Xero reveals the impact of mammoth Amazon Web Services migration
crn.com.au
crn.com.au
AWS offers the convenience of managed hardware and services on, for which it is charging its premium. As companies grow, they can think about investing in rented servers and managing the software on top of it themselves.
Beyond a scale, owning and managing the servers may also make sense for many.
It's just a game to keep VC's and other people happy.
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Hey ma! look I cut our costs by 25%
The claim you should be suspicious of is the one that says you can save money migrating to bare metal. That may be possible in some cases, but not in any typical large company.
You can do 10x cheaper than AWS easily, if you are willing tomake tradeoffs that AWS just can't make globally for all their customers.
EDIT: If you’re paying silicon valley wages, and target a global audience with your site/product, and can get from AWS something cheaper than the publicly listed prices, then AWS very likely will be a good deal for you. But many companies have different needs than these, and may be able to save money by dropping things they don’t need.
The second factor is levels of abstraction. It's cheaper to run your own virtualization software on rented dedicated hardware than to use EC2, and it's cheaper to run your own kubernetes cluster than to use EKS or GKE.
The places where having external companies do it sabes the most is (a) in running the actual hardware and networks and (b) providing a platform for your software (e.g. Google app engine).
Taking a bunch of rented dedicated servers and configuring kubernetes is cheaper than renting the computational power through GKE or EKS.
But basically yeah, these are the same standard solutions to saving money with hosting that have been pretty much known for decades.
EDIT: Be aware, this only applies for the publicly listed prices — if your company can get a deal like Snapchat did with Google, or Netflix with Amazon, then the math may work out entirely different. But I don't know what they pay so I can't comment on that.
Has it changed much? I haven't done real hardware in a while, but I remember the rack power to be a very limited resource years ago. (I.e. you could easily pack more hardware in the rack than you'd be allowed to power)
In London area (city and outskirts like Oxford) its £1500-2000 per 10kw and they count the PSU rating regardless of what you actually use. And that is on paper only as many DCs limit a rack to 20A which gives 4.8kw only so if you need more you need to lease another rack which costs more money. And leasing adjacent racks also isn’t really cheap they usually give you maybe 2-3 ones if you need more than that well then you are now leasing floor space which means if you need say one rack with 15kw rated bare metal you may end up having to lease enough room to hold 10 racks if not more.
How quickly can you scale up your design 10x? 100x?
Who needs to scale 100x in a matter of hours? For those companies, AWS may be very useful.
My entire point is that not everyone needs all the functionality AWS provides, and that’s where you can save the money.
Flexibility is a much bigger factor in using the cloud.
I've worked at organisations where "get N extra servers" was a 6-8 month process. Because of this you have to be extremely good at capacity planning.
And very few organisations are good at these guessing games.
Either you over-provision with a generous safety margin; or you don't - and your fail to handle peak loads.
This applies to AWS and GCP
That's an interesting data point considering EKS isn't GA yet.
Now we can make a simple case differentiation:
(a) EKS is more expensive than EC2. Due to Premise 1, that means EKS is more expensive than alternative hosters. QED.
(b) EKS is cheaper than EC2. Possible, but very unlikely, and I’m betting against this.
Now with AWS i can manage a whole infrastructre AND write code where you needed an admin team before.
If you just use EC2, though, you’ll find many other providers of virtual or dedicated servers for rent for much cheaper, with similar performance and reliability.
If you’re fully integrated in the AWS ecosystem, it is much more convenient, but also of course more expensive.
That said, unless you’re in silicon valley, your hiring costs will be so much lower than amazon’s that even your own admin team might end up cheaper than using Amazon’s.
Are you really replicating AWS or just EC2? How do you replicate S3? Glacier? What about Aurora (DB replication that actually works!). If all I need is raw compute, I can go back to building machines and beat AWS prices but I will have no where near the same level of functionality, flexibility, and now it is up to me to maintain them.
That’s a lot of wasted infrastructure and time managing it.
However AWS allows you to accomodate uneven growth and load. You can create new machines in minutes (or half an hour for Windows). The virtual nature allows you to quickly ditch a broken host for a good one. You can also save money on development infrastructure by switching it off, or run background jobs on spot machines. Then there's the other services available such as S3 and Lambda.
Of course there are other clouds worth considering, but the advantage of cloud infrastructure is the ability to call it up without months of lead time.
AWS employee here, so I am obviously cloud provider biased, but in my viewpoint having that discipline only comes from having very good, expensive engineers. It's hard to get people who really know how to run a datacenter well, especially when most of the good ones would probably prefer to work for a larger cloud provider since than is more interesting and impactful than running a smaller datacenter for a single company.
The forgotten / underestimated cost is the salaries of these people to set things up well in the first place, be on call to fix things when they break, and perform those upgrades in the same way that cloud providers do.
A single engineer salary can get you a LOT of cloud compute power on AWS. If a cloud provider allows you to build the same thing with two fewer engineers then that's probably an extra $400k or so for the infrastructure budget after you factor in these engineer's salaries, taxes, benefits, etc. And $400k can get you an incredible amount of AWS cloud compute.
The thing is, you need this equivalently for any cloud provider as well. People who know how to operate and run a cloud account effectively are not a dime a dozen, and given the migration going on now are actually in higher demand than some qualified datacenter operators.
