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Date:
Feb 20, 2014

Startups, It’s Time to Graduate from Amazon

startups-time-to-graduate

7 Years of “Cloud Inflate-uation”:

For about seven years, the IT industry and its pundits have been infatuated with the “cloud” – specifically Amazon Web Services (AWS). Tech startups and their investors have flocked to AWS with inflated expectations on the notion that cloud economics were better than hosting applications themselves. After all, start-up resources are tight, agility is required, and any time not wasted on infrastructure management can be put toward business and product differentiation.

It all makes sense, but start-ups and investors alike are now finding that much of AWS’s promise is not being met. After as much as seven years of doing this “cloud” thing, many are having second thoughts about a cloud ONLY solution. AWS was expected to deliver reliability, cost savings, flexibility, and good support, but these benefits have not been realized and it’s the customer that suffers.

 

The Shift Away from AWS

Plenty of customers aren’t keeping quiet about their dissatisfaction anymore. Smaller Start-ups like Moz, or larger companies like Target. One customer, Moz, reports spending about 25 percent of revenues on AWS cloud services – that’s ENORMOUS for a start-up – and this small fortune kills their margins. Adding insult to injury, they weren’t even getting what they paid for and experienced significant product instabilities and poor customer service.

Moz is the latest high profile departure from AWS, CEO Sarah Bird’s blunt criticism of Amazon Web Services (AWS), which she says the company is leaving for reasons of cost, product stability, and service. Moz spent almost $2.4 million on cloud services—the “vast majority” on AWS—in 2011, or 21 percent of that year’s revenue; $6.5 million in 2012, 30 percent of revenue; and $7.2 million last year, 25 percent of revenue. These costs are far out of proportion for what Moz gained during those years.

“We create a lot of our own data at Moz, and it takes a lot of computing power,” Bird says in her 2013 Year in Review post. “Over the years, we’ve spent many small fortunes at Amazon Web Services. It was killing our margins and adding to product instability. Adding insult to injury, we’ve found the service… lacking.” Ouch!

The fundamental shift in perception of these services as you see Moz’s CEO articulating, is happening in the industry today and it marks a turning point for the cloud, however these AWS shortcomings should not affect every cloud business out there. There are, in fact, plenty of solution providers that meet all expected requirements and then some. AWS customers are all too familiar with major outages so when looking at these giant AWS bills every month, things just do not add up. Trying to reach real customer support is fruitless. As these start-ups have grown, they now need – and deserve – top performing flexible infrastructure with predictable cost models; the AWS solution simply cannot deliver. At the most fundamental level alone, consider the fact that many applications are just not meant for a pure cloud set-up. It is well documented and argued that AWS is not suited to run many applications due to fundamental reliability and performance reasons, such as big data applications, databases, or any I/O intensive applications.

 

Enter Hybrid Hosting. 3.5X Cost Savings!

dedicated-lineupHybrid cloud” is the new buzz and all the pundits are now convinced that it is the answer. We certainly agree, as long as the vendor does it “right”. Hybrid has to be done in a fully automated, and scalable fashion. It can’t be done in a “custom” and manual fashion. At the surface, a hybrid cloud solution meets all the business needs as it enables start-ups to graduate from pure expensive utility billing to more predictable billing. It also allows start-ups to move applications in need of performance such as databases, big data farms, et al. to much more robust bare metal dedicated servers vs. virtualized cloud servers. But Hybrid also allows start-ups to retain all the benefits of cloud: web app scalability, ability to spike at a moment’s notice, the ability to tune the environment specifically to the actual utilization, and so on. Over the next few years we expect to see a mass exodus from AWS and similar “cloud only” environments.

In the following simplified example, the savings are quite clear, and an organization sees further benefit from the fact that the cloud aspects of Hybrid Cloud are on-demand. What you see here is a two server configuration, one dedicated and one cloud-based versus two virtual cloud-based instances in AWS services. The savings only compound when you introduce any number of a multitude of configurations that put the highest demand computing requirements on the right type of equipment at a better cost.

CMS Reference Architecture – Hybrid vs Amazon

Cost Comparison between Hybrid Hosting ($828.00) vs Amazon ($2794.00)

All Hybrid Clouds are not equal!

The hybrid cloud answers the hosting demands of modern organizations by bringing the performance elements of dedicated systems into the picture – while delivering all the benefits of the “cloud” that investors and start-ups love. However, we believe that “ordinary” hybrid is incomplete, unless you couple the automation required to make it a completely on-demand solution. Be aware that “custom” hybrid solutions are expensive, includes hardware to buy or rent to enable, require contracts and are time intensive to implement or move. On the other hand, an “on-demand” hybrid cloud is fast, flexible, and completely customized by you – built into your hosting environment exactly the way you want it at the click of a few buttons. No contracts. Customers get the high-performance of bare metal dedicated servers combined with a flexible, rapid cloud in one easy to manage, on-demand and efficient product. It is a natural place for a start-up to host its environments – and best of all it will grow with the business.

Would love to hear about your experiences, and thoughts.   If you feel the seven year itch coming on and are curious about the hybrid cloud, give Codero a call or chat with one of our hosting specialists.

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