[adamcharnock]

This is an industry we're[0] in. Owning is at one end of the spectrum, with cloud at the other, and a broadly couple of options in-between:

1 - Cloud – This is minimising cap-ex, hiring, and risk, while largely maximising operational costs (its expensive) and cost variability (usage based).

2 - Managed Private Cloud - What we do. Still minimal-to-no cap-ex, hiring, risk, and medium-sized operational cost (around 50% cheaper than AWS et al). We rent or colocate bare metal, manage it for you, handle software deployments, deploy only open-source, etc. Only really makes sense above €$5k/month spend.

3 - Rented Bare Metal – Let someone else handle the hardware financing for you. Still minimal cap-ex, but with greater hiring/skilling and risk. Around 90% cheaper than AWS et al (plus time).

4 - Buy and colocate the hardware yourself – Certainly the cheapest option if you have the skills, scale, cap-ex, and if you plan to run the servers for at least 3-5 years.

A good provider for option 3 is someone like Hetzner. Their internal ROI on server hardware seems to be around the 3 year mark. After which I assume it is either still running with a client, or goes into their server auction system.

Options 3 & 4 generally become more appealing either at scale, or when infrastructure is part of the core business. Option 1 is great for startups who want to spend very little initially, but then grow very quickly. Option 2 is pretty good for SMEs with baseline load, regular-sized business growth, and maybe an overworked DevOps team!

[0] https://lithus.eu, adam@

[torginus]

I think the issue with this formulation is what drives the cost at cloud providers isn't necessarily that their hardware is too expensive (which it is), but that they push you towards overcomplicated and inefficient architectures that cost too much to run.

A core at this are all the 'managed' services - if you have a server box, its in your financial interest to squeeze as much per out of it as possible. If you're using something like ECS or serverless, AWS gains nothing by optimizing the servers to make your code run faster - their hard work results in less billed infrastructure hours.

This 'microservices' push usually means that instead of having an on-server session where you can serve stuff from a temporary cache, all the data that persists between requests needs to be stored in a db somewhere, all the auth logic needs to re-check your credentials, and something needs to direct the traffic and load balance these endpoint, and all this stuff costs money.

I think if you have 4 Java boxes as servers with a redundant DB with read replicas on EC2, your infra is so efficient and cheap that even paying 4x for it rather than going for colocation is well worth it because of the QoL and QoS.

These crazy AWS bills usually come from using every service under the sun.

[bojangleslover]

The complexity is what gets you. One of AWS's favorite situations is

1) Senior engineer starts on AWS

2) Senior engineer leaves because our industry does not value longevity or loyalty at all whatsoever (not saying it should, just observing that it doesn't)

3) New engineer comes in and panics

4) Ends up using a "managed service" to relieve the panic

5) New engineer leaves

6) Second new engineer comes in and not only panics but outright needs help

7) Paired with some "certified AWS partner" who claims to help "reduce cost" but who actually gets a kickback from the extra spend they induce (usually 10% if I'm not mistaken)

Calling it it ransomware is obviously hyperbolic but there are definitely some parallels one could draw

On top of it all, AWS pricing is about to massively go up due to the RAM price increase. There's no way it can't since AWS is over half of Amazon's profit while only around 15% of its revenue.

[mrweasel]

Just this week a friend of mine was spinning up some AWS managed service, complaining about the complexity, and how any reconfiguration took 45 minutes to reload. It's a service you can just install with apt, the default configuration is fine. Not only is many service no longer cheaper in the cloud, the management overhead also exceed that of on-prem.

[coredog64]

> If you're using something like ECS or serverless, AWS gains nothing by optimizing the servers to make your code run faster - their hard work results in less billed infrastructure hours.

If ECS is faster, then you're more satisfied with AWS and less likely to migrate. You're also open to additional services that might bring up the spend (e.g. ECS Container Insights or X-Ray)

Source: Former Amazon employee

[parentheses]

Fully agree to this. I find the cost of cloud providers is mostly driven by architecture. If you're cost conscious, cloud architectures need to be up-front designed with this in mind.

