Using Netflix as an example again, if they're pitted against a company that runs their own hardware but is otherwise equal, they will lose. A portion of their profit is siphoned off as Amazon's profit. What's already happened is Netflix is directly funding development of Amazon Prime Video.
Or a traditional business renting a storefront? Something that happens all the time. Even huge companies like Apple use OEMs. Samsung manufactured Apple chips for years despite putting up a direct competitor to apple in the Galaxy S.
Systems like this allow people who do not have capital to scale up. Just like developers build malls and lease space to retailers or OEMs build factories and lease them to companies to make equipment.
Meanwhile, the most successful hardware vendors are all farming production out to third party manufacturers...
The only clear differentiator then is actually owning a datacenter. And the Total Cost of Ownership of that isn't easy. For someone who doesn't want to be in the datacenter-ownership business, opting in to cloud would make sense. Concerns for privacy and government intervention are a valid concern though.
Correct.
Traditional product companies very rarely own all their own factories.
Do you honestly think Netflix management is incompetent? They've run the numbers on this countless times. They have way more insight into their spend and operations than a random anonymous internet commentator.
Most companies at even 1k servers will get enormous cost savings from O&O.
A former employer, then in the 600-ish box range, costed out moving to ec2. Our ops actually brought up our internal hadoop cluster on ec2 as well as ran parallel workloads for a week. Amazon at the time offered price deals to attempt to get them as a marquee customer, as well as a bunch of engineering time. Even so, ec2 cost 3-4x as much for 1/3 the throughput. ec2's prices have since fallen, but so has the price of bare hardware.
People also overestimate the cost of hands-on; this company contracted for 4 hours / week with a local person. If you get serious about puppet/chef you can successfully run lots of servers in a remote datacenter.
so, you were saying?
Or do you think facebook,google,aol,tripadvisor and pretty much anyone beside HotNewStartup are incompetent?
The video is the most important part of their product, so keeping it at your ISP or a local exchange not only lowers latency, but most likely also gives better throughput since it only has to travel through your ISP's network or local exchange links without having to go through the rest of the internet backbone.
Latency ( 30ms vs 300ms) doesn't matter much in video playback, only throughput. Once you hit play, it isn't bi-directional.
But you're just nitpicking. This IS their core business, and they realized its "too core" to give to someone else.
So yes, you do "outgrow the cloud", and well, part of "outgrowing" can be cost structure. Gitlab offers a free service, their main competitor, github, runs their own datacenter. Why do you think that is?
Put another way, if there was a cloud DC in each major city and Netflix hadn't already started using their own edge nodes, then there's nothing stopping them from spinning them up in each cloud DC as opposed to their own hardware. There's nothing inherently special about their setup except location.
Nothing about this situation says that Netflix "realized its "too core" to give to someone else." I don't quite understand how you're making that leap. Instead, they had a very specific requirement (that most companies don't have, mind you) that current cloud hosts can't provide. Nothing else.
Besides, here is a list of companies using AWS:
https://aws.amazon.com/solutions/case-studies/
You think Google and Microsoft is incompetent when they offer cloud services to their customers? There are a lot of companies that do know want to own any datacenter related infrastructure because it is irrelevant to their business and there is no on-board expertise. While there are companies that can afford to hire staff for running large DC operations. I thought this is pretty obvious to everybody.
> Or do you think facebook,google,aol,tripadvisor and pretty much anyone beside HotNewStartup are incompetent?
Far from it, and that's precisely my point. At Facebook scale, it certainly makes sense to run your own data centers. At HotNewStartup, it obviously doesn't. Competence is finding the solution which works best for your scale and organization, not following some generic rule.
The question is, does it make sense for businesses with a handful of servers running their office environment, to a few thousand servers running production for a moderately popular web service, to pay consultants to drive out and tend the servers in their office closets/colo racks, rather than piggy-back on someone else's (mostly) well-oiled machine with economies of scale.
If you can build an in-house equivalent of the AWS team, do it. If you're going to pay someone to do it for you, AWS might be a better deal than your neighborhood business IT firm.