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Comment by lmm | Hacker News Reader

> almost by definition, it costs more to run workloads on cloud machines than on your own hardware.

Why should that be so? I'd expect the all-in cost of a cloud machine to be less than my own hardware, for the same reason that buying electricity from the grid is usually cheaper than generating it on-prem.

> You can't address that problem by moving from EKS back to ECS, like one commenter suggested.

If EKS is more expensive (because it's something they see as a value-add) whereas ECS is a commodity service at commodity prices, then moving there could well solve the cost issue.

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A better analogy for cloud vs on-premises is going to a restaurant vs cooking. The markups are about the same too.

Wouldn't the cost of cooking be higher depending on who you are? If one could spend few hours doing something that has higher ROI than eating pre-cooked food, then you are actually losing money cooking your own food.

Yep, which makes it a pretty good analogy.

This virtually never happen with the cloud.

You're paying for someone elses profit monthly with the cloud.

It has to cost more.

Beyond a certain scale, sure. But at small scale, you can completely avoid hiring an ops team, or hire a much smaller one, which can more than offset the cloud provider price premium.

My current company works in a niche market with a smallish number of large customers, so our scaling needs are modest. Our total AWS bill is about a third the annual salary of a single ops person.

There's gotta be a very long tail of companies like mine for whom outsourcing to cloud vendors is cheaper than self-hosting.

Depends on the industry and barrier of entry. If your in one with alot of compliance overheads your are outsourcing alot more them compute and storage to your cloud provider. Hiring inhouse in that same case its extremely expensive unless you are over a certain size.

This article seems written by someone who gets excited by shiney objects / hype trains.

What if someone's else profit is due to economies of scale?

With like 40-50% margins too.

> Why should that be so? I'd expect the all-in cost of a cloud machine to be less than my own hardware

Because cloud hardware doesn't have all the burdens of physically managing a real server. Replacing SSDs. Upgrading RAM. Logging to a iDRAC to restart a crashed server. All those things don't exist in the cloud and make you loose so much operational time. That's why clouds will ALWAYS cost more than bare metal. The cons is that with cloud you keep paying for the same servers: there are no assets anymore, only costs.

Not to mention keeping spare parts around for when something breaks, or having to drive out to the DC to fix/replace the thing that broke or won't restart. Hell, even something "simple" like managing the warranties for the gear you have is no fun at all. People tend to forget all those little things when espousing the evils of the cloud, but I'm here to tell you that they all add up and they are all a major pain in the butt. Cloud gets rid of all that.

There are also discussions around CapEX versus OpEx that apply here, and depreciating costs over time. There is a trade-off of agility, cost, and maintenance, but the markup on cloud is quite high.

The major determinant in hosting cost isn't power, it's the cost of the hardware. But I mean, even if you don't buy my axiomatic derivation, you can just work this out from AWS and GCP pricing.

> The major determinant in hosting cost isn't power.

Let's do the math then.

https://www.hetzner.com/news/neue-dedicated-server-2023/

Let's assume the Hetzner EX101 consumes 200 W (equals 0.2 kW) on average.

Let's assume a private household electricity price of 0.40 EUR/kWh (Germany).

The monthly electricity cost will be; 0.40 EUR/kWh x 0.2 kW x 24 h/day x 30 day/month = 57.60 EUR/month for electricity.

The Hetzner EX101 costs 84 EUR/month.

So even with self-energy production and cheap electricity buy prices, power / electricity is very significant.

At least in the US, businesses/commercial/industry typically get a significant discount on electrical pricing vs consumers.

I always saw it being close to 7:3 with non recurring hardware cost to mrc facilities & power on 3 year depreciation for major markets.

That said all of the big cloud providers SHOULD have a structural advantage on all of those dimensions. None if the small players or self hosting shops are doing the volume, much less the original r&d, of the big cloud providers. The size of that discount, and how costly it really is to achieve, is another topic.

Disclosure: principal at AWS. Above information is my personal opinion based on general experience of 20 years in the industry doing networking, compute farms, and operations.

Even if [0] cloud does have structural advantage, it’s clear that cloud vendor isn’t willing or wanting to pass them off to customers, and tends to nickel and dime on other necessity like the infamous bandwidth cost.

[0] I’m really curious how big, if any, structural advantage large cloud vendor has over small-time colo user, because surely cloud comes with all kinds of overhead? All the fancy feature AWS provides cannot be free. If customer does not care for those, would colo, or a small “vps” vendor, actually have structural advantage over AWS?

AWS’s 24% of operating margin does not appear out of nowhere.

If someone is making profit does not mean you are making a loss. Both consumer and producer could end up making profits depending on the situation

Cloud is reasonably cheap until you need to move data out (eg to serve html to customers). Egress charges are where the big players hit you.

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