I think it has more to do with initial fixed cost. Personally I used my cofounder's existing array, but that's not an option for most companies, particularly s

I think it has more to do with initial fixed cost. Personally I used my cofounder's existing array, but that's not an option for most companies, particularly starting out, and cutting out server purchasing costs pays in the short term. However, if you have the initial funding, as in this instance, it pays to buy the servers you need. Plus, it's an asset that, should your company fail in 6 months, can be sold to at least salvage some of the initial investment. [edit]In the last boom, though, people bought millions of dollars worth of servers and equipment that are now less than worthless; in many cases you have to pay to get rid of them. So, I guess there can be a significant downside.