Amazon bares its computers

If EC2 customers realised this, they'd lose 90%+ of their customer base.

Analysts estimate Amazon Web Services will have $3.8 billion in revenue in 2013, with a 100% gross margin. It's big enough that it's raising the gross margin of the whole company.

I have never seen a case where AWS makes financial sense for the base load, or for anyone without that severely bursty traffic, though. For batch jobs or handling peaks of less than 6-8 hours, sure. But fewer people have peaks that are economical to handle that way than they think. And for those who do - e.g. retailers that needs to handle the christmas rush, depending on a system where servers can in theory become unavailable at any time is a high risk game.

Most of the time you can get to 30% of AWS with rented managed servers. Racking your own kit can get substantially below that.

Going hybrid is interesting, though, as it actually makes the case for actually using AWS much even weaker for most people:

Whereas previously you'd need your managed servers to be able to handle sufficient peaks to give you time to spin up more servers, once you have support for spinning up cloud instances for peaks, you can often aim for near 100% utilisation during normal days peaks, which magnifies the price difference substantially.

Even for most e-commerce sites, unless your site has a very localised audience, peaks are rarely high enough or sharp enough to make AWS economical if you have a system that's prepped for a hybrid situation - you can let things get very close to the wire, and start spinning up VMs, but you very rarely will find situations where it's worth doing for more than a few days before it'll be apparent it'll be cheaper to spin up a managed machine billed monthly, and/or putting in an order for more kit to put in your own rack.

> Not having lots of idle capacity that still has to be managed and paid for,

You are still paying for it with AWS with every single hour of VM's you pay for - it's one of the reasons AWS is so expensive: You have to fund all the spare capacity they need to have on standby to prevent running out of hardware during peaks.

> not having to beef up the Ops/IT staff,

This attitude scares me. You have to be prepared to deal with outages of pretty much every kind with AWS too. If you run managed servers, there's pretty much no difference, other than that you have to account for whatever the hosts turnaround time in bringing up new servers is (which one of those places where a hybrid setup might help you - especially if you're using a host like e.g. Softlayer or Iweb that offers the full range from managed servers to cloud servers in the same data centres).

The one thing you don't have to deal with is if you use a colo and it saves you people to cable up and rack servers and install the OS. But you can hire people to do that too.

> not having to own your own/manage/maintain hardware, etc.

... but you don't need to do this to beat AWS hands down, either: If you rent managed servers on a month by month basis, with no contracted minimum term, you can still easily come out vastly cheaper for the base load and most peaks.

> My advice to others is to be wary about generalized figures like "20-30% of cloud cost" from anyone with a vested interest in getting you to switch. Generalizations are dangerous when every usage case is different.

Sure. It's sound advice to do your own maths. But every time I have, for a variety of different sites, AWS has come out ludicrously expensive for anything but batch jobs and very short, sharp peaks.

Elastic scaling will save you money on AWS, but you generally can't scale everything (databases, caches, storage are harder to elastically scale up and down). And you need to pay at peak for whatever your peak is and deal with additional complexity of elastic scaling to begin with. No doubt you're paying smart people already to figure this out - it doesn't come for free.

In any account - if you take a largish box you might rack as an example (Dual-socket Sandy Bridge Xeon, ~256GB RAM, SSD, approximately a cr1.8xlarge), that box costs about $30k annually on AWS. You can buy it for around $8k. Over two years with hosting costs, you're looking at around $10k vs $60k roughly. Numbers work out similarly for other instance types although you would need some scale - perhaps a dozen of these systems - for this to make sense for your application.

Netflix I think is a special case - video delivery which they almost certainly don't do from AWS is their biggest cost - api/web traffic would be dwarfed in comparison, so who cares if it's expensive on AWS in that case? They probably enjoy the flexibility of AWS more than the little bit of money they might save by doing it themselves. Many other largish companies have gone the private cloud route; Zynga comes to mind: http://www.informationweek.com/mobile/inside-zyngas-big-move...). It's not the right fit for everybody, but it's a consideration.

Hybrid is interesting too -- provision your own hardware for the big iron - and burst into cloud for the rest of it.

All the hype of "cloud" makes people think that it's the only and/or best way to do it - certainly not the case for every sort of business.

Amazon's valuation is almost purely an emotional basis, as all future returns are being pulled forward to the extent that they're overvalued and the calculations about their future earnings expectations are correct. Is Amazon worth $50 billion? $100b? $168b? That's an emotional judgment today, as they have no profits and little history of profitability, and if you want to speculate on tomorrow... well if their valuation keeps bubbling up, they'll soon catch Walmart, which has $17 billion in annual profit (meaning it may only take... 20 years or so for Amazon to fully realize that market value via profitability). Amazon is going to be an excellent short at the end of this stock market bubble, they'll lose half their value on the down swing (my opinion).

However keep in mind, this is not a company that has always been loved by Wall Street. For most of its life, it has been hated by Wall Street. If you run an average price from early 2003 through the end of 2008, the stock was essentially flat lined for five years. And obviously it was viewed with near universal disgust after the dotcom bubble imploded, and the stock cratered to the $5's after 9/11. Amazon.Toast and all that.