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The reason why it is extremely hard to engineer robust large scale AWS cloud apps can be summarized under the umbrella of performance variance:

  - machine latency varies more, you can't control it

  - network latency varies more

  - storage latency varies more (S3, Redshift, etc.)

  - machine outages are more frequent

where more can be an order of magnitude more variation than on bare metal deployments. I am not saying the performance is that much worse, only that it will unpredictably vary for a certain instance. The interference is non gaussian and can happen in bursts as opposed to easy-to-model-and-anticipate white noise.

It's a lot harder to engineer cloud scale software to scale robustly and not degrade in latency when running on a large amount of nodes. For example, see [1]

Most of open-source cloud software does not come with these algorithms batteries included and it is not trivial to retrofit this kind of logic. Just being smart about loadbalancing won't cut it when at any given moment one of your nodes will become 10x slower than others even though your code is sound and in fact does not slow down like that.

In fact, what you lose in AWS convenience and "free" maintenance, you gain in simpler RPC/messaging/fault tolerance/storage infrastructure that can sometimes accommodate an order of magnitude more traffic or users on a machine then if deployed in AWS.

[1] http://research.google.com/people/jeff/latency.html

Great comment! Thanks a lot for sharing this.

> There's not much need for a fancy article on a fancy website in order to understand a key concept of cloud computing:

I wish it were true, but plenty of companies are gripped by cloud fever. I've seen quite a few going down the route of charging into the cloud not because they've run the numbers and found it stacks up, but because they want to be in the cloud, and Amazon have some great marketing people.

From personal experience this is absolutely true. The initial cost to migrate and learn the cloud practice is unbelievable, but once you have the process in place running on Amazon CAN save some cost down the road, including the hours you need to replace hardware. You will build tools or use existing tools to create your infrastructure and operation process. A generous estimation to reach a level of maturity is 1.5 year. For ever-growing business this cloud fever is acceptable.

You can definitely save cost by subscribing to reserved instances, but the downside is you have to put down money upfront, which is very hard for many small players out there.

But watch out if you run data pipeline jobs - sometimes your so-called big data is really not that big. A few GBs daily report doesn't need to run on c3.xlarge instances. They can do just fine with a 24/7 m3.large instance. There was an article on HN a while ago about how one could run a custom report with shell commands on a commodity hardware, and get 100x times performance compare to running on EMR. You can also consider running most of your jobs on premise. Ihe network banwidth in/out is probably going to be cheaper than running all of your jobs on EMR. Direct connect is a great choice to boost the connectivity stability and security. Go for it.

Cloud is great for HA, because on Amazon you are encourage to build in multi-AZ and even multi-region. S3 is absolutely the de-facto today IMO for object storage. It's cheap and reliable. The learning curve for proper Amazon (or just about any cloud provider) is really deep. You can either end up like running Black Friday sales, or running like Netflix with monkey enjoying tea.

Running on cloud is no different than running on-premise, just you have to start all over again, because now you have to re-consider network, security, monitoring, and practice.

"You can definitely save cost by subscribing to reserved instances, but the downside is you have to put down money upfront (...)"

This isn't required anymore. AWS introduced new Reserved Instances options few months ago, including a "no upfront" option which still gets you ~40% discount over on-demand prices.

https://aws.amazon.com/blogs/aws/simplified-reserved-instanc...

But if the alternative to reserved instances is buying servers then the paying upfront thing isn't so much of an issue.

It is interesting coming at it from the other side, I get hit up all the time to move my infrastructure to the cloud, I give them the specs and what I pay per month, tell them that if they can beat it I'll switch. The closest anyone has come has been about 4x the cost I'm currently paying.

But I note that I have a unique case that isn't covered by the cloud "architecture" (crawling the web and indexing it). Explaining that it is "ok" if I am in the 10% not covered by your 90% solution. But sales folks never like to hear that.

Yeah, it's always fun when I tell someone at we're 100% self-hosted too. They never stop to think that traffic, load, and usage patterns on craigslist are pretty well understood at this point. Plus it's certainly cheaper than paying someone else to run all your hardware. You get to pick your peers, pick your hardware, and allocate as you see fit.

It's cheaper if you have a good team, which it sounds like you do.

A ton of places don't have a good team, and the cost numbers end up being a lot closer.

A great team will destroy Cloud margins. An Average-Bad team will fall in line, plus you don't have to run the team anymore.

Your comment makes sense, but it implies Netflix does not have a great team, or that it has other considerations than pure financial ones?

I've had many clients on AWS rack up six-figure monthly bills unnecessarily simply because they didn't realize how to design for cost.. it's not a silver bullet. Those penny fractions add up fast. There are a lot of tricks to save money.

We run into this at FastMail all the time as well. For the one customer who needed "their own gear" we built out on SoftLayer for much the same reasons as the article - real hardware where you need it.

But our operations costs are so much lower than renting that we could replace all our hardware every year and still break even.

(yeah, we could get SoftLayer to refresh our hardware every year as well, but we don't need it refreshed that fast, and at the end we still own the hardware)

That's cause you need to use the feature of your cloud. Run lots of servers and shoot them, when you dont need them. That's why the cloud is better than anything else. But most people just rent their xl3.large instance.

Sounds akin to the outsourcing binge that went on a decade (?!) or so back.

Back then it seemed most companies did it not because they had done the numbers, but because a few big names had done it and so the others did it to apparently piggy back on the stock markets attention.

in fact it is related to outsourcing. in the past outsourcing processing involved shipping drives of data overseas. The risk and schedule hit were big, the offshore companies had crap hardware that usually cost a lot more than it cost in the US. That quieted down for a while. The new cloud stuff got these people interested again in processing outsourcing, only now the data is shipped to google.amazon/whoever and the outsource employees use the cloud vms to run the processing. I wonder how long before this mini trend starts slowing down when they finally figure out that management overhead and poor communication is in most cases the main problem with outsourcing.

