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Comment by arn3n | Hacker News Reader

Everyone suggesting that they simply charge users for commits to drive off AI-heavy users forgets that Github is owned by Microsoft, who has a big incentive to keep having developers use AI.

I suspect that Microsoft would even prefer to have Github operate at a loss, if that loss were because all its users were using their models and paying for OpenAI subscriptions to generate the code.

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> I suspect that Microsoft would even prefer to have Github operate at a loss,

I assumed it does, do you know that it doesn't?

I presume there’s a lot of companies out there paying GitHub very large sums to host all their private repos.

No doubt. ...You can have non-zero revenue and still be loss-making though.

Conversely, what suggests GitHub has a huge operating cost?

Running a GitHub clone at their same scale as a customer on cloud pricing would likely be insane. But y’all know infra is actually quite cheap when you run it yourself right?

It’s usually the case with these M&A deals that the profit just never quite makes sense to justify the purchase price, unless you can truly scale up the user base or revenue model. GitHub was already so mature as a solution when they bought it, I don’t know that they could have added that type of value just by slapping a Microsoft logo in the footer.

It used to be, and buying a few servers was a cheap way to get off the cloud (if you can manage them efficiently). But with RAM and other costs these days... I've had to rethink it a lot.

It's at worst ten times as expensive as it should be. But AWS was already ten to a hundred times as expensive, so even in the computer parts crisis, self hosting is still ahead.

> what suggests GitHub has a huge operating cost?

They just added 3 million CPU cores to the fleet. That’s a lot of cheddar.

Absolute numbers aren’t useful in this analysis. We know capital is easily available for the expenditure. You have to consider it as a relative number to revenue or users otherwise big numbers always look scary.

I agree - however, I was responding to your direct question about whether GitHub's operating cost was high, and there's some data that suggests that it is!

If this is one of their major expenses and only represents 5% of annual revenue, it’s not. Often SaaS companies can run at 90%+ gross margins even with a highly utilized free user tier. Their selling expenses and labor/opex and SG&A run rates can be all over the map but these are extremely controllable and represent the operating strategy being executed more than the cost of service.

Would you say that the operating cost of running an airline is high or low?

I don’t know that industry as well. But I can look at it through a similar lens and would guess that it’s high.

I say that because every thing that goes into the service is expensive. Large capital expenses (planes, probably a lot I don’t even know about), large variable operating costs (fuel, flight specific labor, airport fees, and all the other stuff that is required for every flight). A large portion of their expenses scale with revenue. Meanwhile, there is high revenue pressure (customers are price sensitive and competition is fierce and often a direct substitute).

SaaS is inherently more scalable than practically any other business/industry. Comparing to an industry that is exceedingly financially constrained, often to the point of requiring government subsidies, is frankly a bit silly if you’re trying to make any point here.

Let’s also look at it from a risk of growth perspective to highlight how different things are. If GitHub invests in a new server/rack/datacenter to support growth it likely breaks even once it’s at <20% capacity (or could, lots of variables). Even if it takes longer than they expected to use the new capacity it’s not too big of a deal. The unused part is bought but can be powered down until needed. So it’s not burning a hole in their P&L.

However, what does an airline have to do to rollout service to a new city? They need to buy new planes, sign contracts with the new airport, hire pilots and crew, launch a marketing campaign informing customers to generate demand, and probably some other sunk costs. Once service begins, they want to be at full capacity immediately. They can’t power down 80% of fuel or labor. It will burn cash until they reach a much higher utilization rate. Closing the city is a major public failure for the airline that will be discussed in media, among customers, and could easily lose people their jobs. It’s very risky in comparison is my point.

This is like letting someone stay in your house for free while charging them to burn it down.

If you can sell them fuel, it might be a lucrative business.

Thinking more, the object of the "house" is to extract value, whatever it is by rent or letting them burn it down, as long as the correct dues are paid, the mission is accomplished.

The long view is that MS will sell those developers the tools that slow down or put band-aids on the damage they inflict on their own codebases by using AI.

They could do this in a way that lessens external pull requests.

For example, bolting co-pilot on to github, or a Codex in the web kind of thing that gives unlimited check ins.

It's like how Grok Heavy gives the user X premium or whatever. You charge for the tokens and give the unlimted premium access as a bonus. Basically, bundle it.

> bolting co-pilot on to github

They already did this, no?

I meant as a prerequisite to unlimited checkins.

Right now anyone can publish to public repos in an unlimited manner. They could choose to limit that and elevate unlimited to a paid co-pilot of codex bundled plan.

Microsoft, who would also have an incentive to extinguish the largest hub for open source development, having already embraced and extended it.

15 years from now, they'll say it was obvious.

Microsoft has a financial incentive to push LLMs and also an existential reason since LLM-generated code is incompatible with the GPL.

The GPL is irrelevant nowadays anyway since everything is MIT (corporations won the license propaganda war). I think my computer has, like, five GPL programs? Ten? It's just that two of them are coreutils and Linux, and that basically holds up the GPL as a concept.

operating at a loss and non-operational because of outages are very different. If they can't maintain service levels nobody - AI super user or quant, old-fashioned human - will be happy.

What Microsoft models?

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