Yes, you’re paying for a ton of stuff there that you probably don’t use and then are susceptible to bugs that have nothing to do with your use case. At $5B it would not cost anywhere near that much to replicate. Your infra would be better tailored to your workloads and your sw teams which would further drive costs down. The upsides are that you only drive features you need and keep things simple. The downside is that your need a big org to do this. It’s a long term play.

Snap was spending 2B over 5 years - so 400M/yr. By comparison, Uber, who operates under managed colo, spends nearly 200M/yr alone on real estate for their datacenters. Who knows how much they are paying in engineering salaries so manage those datacenters.

Personally I don't think there's a one size fits all solution, you will have to do the math (like I'm sure Snap, Netflix and others have done) to see if cloud is worth it. However, I agree, for most teams the default should be cloud.

> Uber, who operates under managed colo, spends nearly 200M/yr alone on real estate for their datacenters

200 million a year, huh.

The cost of commercial office space in the U.S. can range from $6 per square foot in low cost regions to over $12 per square foot in New York City. On average, a 50-cabinet data center will occupy about 1,700 square feet. At a median cost of $8 per square foot, the space alone would cost about $13,600 per month. [1]

Are Uber renting on the order of two million square feet of data centre? Do they have sixty thousand cabinets of hardware?

If they do, i would absolutely love to see a quote for how much it would cost them to run in the cloud.

I think it's far more likely that number is bullshit.

[1] https://npifinancial.com/blog/data-center-pricing/

>Office and data center rent expense was $194 million and $221 million for the years ended December 31, 2017 and 2018, respectively.

https://s23.q4cdn.com/407969754/files/doc_financials/2019/ar...

Page 124

So that number includes (and is almost certainly dominated by) the cost of their office space.

Unless that's capex for building, or includes server capex that they depreciate, that seems way high given Uber's scale.

A pretty dense cabinet should only cost ~$1400/mo at wholesale (1MW+ rooms) rates, and $200M is 143,000 cabinets.

And it's public that Uber uses multiple clouds as well.

Disclaimer: I haven't reviewed public Uber filings, would be very interested if there's any data that indicates they're really spending $200M on opex for real estate (which would be equivalent to $400M/year on cloud, which is either opex or potentially mix if there is some reserved instance-type cloud spend).

The 42U rack might be only $1400 per month but the servers to put inside are $5000 upfront per U.

42U times $5000 divided by 3 years is still only $5833 per month per rack. Add the $1400 and we have a total amortized rack cost of $7233 per month. (naively assuming you could fill every spot in the rack with servers).

But servers can't be included in a "Uber spends nearly 200M/yr alone on real estate for their datacenters" figure anyway.

The rack is $2800 per month, not $1400. The lowest advertised pricing does not include enough power to supply half of what's in the rack.

Add $200 per server per month to have a gigabit uplink.

Add $4000 per server per lifetime for VmWare licenses.

These are reasonable estimates of course. Could be multiple of that depending on what hardware is used and what colo. Physical hardware easily gets as expensive as any cloud.

Not easily; you’re making the argument that there can be high expenses for collocating but you’re talking about a -lot- of computational power.

I know that hardware varies a lot for sure, but for context I put together 3 racks 50% density with an 800gbit backplane for around 18k eur/mo.

I spared no expense, official juniper QSFPs (which are egregiously overpriced) and top of the line Dell servers with full out of band licenses.

And once there: interconnected bandwidth and IOPs became “free” (or, no extra charge).

We put the same application in cloud And it costs us 40k eur/mo with a heavy amount of optimisation, with half-sized instances and an aggressive optimisation in bandwidth/iops.

Clouds “sticker price” to us is 4x that of physical. You can buy a lot of human time for that price.

Physical infrastructure is always overprovisioned because it has to be planned long in advance and the smallest unit is huge (8 cores? 128 GB of RAM? for a small server).

If anything that's an argument against physical infra, not in favor of. Although it's fine if one wants a lot of the same big servers (an Hadoop cluster, or video computing cluster, or a CDN), which are the few use cases where physical can make sense (and hybrid cloud probably makes even more sense).

With AWS, you'd never spin half of that infra upfront. You'd spin a few VMs and start running stuff. If the project goes well, spin more or bigger VMs, otherwise spin down. Cost is very dynamic and the company doesn't have to spend half a million upfront, which is a big financial problem for many companies.

Anyway. We can both agree on AWS being overpriced. The reference on costs should be Google Cloud if one is cost conscious, not AWS. Google Cloud is often half the costs of AWS for the same thing.

AWS vs Google comparison, bit old and instance types have changed but relative pricing has not moved https://thehftguy.com/2018/11/13/2018-cloud-pricing-aws-now-...

And this one more recent since they've released high memory instances to compete with SoftLayer: https://thehftguy.com/2018/11/13/2018-cloud-pricing-aws-now-...

My costings are based on GCP; with sublime discounts even.

And, I would really agree with you if not for 2 things:

1) "wasted" cycles are not wasted, the CPU will clock down.