Microservices is a killer with cost. For each microservices pod - you're often running a bunch of side cars - datadog, auth, ingress - you pay massive workload separation overhead with orchestration, management, monitoring and ofc complexity

I am just flabbergasted that this is how we operate as a norm in our industry.

[lumost]

I don’t understand why most cloud backend designs seem to strive for maximizing the number of services used.

My biggest gripe with this is async tasks where the app does numerous hijinks to avoid a 10 minute lambda processing timeout. Rather than structure the process to process many independent and small batches, or simply using a modest container to do the job in a single shot - a myriad of intermediate steps are introduced to write data to dynamo/s3/kinesis + sqs/and coordination.

A dynamically provisioned, serverless container with 24 cores and 64 GB of memory can happily process GBs of data transformations.

[re-thc]

> your infra is so efficient and cheap that even paying 4x for it rather than going for colocation is well worth it because of the QoL and QoS.

You don’t need colocation to save 4x though. Bandwidth pricing is 10x. EC2 is 2-4x especially outside US. EBS for its iops is just bad.

[jdmichal]

It's about fitting your utilization to the model that best serves you.

If you can keep 4 "Java boxes" fed with work 80%+ of the time, then sure EC2 is a good fit.

We do a lot of batch processing and save money over having EC2 boxes always on. Sure we could probably pinch some more pennies if we managed the EC2 box uptime and figured out mechanisms for load balancing the batches... But that's engineering time we just don't really care to spend when ECS nets us most of the savings advantage and is simple to reason about and use.

[BobbyTables2]

Also don’t forget the layers of REST services, ORMs, and other lunacy.

It runs slower than a bloated pig, especially on a shared hosting node, so now needs Kubernetes and cloud orchestration to make it “scalable” - beyond a few requests per second.

[nthdesign]

Agreed. There is a wide price difference between running a managed AWS or Azure MySQL service and running MySQL on a VM that you spin up in AWS or Azure.

[bojangleslover]

Great comment. I agree it's a spectrum and those of us who are comfortable on (4) like yourself and probably us at Carolina Cloud [0] as well, (4) seems like a no brainer. But there's a long tail of semi-technical users who are more comfortable in 2-3 or even 1, which is what ultimately traps them into the ransomware-adjacent situation that is a lot of the modern public cloud. I would push back on "usage-based". Yes it is technically usage-based but the base fee also goes way up and there are also sometimes retainers on these services (ie minimum spend). So of course "usage-based" is not wrong but what it usually means is "more expensive and potentially far more expensive".

[0] https://carolinacloud.io, derek@

[spwa4]

The problem is that clouds have easily become 3 or 5 times the price of managed services, 10x the price of option 3, and 20x the price of option 4. To say nothing of the fact that almost all businesses can run fine on "pc under desk" type situations.

So in practice cloud has become the more expensive option the second your spend goes over the price of 1 engineer.

[Lucasoato]

Hetzner is definitely an interesting option. I’m a bit scared of managing the services on my own (like Postgres, Site2Site VPN, …) but the price difference makes it so appealing. From our financial models, Hetzner can win over AWS when you spend over 10~15K per month on infrastructure and you’re hiring really well. It’s still a risk, but a risk that definitely can be worthy.

[mrweasel]

> I’m a bit scared of managing the services on my own

I see it from the other direction, when if something fails, I have complete access to everything, meaning that I have a chance of fixing it. That's down to hardware even. Things get abstracted away, hidden behind APIs and data lives beyond my reach, when I run stuff in the cloud.

Security and regular mistakes are much the same in the cloud, but I then have to layer whatever complications the cloud provide comes with on top. If cost has to be much much lower if I'm going to trust a cloud provider over running something in my own data center.

[adamcharnock]

You sum it up very neatly. We've heard this from quite a few companies, and that's kind of why we started our ours.

