> they're making a profit off of this service, meaning it's more expensive than what we were doing!

I hope you can see that this is a logical fallacy known as "zero-sum thinking". It is not only possible for a business to profit while lowering prices, it is universal throughout the economy. Tomato farmers make a profit selling tomatoes at a price much lower than the cost to grow tomatoes at home. Bakeries radically undercut the cost of home baking. It is obviously cheaper to buy motor fuel at the gas station than it would be to buy crude and refine it yourself.

The main reason people think their on-prem is cheaper than cloud is that they are bad at accounting.

https://arstechnica.com/information-technology/2024/10/basec...

> [2023] 37Signals expected to save $7 million over five years by buying more than $600,000 worth of Dell server gear and hosting its own apps.. [2024] update: it's more like $10 million (and, he told the BBC, more like $800,000 in gear). By squeezing more hardware into existing racks and power allowances.. transferring its 10 petabytes of S3 storage into a dual-DC Pure Storage flash array, 37Signals expects to save money, run faster, and have more storage available.

Your overall point isn't wrong, but...

> Bakeries radically undercut the cost of home baking

This is not always true anymore. I bought a (nice, expensive for its product category) bread machine on Amazon for something like $300. I can bake a loaf of spelt flour bread with nuts and raisins for ~$2 in ingredients at unoptimized grocery store prices. The more-or-less same loaf from a bakery would cost me probably ~$8. Now, that loaf from the bakery would be nicer - artisan etc. - but the bread machine gives a nice crust, I slice it up to throw in the freezer anyway, and the bakery loaf isn't worth the premium to me. I'll see a return on my investment in about a year.

Industrialization should reduce prices while improving quality. In many cases this is true. But it's worth it, sometimes, to have the actual numbers in mind, in case the industrial producers start to forget that they are competing with home processes and raise their prices without consideration. Sometimes, owning your means of production will be cheaper than paying someone else to pay R&D, rent, labor, and marketing.

You’re right but this isn’t tomato farming. This is writing software to automate certain actions and expose that automation as an api.

This is an attainable goal for just about any skilled software development team, and the analogy of a tomato farmer doesn’t really fit.

AWS has to provide a generalized solution to serve a wide range of customers and needs, while a company writing its own stuff needs only provide a solution for its own needs.

Damn near everything I do can be expressed as EC2, S3, and Lambda. And IAM.

Those are not challenging APIs to write in order to expose basic functionality and authentication, and such an API existing in my employer 10 years ago would have proven cheaper than AWS, especially for bandwidth; it’s all the manual steps and manual checks that needed to be done within my employer which drove us to AWS quickly.

We could definitely do EC2, S3, and Lambda cheaper than AWS charges us today.

So, to dig into (and maybe stretch) one of your analogies a little bit:

> Tomato farmers make a profit selling tomatoes at a price much lower than the cost to grow tomatoes at home.

This is because at home, you have an elastic need for tomatoes. One week you need a few, the next week you need none, the next week you need a lot. In that case, yes, growing your own tomatoes would be very silly. (This part of the analogy works with on-demand instances.)

However, if you aren't a home, but you're a busy restaurant, you're not buying tomatoes from the grocery store. You have a regular, fairly fixed capacity, and so you go with a produce vendor who's able to serve that need at a decent price. Part of the reason you're able to get a cheaper price is through volume and due to the regular-ness of the business. (this part of the analogy works with reserved instances.)

Okay, so let's move from tomatoes to the actual building of a restaurant itself. Similar to a reserved instance, renting a building is a decent way to get started with less capital, and you have fairly consistent capacity requirements. But at some point, you realize what McDonalds did: owning the building and land beneath it ends up being a great deal at certain scale. Because that ends up being cheaper still, in the long run. This is closer to on-prem. (Okay at this point this analogy is getting pretty silly but it was fun to try and work through it...)

So, the trick is, for a lot of organizations, they could realize the benefits of owning their own hardware, but to get back to your original analogy, running your own hardware comes with its own set of costs that may make it not worth it. You have to have staff to operate everything, you have to manage all of the various supplier relationships, keep track of software licensing fees, etc etc etc. Even with all of this, as my sibling comment shows, often this can be cheaper than using the cloud.

But one way of looking at Oxide is, we are making it so that it's simpler to own your own hardware, thanks to all of the integration work we do. You don't have to manage a ton of vendor relationships, you have "one throat to choke," as they say. You don't have to keep track of software licensing fees, there are none. You don't need to build out your own software to put the whole thing together, we give it to you. Etc.

So yes, just like a household is best served by going to the supermarket, individuals aren't ever going to buy Oxide. But there's a lot more out there than just households. And larger organizations have fundamentally different needs than they do.

> The main reason people think their on-prem is cheaper than cloud is that they are bad at accounting.

I mean, there's also base accounting stuff that differs significantly between the two, like opex vs capex spend. Not that I'm an expert in that, mind you.