2) Kubernetes was designed specifically for this, the idea is you slice the CPU up so much that you dont waste much resources.

It's astonishingly capable of consuming all resources.

By the by; RAM is never "wasted", it's used for various caches.

As the others say in the comments, understand completely re: servers. And network. And some management overhead. I will write a blog post laying out our COGS at Kentik including all these factors, hope it'll wind up helpful.

> A pretty dense cabinet should only cost ~$1400/mo at wholesale (1MW+ rooms) rates, and $200M is 143,000 cabinets.

The 200M is for a year - at $1400/mo, that's 11905 cabinets.

400M/yr was just Snap’s Google Cloud spend, they also signed a 1B deal with AWS for redundancy.

disclaimer: former uber engineer

we ran the numbers continually and like others mentioned, it was a no-brainer to build on-prem. that said, there are a few use cases where aws/gcp are a great fit. people selling cloud without putting in real engineering work to enterprises generally make my life harder than it already is.

Exactly. Calculating TCO for on-prem vs cloud is tricky. Any time we have done it cloud came out the winner. I also found exceptions: predictable static workloads requiring a huge amount of bandwidth, mostly outgoing. An average company that needs some CPU and storage for various unpredictable workloads benefits from cloud services greatly.

Well those numbers are... weird

Also Uber seems to be much less computing/BW demanding than Snap

@nemothekid Can you provide a source for your claim on Uber's real estate costs for their data centers? I couldn't find anything on Google that corroborates your assertion.

Uber 10-K has operating lease payments in 2019 of $196M and in 2020 of $216M. That's not all data centers but a lot of it is data centers.

Why would you assume that? SF office space goes for way more than data center space.

You can look up the prices of Uber's current office space - they currently pay 16M/yr for their HQ.

If I use S3 + EMR what exactly falls into the category of "a ton of stuff there that you probably don’t use"?

>> Your infra would be better tailored to your workloads

How do you scale elastically with an on-prem infra? What part do you tune more to your own workload when an average company cannot even tune the GC for Java for their own workload?

Your claims do not reflect on reality, it is rather your imagination. I have migrated countless companies to the cloud, and almost every single migration was driven by a single factor: cost. Everything else was an added bonus: inscrased security, availability and elasticity.

> Yes, you’re paying for a ton of stuff there that you probably don’t use

This is the antithesis of any cloud. You only pay for what you use.

> At $5B it would not cost anywhere near that much to replicate.

If you can recreate GCP for $5B in capex, there are likely some VCs lurking here who would like a word with you.

Sorry but that’s not correct. Have you ever looked at the economics of cloud compute at that scale? You absolutely are paying for a lot of tooling that’s irrelevant to your use case. This is because GCP has to be a general provider. They have to offer the broadest possible solution to capture as much share as possible. This means there are money losing services (also low margin) that are offered to provide a complete end-to-end solution. However, the fact that those services exist means that the cost has to be made up for elsewhere. These economics are not some complicated rocket science and exist in many other types of businesses.

Like cable TV.

That's not a perfect analogy but it's easy enough for laymen to understand so I'm stealing it.

IMO, the cloud providers' main advantage is that they will professionally manage all of the underlying hardware. Optionally, they can also manage the low level pieces of software also (e.g. databases, file store, etc.). It's a safe bet that GCP, AWS, Azure et al. can manage/architect their data center much better than the vast majority of companies.

The last point is something that “we”, as an industry, can often be blind to.

If your business is something that is fundamentally not “pushing bytes”, you really, really don’t want to know about routers, firewalls, the OSI layer, SHA256, RAID arrays, all the way to this week’s JS framework. All of that is a big annoyance, and paying AWS to “take care of it” makes sense, even if it comes at a higher price: more often than not, the difference wouldn’t be offset by the time, effort, and risk exposure that you would have to allocate when building your own.

This calculation is different if your business is primarily digital. The gentleman upthread making a game, for example, is perfectly right: his company naturally developed a culture that can evaluate and manage every aspect of its digital operations, because it’s part of its core business, so it makes sense to put that knowledge to good use and save money.

But if you’re incompetent to that degree, AWS isn’t for you because you can’t even write software to run on it. You should be using a fully managed SaaS at that point.

There are three things that make sense to me.

Firstly, if you are big enough, you can manage/architect your data centre better than a cloud provider. You can afford to hire staff to do it, and they can build something specific to your needs. Companies like this should be on-prem.

(It doesn't matter if the company is "digital" or not. It could be a huge retail chain, or a government agency, whatever. The only requirement is to be big enough that you have big needs and can afford a big spend on staff.)

Secondly, if you are small enough, you really, really don’t want to know about routers, firewalls, the OSI layer, SHA256, RAID arrays, etc. Dealing with that would mean another couple of full-time employees, and you can't afford that. Companies like this should be on a SaaS (ideally one less full of gotchas than Heroku).

Thirdly, if you are in between, you have the capacity to deal with system administration, there are some advantages to being able to shape your infrastructure to your needs, but you really don't want to get into real estate and millions of dollars of CAPEX. Companies like this should be on rented physical hardware.