Often times companies move because their organization doesn't deliver, and the hope is a cloud company will do a better job of it.

If you have a great team, I firmly believe hosting yourself is far, far, far less expensive.

If you have a terrible team, then cloud (hosting) is less expensive. Even if it was exactly the same cost, you're gaining by not having to have a staff to run it, and the costs of managing them, etc etc.

Most places don't have great teams. Insert random corporation here likely has a team that is a mess for whatever reasons happen in large companies.

In that case, the Cloud makes a ton of sense for them. They've already screwed up their own organization in some way, and this is a large reset button on the whole thing.

That's worth a ton in itself.

If you're a small org with relatively small volume self-hosting doesn't make sense.

Can you elaborate why not ?

You can get some cheap dedicated hosting (ex: [1]) for a fraction of the price.

It's so cheap compared to AWS you can order a few spare ones and still come out cheaper than your one beefy AWS instance ?

The only way it doesn't make sense is, if you need to scale up and down very fast ?

[1] 60 euro/month: Quad-Core Haswell, 32 GB (non-ECC) RAM, 240Gb SSD @ https://www.hetzner.de

Hetzner is fantastic but if you're not in Europe, what's your latency like?

There's OVH that has a big data center in Montreal.

The cost of the systems is almost irrelevant. The time of qualified people is far more expensive. Sot it's not just the elasticity. You have to look everything from the time perspective as well. What additional knowledge will I need? Will I need to learn load balancers, how to make them highly available? will I have to learn about SSL certificates and termination? Will I need to learn how to implement and operate a secure and highly available DNS service? How much is your time worth? Our hosting costs are a fraction of a single worker's salary. Whether AWS is more expensive is essentially irrelevant. OP argues that it was not doing the job for them which is an entirely different issue.

Don't forget the quality of the work. Frankly, if I'm administering servers I'm not going to do as good a job of it as someone whose whole job is that and I'm not going to do as good a job as Azure or AWS or whoever else either. Platform as a service is the way to go.

Because if your sysadmins are all moonlighting developers having them not develop stuff to do subpar system work is more expensive than just paying the cloud premium.

Reset button is worth a ton in itself. This is a really nice way of looking at it.

My old company moved, after I left, from a dedicated system I built that provided less than 1s response times to a cloud system that averaged 8s response times, because the company focus changed from maximizing performance to maximizing sizzle buzzwords.

I'm glad I left.

If only it were that simple... But every second relatively young engineer I interview points out that "But Netflix! Look how good the cloud works for them!" and once again I need to explain, that Netflix spends millions in engineering resources cost to handle EC2 issues and we are not (almost nobody is) Netflix (yet?).

Oh thank goodness. I thought I was the only one.

Netflix also runs many of their own servers, and puts their own racks into many data centers.

https://openconnect.itp.netflix.com/hardware/index.html

https://openconnect.itp.netflix.com/peeringLocations/index.h...

Amazon also runs Netflix racks

Not sure what you mean with "datacenter". If you mean using co-location or similar it probably works out as a small price difference. If you start with an empty room or an empty piece of ground it might cost you a lot to start building everything and hire people to manage it all. Remeber that the big cloud providers can get a scale benefit where a lot of virtual computers share a small operations team. I do think that physiccal servers usually are faster than cloud computers meaning you might be able to use fewer of them to compensate for the price difference.

I see there are already some contrarian-because-I-feel-like it replies, but this is a really succinct way to put it. Of course there are exceptions and edge cases, but EC2 is all about elasticity. If that doesn't appeal to you, don't touch EC2. If you aren't using the "E" in EC2, there are far cheaper, more performant alternatives.

On a side note, I feel like EC2 is simultaneously the best and worst service on AWS.

>you're also paying Amazon's profits.

Are you? Amazon is not known for posting profits, and is quite possibly operating AWS at a loss.

They have promised to show financial results for AWS itself with the quarterly report being released next month, so we'll see.

Profit for something like AWS is likely difficult to put a number on.

They built it so they could run Amazon.com off the infrastructure, but then decided they could make money leasing their under-subscribed portions.

If they are not making a cut-and-dry profit from AWS (I'd fathom they are, they are one of the most expensive cloud providers and many other providers turn a healthy profit), then they are at least dramatically offsetting their own Amazon.com infrastructure costs which are mandatory anyway.

Actually, they built AWS as a business on its own right from the start and only later moved Amazon.com onto AWS.

http://www.networkworld.com/article/2891297/cloud-computing/...

Amazon is not know for posting operating profits, because they plow funds back into new research and businesses. But they most definitely operate with gross margins on everything they sell.

Update: in FY2014, they sold $89BN ($70.1BN in products, $18.9BN in services), and their cost of sales was $62.8BN. I am pretty sure that their margins are razor-thin in retail, but the service side had higher margins.

The reason they're not making profits as a company is they're spending the money on new projects.

That doesn't mean the AWS part is in itself unprofitable. I'd wager it is, given how the business is somewhat mature and they have a huge chunk of that market.

AWS is hugely profitable:

https://gigaom.com/2013/01/07/amazons-cloud-is-bigger-more-p...

A Motley Fool article claims that while AWS is successful, it isn't profitable, mainly because of the accounting behind capital expenditure. Last year Amazon spent more in interest than their entire operating income. http://www.fool.com/investing/general/2015/02/04/amazon-just...

If AWS posts a loss it'll be because Amazon is reinvesting resources into its growth, not because they're subsidizing each user's costs.