We figured, "Okay, if we can do this well, reliably, and de-risk it; then we can offer that as a service and just split the difference on the cost savings"

(plus we include engineering time proportional to cluster size, and also do the migration on our own dime as part of the de-risking)

[wulfstan]

I've just shifted my SWE infrastructure from AWS to Hetzner (literally in the last month). My current analysis looks like it will be about 15-20% of the cost - £240 vs 40-50 euros.

Expect a significant exit expense, though, especially if you are shifting large volumes of S3 data. That's been our biggest expense. I've moved this to Wasabi at about 8 euros a month (vs about $70-80 a month on S3), but I've paid transit fees of about $180 - and it was more expensive because I used DataSync.

Retrospectively, I should have just DIYed the transfer, but maybe others can benefit from my error...

[iso1631]

> I’m a bit scared of managing the services on my own (like Postgres, Site2Site VPN, …)

Out of interest, how old are you? This was quite normal expectation of a technical department even 15 years ago.

[baby]

I’m wondering if it makes sense to distribute your architecture so that workers who do most of the heavy lifting are in hetzner, while the other stuff is in costly AWS. On the other hand this means you don’t have easy access to S3, etc.

[objektif]

No amount of money will make me maintain my own dbs. We tried it at first and it was a nightmare.

[ibejoeb]

Dead on. Recently, 3 and 4 have been compelling. Cloud costs have rocketed up. I started my casual transition to co-lo 2 years ago and just in december finished everything. I have more capacity at about 30% of the cost. If you go option 3, you even get the benefit of 6+ month retro pricing for RAM/storage. I'm running all DDR4, but I have so much of it I don't know what to do with it.

The flip side is that compliance is a little more involved. Rather than, say, carve out a whole swathe of SOC-2 ops, I have to coordinate some controls. It's not a lot, and it's still a lot lighter than I used to do 10+ years ago. Just something to consider.

[boplicity]

I don't know. I rent a bare metal server for $500 a month, which is way overkill. It takes almost no time to manage -- maybe a few hours a year -- and can handle almost anything I throw at it. Maybe my needs are too simple though?

[edge17]

Just curious, what is the spec you pay $6000/year for? Where/what is the line between rent vs buy?

[mgaunard]

you're missing 5, what they are doing.

There is a world of difference between renting some cabinets in an Equinix datacenter and operating your own.

[adamcharnock]

Fair point!

5 - Datacenter (DC) - Like 4, except also take control of the space/power/HVAC/transit/security side of the equation. Makes sense either at scale, or if you have specific needs. Specific needs could be: specific location, reliability (higher or lower than a DC), resilience (conflict planning).

There are actually some really interesting use cases here. For example, reliability: If your company is in a physical office, how strong is the need to run your internal systems in a data centre? If you run your servers in your office, then there's no connectivity reliability concerns. If the power goes out, then the power is out to your staff's computers anyway (still get a UPS though).

Or perhaps you don't need as high reliability if you're doing only batch workloads? Do you need to pay the premium for redundant network connections and power supplies?

If you want your company to still function in the event of some kind of military conflict, do you really want to rely on fibre optic lines between your office and the data center? Do you want to keep all your infrastructure in such a high-value target?

I think this is one of the more interesting areas to think about, at least for me!

[weavie]

What is the upper limit of Hertzner? Say you have an AWS bill in the $100s of millions, could Hertzner realistically take on that scale?

[adamcharnock]

An interesting question, so time for some 100% speculation.

It sounds like they probably have revenue in the €500mm range today. And given that the bare metal cost of AWS-equivalent bills tends to be a 90% reduction, we'll say a €10mm+ bare metal cost.

So I would say a cautious and qualified "yes". But I know even for smaller deployments of tens or hundreds of servers, they'll ask you what the purpose is. If you say something like "blockchain," they're going to say, "Actually, we prefer not to have your business."

I get the strong impression that while they naturally do want business, they also aren't going to take a huge amount of risk on board themselves. Their specialism is optimising on cost, which naturally has to involve avoiding or mitigating risk. I'm sure there'd be business terms to discuss, put it that way.

[geocar]

Who are you thinking of?

