When you compare raw hardware costs vs VM costs it seems ludicrous. But it's more reasonable than you expect.

First if you commit for 1 or 3 year (like you'd do with hardware) you can get 30-70% discounts already.

Then you have to factor in costs of: replacement hardware, energy, cooling, networking. But the big one is people. Someone has to install all that hardware, fix it if it breaks etc. They provide everything like that for you.

If you are tiny (<10 servers located in your business building) it can be worthwhile because it's just a side job of someone you need anyway. After that you need quite a large scale for it to become really attractive.

> But it's more reasonable than you expect.

If it was reasonable, there would not be other companies providing the exact same product at a fraction of the cost:

https://www.linode.com/pricing/

Aren't ubuntu images free to use? Or are you talking about the ones with support entitlements?

We pay a monthly cost for every Ubuntu VM that we have. Perhaps there is some "get X free VM's" included with a certain Office365 license or something; but ours are certainly not free. You could probably make the exact same calculation as they have done here. How long can rent an Ubuntu VM in Azure for the price of buying actual hardware running Ubuntu etc.

I don't doubt that the VMs themselves cost money. I only doubt that the ubuntu images cost money. In other words, the cost for the VMs should be the same if you installed debian (or whatever home rolled distro).

Yes, no additional cost to install Ubuntu on the VM's.