What doesn't make sense, at any scale, is renting VMs.

> Firstly, if you are big enough, you can manage/architect your data centre better than a cloud provider. You can afford to hire staff to do it, and they can build something specific to your needs. Companies like this should be on-prem.

It's interesting that competent engineers is only a question about cost to you. Where I am at (north of Europe) it's really hard to find good engineers. Even though it doesn't mean much about competence it's not mandatory for people in the IT industry to have a CS degree even if they're managing infrastructure in the cloud for millions every year.

I've been working in the industry at different companies for a bit over 10 years and I would say that a huge majority is just an average person who knows basic concepts about infrastructure but wouldn't be able to design and implement any of it by their own. This includes network infrastructure for the biggest ISPs in the country.

I work as a system engineer and the teams I've been working with the last 5 years, independent of company, have been looking for engineers constantly. The pay well and have great benefits but it's just not enough people out there to take these jobs and manage a full on-prem infrastructure.

So a part of the money you're talking about that should be used to hire all these really competent people are instead used to pay for cloud services where we know that professional people with far more hardware (and software) knowledge is managing the infrastructure. And this is really convenient for a lot of companies.

> The pay well and have great benefits but it's just not enough people out there to take these jobs and manage a full on-prem infrastructure.

I’m from a small province in Canada and we have similar problems here sometimes. One of the questions I sometimes have to ask clients when they make a statement like that is: “do you pay well for the area? Or do you pay well enough to attract talent from out-of-province?”

This often leads to them arguing that “but the cost of living is low here!” And inevitably I have to mention my friends who left the province to go to the Bay Area for 10 years and came back with $500k USD in stocks they collected, on top of what they had left over after paying their high cost-of-living rent.

I feel your pain. Companies running in less desirable areas have to somehow pay a premium for top tier talent. One way, as you mention, is to outsource, whether to cloud providers or part time contractors.

This isn’t meant as a brag at all, but I do the independent contractor thing here and make “pretty darned good for the area” money. Inevitably clients will ask me to come work full-time for them, and we have a painful conversation where I tell them what my taxable income was the year before, as well as the investments I made into equipment and licenses I use to provide the services I provide. The result so far has always been to continue being happy with me as a part-time contractor!

Edit: sorry for the typos, written on mobile with the swipe text thing

if it's ok to poke, can I ask what type of equipment and licenses? Is it like a home tech stack to test new infra setups on?

p.s hope you're staying safe from COVID

How much do you think a competent System engineer should be paid?

I think that's way too hard to answer since it depends on so many factors. But again, my experience isn't that the pay is too low. It's not like there are 10 people coming to the interview with no one taking the offer because of the salary. It's more like no one have applied for the job in three months and the external recruiters sniping LinkedIn didn't find anyone.

But to give some kind of estimate just so you know what page I'm at when I say they pay well I would say somewhere between $60-75k.

So I checked on glassdoor, which is known to lowball tech wages, for Washington D.C. So It isn't NY or Silicon Valley/Forest. The Median wage for a System engineer is 182K USD. At the current conversion rate that is 167.7K Euro. Unfortunately, that's your problem.

too low.

> What doesn't make sense, at any scale, is renting VMs.

I disagree. The big cloud providers will let you rent VMs across multiple availability zones in a single geographic region. That gives you better redundancy than you could get by renting one or more dedicated servers in a single data center. Yes, those same cloud providers offer bare-metal instances, but those are absurdly expensive for a company that only needs small-scale computing power but still cares about uptime.

If you're small, you can get that redundancy on a PaaS. If you're big enough to move off a PaaS, you can rent physical machines in multiple datacentres.

Size is not the only thing that dictates whether one should use a PaaS. It's entirely possible for a tiny generalist team, or even a single developer, to develop an application whose requirements prevent it from running on a PaaS. But that doesn't mean the team or solo developer should have to handle all the hassles of operating physical servers. (Source: I was that solo developer for many years.)

Do you mean PaaS, not SaaS? What other good PaaS exist besides heroku?

I did mean PaaS, not Saas! Apologies, and thank you!

I wish i had a good answer about PaaS. There are hosted Cloud Foundry services. I think CF is more sensible than Heroku, myself. The various serverless platforms are PaaS of a specific kind. I think SalesForce counts. Is OpenShift still a thing?

I'm not super familiar with Heroku and similar platforms, but if I don't rent EC2s (which I take to mean what you meant by "VMs"), how do I host and serve bespoke backend components?

Even if all it does is suck data in, perform some computation, and send it off somewhere else - are you saying there are SAAS providers that are better equipped for this?

In many cases yes, but there are shades of grey. Some systems cannot be shared, for whatever reason.

The cloud providers' main advantage when you're unicorn scale is their engineering team acts as an extension of yours. We regularly hop on calls with AWS to scope out features for them to build for us. Our parent org can pretty much snap their fingers and Google will dispatch their engineers to fix/build whatever they wanted.

That and very preferential pricing.

And a lot of people don't need that. There are a lot of applications that are highly cost sensitive but where losing some data or having some unavailability isn't a deal breaker.