost relative to self-hosting on similar hardware. So you can't factor in things like inflation and hardware performance, which equally made self-hosted solutions cheaper.
- jeffbee 3y ago
  Good luck trying to write down that number. The cloud has list prices. Colo facilities can and will demand 500% rent increases when it's time to renew. You can't predict it.
  - Boatfaceing 3y ago
    [dead]
alright2565 3y ago
Using cpubenchmark.net - a Intel 3770K was released in 2012 for $330 retail, or 20 CPUMark/2012$. - a AMD 7800X3D was released in 2022 for $450 retail ($330 in 2012 dollars), or 105 CPUMark/2012$ or 77 CPUMark/2023$ Looks like consumer performance/price has improved by 5.3x. I'm not sure what exactly the math works out here for cloud hardware, since I don't really have any performance numbers. I'd still expect it to be quite a bit less improvement, since it "feels" like server CPUs have gotten better at cramming more cores on a die, rather than increase each core's performance. Looking at Xeon Platinum 8480+ (2023, MSRP $10k), there's 56 cores@3154 ST CPU Mark, vs. Xeon E7-8890 v2 (2014, MSRP $6.8k) has 15 cores@2175 ST CPU Mark. Assuming your cloud prices are correct, and with these rough performance figures, you're getting a 4.5x cloud performance/price improvement, significantly worse than with real hardware.