Netflix might be spending as much as $120m (but probably a little less), and I thought they were probably Amazon's biggest customer. Does someone (single-buyer) spend more than that with AWS?

Hertzner's revenue is somewhere around $400m, so probably a little scary taking on an additional 30% revenue from a single customer, and Netflix's shareholders would probably be worried about risk relying on a vendor that is much smaller than them.

Sometimes if the companies are friendly to the idea, they could form a joint venture or maybe Netflix could just acquire Hertzner (and compete with Amazon?), but I think it unlikely Hertzner could take on Netflix-sized for nontechnical reasons.

However increasing pop capacity by 30% within 6mo is pretty realistic, so I think they'd probably be able to physically service Netflix without changing too much if management could get comfortable with the idea

[DyslexicAtheist]

this is what we did in the 90ies into mid 2000:

> Buy and colocate the hardware yourself – Certainly the cheapest option if you have the skills

back then this type of "skill" was abundant. You could easily get sysadmin contractors who would take a drive down to the data-center (probably rented facilities in a real-estate that belonged to a bank or insurance) to exchange some disks that died for some reason. such a person was full stack in a sense that they covered backups, networking, firewalls, and knew how to source hardware.

the argument was that this was too expensive and the cloud was better. so hundreds of thousands of SME's embraced the cloud - most of them never needed Google-type of scale, but got sucked into the "recurring revenue" grift that is SaaS.

If you opposed this mentality you were basically saying "we as a company will never scale this much" which was at best "toxic" and at worst "career-ending".

The thing is these ancient skills still exist. And most orgs simply do not need AWS type of scale. European orgs would do well to revisit these basic ideas. And Hetzner or Lithus would be a much more natural (and honest) fit for these companies.

[belorn]

I wonder how much companies pay yearly in order to avoid having an employee pick up a drive from a local store, drive to the data center, pull the disk drive, screw out the failing hard drive and put in the new one, add it in the raid, verify the repair process has started, and then return to the office.

[theodric]

> ancient skills https://youtu.be/ZtYU87QNjPw?&t=10

It baffles me that my career trajectory somehow managed to insulate me from ever having to deal with the cloud, while such esoteric skills as swapping a hot swap disk or racking and cabling a new blade chassis are apparently on the order of finding a COBOL developer now. Really?

I can promise you that large financial institutions still have datacenters. Many, many, many datacenters!

[sanderjd]

This space of #2 like Lithus is not something I'm very familiar with, so thank you for the comment that piqued my interest!

If you're willing to share, I'm curious who else you would describe as being in this space.

My last decade and a half or so of experience has all been in cloud services, and prior to that it was #3 or #4. What was striking to me when I went to the Lithus website was that I couldn't figure out any details without hitting a "Schedule a Call" button. This makes it difficult for me to map my experiences in using cloud services onto what Lithus offers. Can I use terraform? How does the kubernetes offering work? How does the ML/AI data pipelines work? To me, it would be nice if I could try it out in a very limited way as self-service, or at least read some technical documentation. Without that, I'm left wondering how it works. I'm sure this is a conscious decision to not do this, and for good reasons, but I thought I'd share my impressions!

[adamcharnock]

Hello! I think this is a fair question, and improving the communication on the website is something that is steadily climbing up our priority list.

We're not really that kind of product company; we're more of a services company. What we do is deploy Kubernetes clusters onto bare metal servers. That's the core technical offering. However, everything beyond that is somewhat per-client. Some clients need a lot of compute. Some clients need a custom object storage cluster. Some clients need a lot of high-speed internal networking. Which is why we prefer to have a call to figure out specifically what your needs are. But I can also see how this isn't necessarily satisfying if you're used to just grabbing the API docs and having a look around.

What we will do is take your company's software stack and migrate it off AWS/Azure/Google and deploy it onto our new infrastructure. We will then become (or work with) your DevOps team to supporting you. This can be anything from containerising workloads to diagnosing performance issues to deploying a new multi-region Postgres cluster. Whatever you need done on your hardware that we feel we can reasonably support. We are the ones on-call should NATS fall over at 4am.

