The reason companies don’t go with on premises even if cloud is way more expensive is because of the risk involved in on premises.

You can see it quite clearly here that there’s so many steps to take. Now a good company would concentrate risk on their differentiating factor or the specific part they have competitive advantage in.

It’s never about “is the expected cost in on premises less than cloud”, it’s about the risk adjusted costs.

Once you’ve spread risk not only on your main product but also on your infrastructure, it becomes hard.

I would be vary of a smallish company building their own Jira in house in a similar way.

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fauigerzigerk 8 hours ago | parent | next [-]

I'm starting to wonder though whether companies even have the in-house competence to compare the options and price this risk correctly.

>Now a good company would concentrate risk on their differentiating factor or the specific part they have competitive advantage in.

Yes, but one differentiating factor is always price and you don't want to lose all your margins to some infrastructure provider.

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simianwords 7 hours ago | parent | next [-]

Software companies have higher margins so these decisions are lower stakes. Unless on premises helps the bottom line of the main product that the company provides, these decisions don't really matter in my opinion.

Think of a ~5000 employee startup. Two scenarios:

1. if they win the market, they capture something like ~60% margin

2. if that doesn't happen, they just lose, VC fund runs out and then they leave

In this dynamic, costs associated with infrastructure don't change the bottomline of profitability. The risk involved with rolling out their on infrastructure can hurt their main product's existence itself.

	▲	fauigerzigerk 6 hours ago \| parent [-]
		I'm not disputing that there are situations where it makes sense to pay a high risk premium. What I'm disputing is that price doesn't matter. I get the impression that companies are losing the capability to make rational pricing decisions. >Unless on premises helps the bottom line of the main product that the company provides, these decisions don't really matter in my opinion. Well, exactly. But the degree to which the price of a specific input affects your bottom line depends on your product. During the dot com era, some VC funded startups (such as Google) made a decision to avoid using Windows servers, Oracle databases and the whole super expensive scale-up architecture that was the risk-free, professional option at the time. If they hadn't taken this risk, they might not have survived. [Edit] But I think it's not just about cloud vs on-premises. A more important question may be how you're using the cloud. You don't have to lock yourself into a million proprietary APIs and throw petabytes of your data into an egress jail.

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sam_lowry_ 7 hours ago | parent | prev [-]

Precious real-world engineering skills also play a role.

But most importantly, the attractive power that companies doing on-premise infrastructure have towards the best talent.

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d1sxeyes 8 hours ago | parent | prev [-]

It’s also opex vs capex, which is a battle opex wins most of the time.

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bayindirh 8 hours ago | parent | next [-]

Opex is faster. Login, click, SSH, get a tea.

Capex needs work. A couple of years, at least.

If you are willing to put in the work. Your mundane computer is always better than the shiny one you don't own.

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iso1631 6 hours ago | parent [-]

That's because of company policies. An SME owner will buy a server and have it in the rack the next day.

Of course creating a VM is still a teraform commit away (you're not using clickops in prod surely)

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bayindirh 2 hours ago | parent | next [-]

SME and "a server" is doing some big weight lifting here.

If you want a custom server, one or a thousand, it's at least a couple of weeks.

If you want a powerful GPU server, that's rack + power + cooling (and a significant lead time). A respectable GPU server means ~2KW of power dissipation and considerable heat.

If you want a datacenter of any size, now that's a year at least from breaking ground to power-on.

	▲	selkin an hour ago \| parent [-]
		And multiple years from the boardroom making a decision to build a data center to breaking ground.

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amluto 5 hours ago | parent | prev [-]

If you want something at all customized, it takes longer than that to receive the server. That being said, you can buy a server that will outperform anything the cloud can give you at much better cost.

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marcosdumay 2 hours ago | parent | prev | next [-]

Well, capex has a multi-year depreciation schedule and has to cover interest rates. So the simplified "opex wins most of the time" is right.

But we are talking about a cost difference of tens of times, maybe a few hundred. The cloud is not like "most of the time".

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simianwords 8 hours ago | parent | prev | next [-]

I think it wins because opex is seen as stable recurring cost and capex is seen as the money you put in your primary differentiation for long term gains.

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bonesss 7 hours ago | parent | next [-]

For mature Enterprises my understanding is that the financial math works out such that the cloud becomes smart for market validation, before moving to cheaper long term solution once revenue is stable.

Scale up, prove the market and establish operations on the credit card, and if it doesn’t work the money moves onto more promising opportunities. If the operation is profitable you transition away from the too expensive cloud to increase profitability, and use the operations incoming revenue to pay for it (freeing up more money to chase more promising opportunities).

Personally I can’t imagine anything outside of a hybrid approach, if only to maintain power dynamics with suppliers on both sides. Price increases and forced changes can be met with instant redeployments off their services/stack, creating room for more substantive negotiations. When investments come in the form of saving time and money, it’s not hard to get everyone aligned.

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d1sxeyes 8 hours ago | parent | prev | next [-]

True, but for a lot of companies “our servers are on-prem” is not a primary differentiator.

	▲	simianwords 8 hours ago \| parent [-]
		i think we are saying the same thing?

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TonyStr 8 hours ago | parent | prev [-]

Capex may also require you to take out loans

	▲	spacebanana7 5 hours ago \| parent [-]
		Which is incredibly difficult in the public sector. Yes, there are various financing instruments available for capital purchases but they're always annoying, slow and complicated. It's much easier to spend 5k per month than 500k outright.

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aragilar 5 hours ago | parent | prev [-]

It depends. Grant funding (e.g. in academia) makes capex easier to manage than opex (because when the grant runs out you still have device).