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I'm curious about the economics of this. If you reserve an extra large high-CPU instance for 3 years, you end up paying $3,000 per year ($2,800 initial fee + ho

I'm curious about the economics of this. If you reserve an extra large high-CPU instance for 3 years, you end up paying $3,000 per year ($2,800 initial fee + hourly rate). Isn't it cheaper to have your own servers?

jshen 17y ago
cheaper but less flexible.
- nearestneighbor 17y ago
  But you are already giving up flexibility with the 3 year term and reserved instances, or am I misunderstanding something?
  - mmt 17y ago
    I don't think you're misunderstanding anything at all My opinion of what constitutes "middle of nowhere" may differ from the average San Franciscan's, but I've had the opposite estimation of costs that jedberg did. That is, EC2 was 20% more expensive than operating ones own hardware in a South Bay datacenter for a year. This would have been about a year ago, but, IIRC, including operating costs, one would break even at around 10 months of unreserved EC2. Pricing has certainly changed in the meantime, so 30% in the other direction is well within the realm of possibility. Back then, it cost about $3 per year per watt. Now it's pushing $4. The trick is, in the case of ones own hardware, one usually pays for the available capacity, not just what one uses. On a 500W server, that's $2k annually. That's the flexibility that AWS offers: one doesn't pay for the operating capacity, only the use. It would seem, however, that one pays for the hardware up front either way. The great increase in flexibility of operating ones own hardware is not suffering from only ordering off an abbreviated menu. Germane to the OP's question, I have never found any virtual or dedicated server offerings come close (say, a factor of 10) to the I/O performance of something custom configured/assembled (even from inexpensive, commodity blocks). Whether this constitutes a problem is subject to interpretation In general, I remain skeptical that there exists in The Cloud cheap-enough commodity servers suited to even a majority of applications. Remember, even Google had custom hardware very early on.
    - jshen 17y ago
      I've had the same problem with disk I/O bound apps in the cloud. Having said that, the cloud is a great way to launch a site/startup then move off if it actually works out.
  - jshen 17y ago
    I was talking about a different sort of flexibility. The ability to spin up another instance identical to this one if you suddenly need more capacity. The ability to spin up instances to do some data crunching, then turn them off when done, so you only pay for what you use. If the capacity you need is fixed and known it will be cheaper to get a dedicated server. Here's a a counter example. I once worked for an online retailer and we got an order of magnitude more traffic at christmas. With a dedicated server we had to pay for the capacity needs of christmas all year. On the cloud we could add capacity for xmas and then turn off hte extra capacity the rest of the year. It was a lot cheaper.
jedberg 17y ago
To buy physical hardware equivalent to that instance, yes, it would be cheaper. However, you need to also factor in the costs of keeping that machine in a rack for 3 years with power and cooling. When I worked out the costs, it ended up being cheaper to use EC2 by about 30%. My datacenter was a bit expensive, but that is because I was looking at datacenters in San Francisco, since I don't want to have to drive to the middle of nowhere when I have to do maintenance on the physical machine. Also, I was comparing against 1 year reserved instances, which is what I use now.
- nearestneighbor 17y ago
  If it's not a commercial secret, I wonder, are sites like Reddit and Digg low margin businesses, or are hardware/bandwidth costs a tiny speck compared to the ad revenue generated? In your "IAMA" thread on reddit, someone estimated that Reddit must be pulling on the order of $1M per month, making the costs neglibile. Digg must be earning even more, because of its greater number of users and their higher susceptibility to ads.
  - jedberg 17y ago
    I'm not at liberty to discuss reddit's revenues, but what I can tell you is that the entire operational cost of the site (about $15K last month) is small compared to the human cost (ie. salary and benefits)

jshen 17y ago

cheaper but less flexible.

nearestneighbor 17y ago
But you are already giving up flexibility with the 3 year term and reserved instances, or am I misunderstanding something?
- mmt 17y ago
  I don't think you're misunderstanding anything at all My opinion of what constitutes "middle of nowhere" may differ from the average San Franciscan's, but I've had the opposite estimation of costs that jedberg did. That is, EC2 was 20% more expensive than operating ones own hardware in a South Bay datacenter for a year. This would have been about a year ago, but, IIRC, including operating costs, one would break even at around 10 months of unreserved EC2. Pricing has certainly changed in the meantime, so 30% in the other direction is well within the realm of possibility. Back then, it cost about $3 per year per watt. Now it's pushing $4. The trick is, in the case of ones own hardware, one usually pays for the available capacity, not just what one uses. On a 500W server, that's $2k annually. That's the flexibility that AWS offers: one doesn't pay for the operating capacity, only the use. It would seem, however, that one pays for the hardware up front either way. The great increase in flexibility of operating ones own hardware is not suffering from only ordering off an abbreviated menu. Germane to the OP's question, I have never found any virtual or dedicated server offerings come close (say, a factor of 10) to the I/O performance of something custom configured/assembled (even from inexpensive, commodity blocks). Whether this constitutes a problem is subject to interpretation In general, I remain skeptical that there exists in The Cloud cheap-enough commodity servers suited to even a majority of applications. Remember, even Google had custom hardware very early on.
  - jshen 17y ago
    I've had the same problem with disk I/O bound apps in the cloud. Having said that, the cloud is a great way to launch a site/startup then move off if it actually works out.
- jshen 17y ago
  I was talking about a different sort of flexibility. The ability to spin up another instance identical to this one if you suddenly need more capacity. The ability to spin up instances to do some data crunching, then turn them off when done, so you only pay for what you use. If the capacity you need is fixed and known it will be cheaper to get a dedicated server. Here's a a counter example. I once worked for an online retailer and we got an order of magnitude more traffic at christmas. With a dedicated server we had to pay for the capacity needs of christmas all year. On the cloud we could add capacity for xmas and then turn off hte extra capacity the rest of the year. It was a lot cheaper.

jedberg 17y ago

To buy physical hardware equivalent to that instance, yes, it would be cheaper. However, you need to also factor in the costs of keeping that machine in a rack for 3 years with power and cooling. When I worked out the costs, it ended up being cheaper to use EC2 by about 30%. My datacenter was a bit expensive, but that is because I was looking at datacenters in San Francisco, since I don't want to have to drive to the middle of nowhere when I have to do maintenance on the physical machine. Also, I was comparing against 1 year reserved instances, which is what I use now.

nearestneighbor 17y ago
If it's not a commercial secret, I wonder, are sites like Reddit and Digg low margin businesses, or are hardware/bandwidth costs a tiny speck compared to the ad revenue generated? In your "IAMA" thread on reddit, someone estimated that Reddit must be pulling on the order of $1M per month, making the costs neglibile. Digg must be earning even more, because of its greater number of users and their higher susceptibility to ads.
- jedberg 17y ago
  I'm not at liberty to discuss reddit's revenues, but what I can tell you is that the entire operational cost of the site (about $15K last month) is small compared to the human cost (ie. salary and benefits)