Same goes for backups to S3 vs. setting up a SAN on the datacenter.
Managing AWS infrastructure isn't trivial, it's easy to forget what that instance does, if everything was provisioned with point and click. Cloudformation or terraform makes it doable. But technical debt is also something you can defer payment on :)
Additionally Aurora has robust zero downtime self recovery from a variety of error conditions including disk failures, and you can test that out by running a SQL query that simulates disk failures for example: https://docs.aws.amazon.com/AmazonRDS/latest/UserGuide/Auror...
This level of operational excellence is incredibly hard to build yourself either on premise or even in the cloud if you are only using VM's. Time and time again you see companies that thought they had backups but then discover the backups don't work right. It's not because these companies are stupid, its because it is hard to do right, and building and testing this requires a lot of engineer time. When you do take the time to hire the right people who can do it right you end up finding it is way more expensive to do it yourself than using a cloud managed service. AWS is able to offer the service much cheaper because the cost of development and maintenance, etc is spread across a huge number of customers.
I'm not saying any of this is necessarily wrong, just not what people often expect when they dump, to them, a significant amount of money into something. Many midsize and larger companies like to "big dog" their vendors. They are not accustomed to the cog in a machine feel that most of us tolerate daily.
It is easy to sit back and say AWS is really easy; but it just means you haven't looked elsewhere.
Additionally most public clouds have law enforcement or government entities monitoring or tracking things (to an unknown scale). You are always better off in a regular datacenter.
If you don't know why maybe you should hire someone to tell you why.
> Free answers are good. But if you want great answers you have to pay.
It makes at least some bizarre level of sense that a social company like Twitter, with no clear customer other than "maybe advertisers" to not turn a profit for some time, but for an accounting software company, whose product is paid, to burn cash for over a decade, it just doesn't seem right. It seems like a scam to bilk investors.
Let's raise a glass to the inevitable bankruptcy, in which the founders and VCs don't suffer because the IPO already happened. Here's to you, Rod Drury, Peter Thiel, and Chris Liddell (now working for the Trump administration). Great job, guys. If you end up in jail, I'll send postcards.
There's a _ton_ of funding going from the states to various agencies for various pro-software, next-silicon-valley initiatives. Most of this money is handled by career bureaucrats with little personal experience in running a business.
It's easy to waste someone else's money by giving CPR to a large domestic IT firm, when the alternative is being held responsible for the lost jobs when the company goes under.
That seems more likely especially in a case like this, where the employees are skilled, and where the company isn't doing anything unique (novel, charitable, beneficial to society in a nonprofit way, etc) that would merit rating it by some other metric than profit.
It just seems tremendously wasteful to be losing tons of money in a market where there's already a lot of competition and you're not doing anything new. This isn't an electric car, and AI, a space company, where the outlay might be a lot and the time to develop the tech is great, this is a long-established market full of already-solved-profitably problems.
I would guess most of Xero's employees are outside of NZ, but since NZ's primary export is dairy, the government might be foolish enough to try propping it up with some nebulous hope that "keeping the tech industry afloat" will somehow be beneficial, rather than letting the few technologists in their employ go to work for another, more useful company, or to go and start a startup of their own (perhaps with government funding, in lieu of it going to Xero, in that hypothetical situation.)
Maybe without Xero, they'd be out looking for and learning new things, starting new companies, etc. That's what I would do if I worked for Xero (which was conceivable, at one point) and they closed down.
The US doesn’t really have a similar culture of perpetual cash injection, often in the form of low-interest loans.
What an incredibly strange statement. It's so far away from the reality of the situation that it comes across as just looking for an excuse to lash out.
Their revenue climbed 38% to NZ$407 million, with a positive EBITDA, and grew their subscriber base by 1/3. That business isn't even remotely in danger of going bankrupt. If running a NZ$28 million loss results in that kind of tremendous business expansion, they should do it perpetually.
They're not profitable, they expanded, the expansion incurs more loss, what they're doing is digging a deeper hole. If you lose money per customer overall, and you get more customers, now you're losing even more money.
"Positive EBITDA", if you can't pay your taxes/etc and break even... guess what, you're going bankrupt eventually.
All this and they think they can compete with Intuit. This won't be the first time a New Zealand company succeeded in the "ignored by competition because its too small and has its own system of laws and isn't part of a cooperative economic zone (vs, you know, just expanding to another large city in US/EU)" and then thought it could compete overseas, only to have its ass handed to it.
It's still a bet, it's impossible to say if the lifetime value holds up in the face of competition, screw ups or changes in the business environment - but that's why it's an investment.
Now this isn't quite as simple as that but growth without profit and without the prospect of profit isn't something any investor should be keen on.
Without profit the company will have to either take out loans (which require repayment with interest) or issue more capital (which dilutes current investors).
This can be fine in the initial growth stages of a business (you have a plan to start making a profit in the future), however for a 10+ year old business who's already floated their stock, it's not great to indefinitely prioritise turnover over profit.
It’s a solid product though. Much better than QuickBooks or anything else I’ve used.
Don’t forget the vendor lock-in. Once an org start using accounting software - they are very unlikely to switch.
Kind of like the early days of the XBox. Sometimes you just have to burn money and years to get your foot in the door.