Your team also has full access to the Kubernetes cluster to deploy to as you wish.

I think the pricing page is the most concrete thing on our website, and it is entirely accurate. If you were to phone us and say, "I want that exact hardware," we would do it for you. But the real value we also offer is in the DevOps support we provide, actually doing the migration up-front (at our own cost), and being there working with your team every week.

[whiplash451]

> Option 1 is great for startups

Unfortunately, (successful) startups can quickly get trapped into this option. If they're growing fast, everyone on the board will ask why you'd move to another option at the first place. The cloud becomes a very deep local minimum that's hard to get out off.

[eru]

> 4 - Buy and colocate the hardware yourself – Certainly the cheapest option if you have the skills, scale, cap-ex, and if you plan to run the servers for at least 3-5 years.

Is it still the cheapest after you take into account that skills, scale, cap-ex and long term lock-in also have opportunity costs?

[graemep]

That is why the the second "if" is there.

You can get locked into cloud too.

The lock in is not really long term as it is an easy option to migrate off.

[chrisandchris]

Personal experience: Did some cloud stuff for SME, and later on started colocation. I think my learning curve for all the cloud-stuff was the same as for all the colocation stuff, except the cloud will not get you rid of firewalls, NAT, DHCP and all that stuff. Cloud isn't that much easier, it's just a little bit different. IMHO, the largest disadvantage of colocation is that it requires (sometimes) physical presence at a datacenter.

[LeFantome]

This is a good summary and my take as well.

The cloud is great when you just need to start and when you do not know what scale you will need. Minimal initial cost and no wasted time over planning things you do not know enough about.

The cloud is horrible for steady-state demand. You are over-paying for your base load. If your demand does not scale that much, you do not benefit from the flexibility. Distance from the edge can cause performance problems. In an effort to “save money” you will chase complexity and bake in total reliance on your cloud provider. AAA l

Starting with the cloud makes sense. Just make sure not to engineer a solution you cannot take somewhere else.

As you scale and demand becomes known, you can start to migrate some stuff on premises or to other managed providers.

The great thing about “cloud architecture” is that you can use a hybrid model. You can selectively move parts of the stack. You can host your baseline demand and still rely on the cloud for scalability.

Where you need to spend the money and gain the expertise is in design. Not a giant features waterfall but rather knowing how to build an application and infrastructure that is adaptable and portable as you scale.

Keep it simple but also keep it modular.

At least, that had been my experience.

[themafia]

> while largely maximising operational costs

The core services are cheap. S3 is cheap. Dynamo is cheap. Lambda is exceedingly cheap. Not understanding these services on their own terms and failing to read the documentation can lead one to use them in highly inefficient ways.

The "cloud" isn't just "another type of server." It's another type of /service/. Every costly stack I've seen fails to accept this truth.

[preisschild]

Been using Hetzner Cloud for Kubernetes and generally like it, but it has its limitations. The network is highly unpredictable. You at best get 2Gbit/s, but at worst a few hundreds of Mbit/s.

https://docs.hetzner.com/cloud/technical-details/faq/#what-k...

[victorbjorklund]

Is that for the virtual private network? I heard some people say that you actually get higher bandwidth if you're using the public network instead of the private network within Hetzner, which is a little bit crazy.

[Schlagbohrer]

Can someone explain 2 to me. How is a managed private cloud different from full cloud? Like you are still using AWS or Azure but you are keeping all your operation in a bundled, portable way, so you can leave that provider easily at any time, rather than becoming very dependent on them? Is it like staying provider-agnostic but still cloud based?

[adamcharnock]

To put it plainly: We deploy a Kubernetes cluster on Hetzner dedicated servers and become your DevOps team (or a part thereof).

It works because bare metal is about 10% the cost of cloud, and our value-add is in 1) creating a resilient platform on top of that, 2) supporting it, 3) being on-call, and 4) being or supporting your DevOps team.

