Your Vision May be Clouded

I took a lot of crap when I decided to vertically integrate our business four years ago and I invested around $40,000 with Dell to buy our own server cluster. Right then THE CLOUD was the hot new thing, and still is and I was not getting on board. I leased a rack at a respectable Seattle based hosting facility and my wife added the ability to unbox and rack Dell 2950 servers to her long list of talents. The hosting facility team would have done it for us, but we like to get our hands dirty.

That was the most work we did to set up our own server cluster. Four years later we have a 99.9% uptime record and we run a profitable company with an ad network, real-time analytics product and a free virally distributed service off our cluster of 20 machines. When we mail our customers we send over half a million emails in less than 24 hours off our own email server. We serve between 400 and 800 application requests per second all day long.

During the last four years I’ve watched friends and acquaintances get burned by the cloud either due to down time or cost. We pay $3400 per month to host our 20 dedicated machines in a single rack. We have a gigabit connection to the Net and our average bandwidth throughput is around 125 megabits per second constantly.

I’m tired of the Wired Magazine crowd giving me crap for not “being in the cloud” or “getting with the cloud” or whatever. So I’m throwing this down: During the last 4 years I’ve had 99.9% uptime and I’ve spent a total of $190,000 during those 4 years on hosting, which includes the capital investment in the servers. We’ve had a constant throughput of 80 to 120 megabits per second (increasing over time) and roughly 40% avg CPU usage on 20 dual CPU machines (with dedicated Intel E5410 CPU’s each with 4 cores).  As I mentioned we do 400 to 800 app requests per second and we also have an average of 25,000 concurrent connections on our front-end server. I’ll bet anyone who reads this a beer that you won’t find a cloud provider who can do this for you for less than 3X what I’ve paid. [That works out to $3,958 per month.]

If you think having your own dedicated servers in a colocation facility ties you geographically to one place, it doesn’t. I work wherever I want. For 3 out of the last 4 years I was in Seattle. The last year I’ve been in Colorado. I spent 3 weeks in France this month and while I was there I diagnosed a failing drive in one of our servers, ordered the replacement from Dell which will arrive today and be racked by the support team at our hosting facility. We’ve done hardware replacements or upgrades like this many times, including ordering new servers, upgrading memory, upgrading Ubuntu versions and it’s no big deal. A local support person with an anti-static strap and a basic knowledge of linux shell commands can resolve 99% of issues that come up.

I encourage everyone reading this to challenge the marketing hype around THE CLOUD. Go to Dell’s site, get a feel for price/performance, call your local colo provider and get prices on a full rack with a gigabit connection. You will almost certainly be surprised at the bang you’ll get for your buck and how easy it is to manage your own physical machines.

Understand that THE CLOUD exists as a buzzword to help software companies sell more software as a service. It’s sad when software startups who should be using the buzzword to sell more service get taken in by the marketing and outsource their core infrastructure.

15 thoughts on “Your Vision May be Clouded

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  3. You say 99.9% uptime like there is some accepted criteria for uptime. Do you count planned outages by your single colo provider a downtime? Also 99.9% is 4 full days of downtime every year… That’s pretty bad IMO!

    Anyway, with just one rack, you are pretty susceptible to a provider failure. With a cloud provider you would be able to spread across availability zones and/or regions, further mitigating your risk.

      • How embarrassing… there are three things I have to say to that.

        1) you’re totally right

        2) I have no idea where that idea came from but it has been wedged in my brain for quite some time without actually having done the math to confirm 99.9% uptime is 8.76 hours of downtime per year.

        3) the third is.. .. uuuuhh.. rrr… oops!

  4. Well – IMHO there is only one thing to select cloud.

    They give you quick exit strategy. Once you decide that you don’t need an such resource you can leave them and pay less.

    If you bought own hardware, colocation, setup things and other related work you can’t abandon them quick.

    PS: Don’t blame me – i use both. I had few boxes in local colocation spaces but for fastest delivery i use Amazon CloudFront (only for media files).

    • Thanks for the comment Peter (And Joe, forgot to thank you mate). Don’t want to seem like all I do is argue with people who are kind enough to take the time to read my blog, but I have to disagree here too.

      One of the biggest problems with any cloud provider is vendor lock-in. It’s great for the vendor, like Amazon. You write a lot of custom code to talk to their cloud API’s and you have to throw it all away if you move. If you have your own hardware, this isn’t a problem because all data center’s speak TCP/IP and if you don’t like Dell you can switch to HP.

      So in reality a cloud provider is working hard to create vendor lock in. A colocation provider or hardware vendor like Dell doesn’t really have that option, since you expect to be given a ethernet cable that speaks TCP/IP or rackable servers that speak Ubuntu or Windows, etc. Even rack configurations are standard. You can simply unrack your servers at one data center and re-rack them at another if you’re so inclined.

  5. First I gotta say I’m not a cloud zealot. Just playing devil’s advocate here…

    In your cost comparison, please figure out the average # of hours per month you spend doing all those things you mentioned:

    * diagnosing hardware issues
    * ordered hardware and replacement hardware
    * communicating with support team at your hosting facility
    * other hardware replacements/upgrades
    * software upgrades

    Then multiply by how much you value an hour of your time…

    PS: Did Dell pay you to write this? :)

    • Hi Joe,
      I spend usually zero hours a month doing any of the above. This last month I spent around 2 hours ordering a new HDD after getting an alert on predictive failures on the drive and sending a support request to our data center to let them know to expect the drive.

      Once the servers are installed and running, unless you have a problem, which is rare, there actually is very little to do.

      This should give you an idea of whether or not Dell pays me anything:

      I’d like to play devils advocate with you for a moment: Take my numbers and run them through a cloud providers pricing plan. Let me know what you find.


        • Yeah I know. One day I’m going to sit down and spreadsheet a bunch of cloud providers alongside colo providers with the hardware investment, amortization, the whole deal.

    • As an aside, the math of “how much do I value my time” doesn’t apply well in startups. Lets test it:

      My time is worth $150 an hour. Lets say I spend 40 hours a month on ops that a cloud provider could take over. [That’s not the case, but lets say]. That suggests the cloud provider could charge me $6000 a month more than I’m paying now and I’d still break even. So I move to a cloud provider. Where does the $6K come from? Well I said my time was worth $150 per hour. So since I have all that spare time, I should now either invest it in my business and get that $150 per hour or go and consult at $150 an hour. Well consulting to pay my startups hosting provider doen’t sound like such a hot idea because that’s what I started a biz to get away from. So instead I invest the time in the business. Problem is that the ROI in that investment only shows up a year later, and I need to pay my fancy new cloud provider $6K in advance. So the only option is to raise money, lose equity and have yet another investor breathing down my neck.

      Unfortunately the math of valuing one’s time is what a lot of startups apply and what causes them to raise money and give a way round after round of equity. I’ve been accused by folks in the valley of of scrounging for pennies in the couch with an approach like this, but it’s why we’re profitable and still own and control our company.


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