This starts with us providing a Kubernetes cluster which we manage, but we also take responsibility for the services run on it. If you want Postgres, Redis, Clickhouse, NATS, etc, we'll deploy it and be SLA-on-call for any issues.

If you don't want to deal with Kubernetes then you don't have to. Just have your software engineers hand us the software and we'll handle deployment.

Everything is deployed on open source tooling, you have access to all the configuration for the services we deploy. You have server root access. If you want to leave you can do.

Our customers have full root access, and our engineers (myself included) are in a Slack channel with you engineers.

And, FWIW, it doesn't have to be Hetzner. We can colocate or use other providers, but Hetzner offer excellent bang-per-buck.

Edit: And all this is included in the cluster price, which comes out cheaper than the same hardware on the major cloud providers

[victorbjorklund]

Instead of using the Cloud's own Kubernetes service, for example, you just buy the compute and run your own Kubernetes cluster. At a certain scale that is going to be cheaper if you have to know how. And since you are no longer tied to which services are provided and you just need access to compute and storage. you can also shop around for better prices than Amazon or Azure since you can really go to any provider of a VPS.

[CrzyLngPwd]

#2.5ish

We rent hardware and also some VPS, as well as use AWS for cheap things such as S3 fronted with Cloudflare, and SES for priority emails.

We have other services we pay for, such as AI content detection, disposable email detection, a small postal email server, and more.

We're only a small business, so having predictable monthly costs is vital.

Our servers are far from maxed out, and we process ~4 million dynamic page and API requests per day.

[megggan]

Getting rid of bureaucratic internal IT department is a game changer for productivity. That alone is worth 10x infra costs, especially for big companies where work can grind to a halt dealing with obstructionists through service now. Good leaders understand this.

[bell-cot]

Sadly true. Or, the so-called internal IT Dept. can be a shambolic mess of PHB's, Brunchlords, Catberts, metric maximizers, and micromanagers, presiding over the hollowed-out and burned out remains of the actual workforce that you'd need to reliably do the job.

[Archelaos]

I am using something inbetween 2 and 3, a hosted Web-site and database service with excellent customer support. On shared hardware it is 22 €/month. A managed server on dedicated hardware starts at about 50 €/month.

[doctorpangloss]

Where do AWS reserved instances come into your hierarchy? What if there existed a “perpetual” reserved instance? Is cap-ex vs. op-ex really the key distinction?

[jgalt212]

We looked at option 4. And colocation is not cheap. It was cheaper for us to lease VMs from Hetzner than to buy boxes and colocate at Equinix.

[rcpt]

5. On-premise and engineers touch the wires every few days.

[bpavuk]

if someone on the DevOps team knows Nix, option 3 becomes a lot cheaper time-wise! yeah, Nix flakes still need maintenance, especially on the `nixos-unstable` branch, but you get the quickest disaster recovery route possible!

plus, infra flexibility removes random constraints that e.g. Cloudflare Workers have

[slyall]

There are a bunch of ways to manage bare metal servers apart from Nix. People have been doing it for years. Kickstart, theforeman, maas, etc, [0]. Many to choose from according to your needs and layers you want them to manage.

Reality is these days you just boot a basic image that runs containers

[0] Longer list here: https://github.com/alexellis/awesome-baremetal

[adamcharnock]

Indeed! We've yet to go down this route, but it's something we're thinking on. A friend and I have been talking about how to bring Nix-like constructs to Kubernetes as well, which has been interesting. (https://github.com/clotodex/kix, very much in the "this is fun to think about" phase)

[aequitas]

This is what we do, I gave a talk about our setup earlier this week at CfgMgmtCamp: https://www.youtube.com/watch?v=DBxkVVrN0mA&t=8457s

[muvlon]

Option 4 as well, that's how we do it at work and it's been great. However, it can't really be "someone on the team knows Nix", anyone working on Ops will need Nix skills in order to be effective.

[preisschild]

I'm a NixOS fan, but been using Talos Linux on Hetzner nodes (using Cluster-API) to form a Kubernetes Cluster. Works great too!