Cloud or Physical Servers

Cloud Physical ServersWe've discussed the benefits of cloud hosting here at Ananova many times. There are times where the cloud does not work out, such as like Eric Frenkiel, founder and CEO of MemSQL. And you can't say the man didn't give it the old college try.

As most startups do, he relied on Amazon Web Services to provide cloud hosting services from the very beginning. However, the solution was short-lived, and Frenkiel ended up going with a more traditional physical server instead.

Cloud or Physical Servers: Why?

It seems they outgrew Amazon's cloud, reaching a stage in development where physical servers and computers were cheaper than the cloud hosting solution AWS was providing. Because of this, Frenkiel said, “I'm not a big believer in the public cloud. It's just not effective in the long run.”

This demonstrates the idea that the cloud isn't for everyone. It's great for a startup in the beginning, or a newly created website that doesn't grow very big, but for others it's just not economically feasible. Zynga, the online gaming giant, is a perfect example. They too moved away from Amazon's cloud environment and transferred it all to in-house data centers when Amazon just wasn't enough for their needs. Surprisingly though, it isn't just giants like Zynga, but smaller companies, that are switching to traditional hosting environments.

Cloud or Physical Servers: Too Expensive

Uber, ride-sharing startup company, switched over to dedicated hosting company Peak Hosting from Amazon's cloud, as have Mixpanel, analytics company, and Tradesy, online clothes-trading company.

Engineer at VMware, Kit Colbert, said, “I don't know how much this is written about…Within IT departments, public clouds do tend to get more expensive over time, especially when you reach a certain scale.”

Frenkiel found it was easier to rent virtual servers from Amazon for MemSQL in the beginning where prices were low, and its seed funder, Y Combinator, offered $10,000 Amazon credits. Of course, it seemed like a great idea. “When you're lean and just getting started,” said Frenkiel, “it's obviously the way to go.”

When prices rise, it becomes time to reconsider your options, which is precisely what happened to Frenkiel. With the site's database stretched across hundreds of servers, and more virtual machines were required for testing, the cloud became a bad idea fast.

Cloud or Physical Servers: The Turning Point

In April, MemSQL spent a whopping $27,000 on Amazon's virtual servers. If they continued for the remainder of the year, that would be $324,000 total. Physical servers, on the other hand, only cost $120,000 and would perform for at least three years. And even if they needed to add more servers, they'd still be saving money compared to what they would pay Amazon's cloud hosting services.

In fact, Frenkiel said that if they still worked with Amazon, MemSQL would have spent roughly $900,000 over the next three years! This demonstrates the value in his decision to switch over to physical servers, costing roughly $200,000. “The hardware will pay for itself in about four months.”

“The public cloud is phenomenal if you really need its elasticity,” he said. “But if you don't — if you do a consistent amount of workload — it's far, far better to go in-house.”

Even Rackspace's CTO, John Engates, agrees. “Web servers belong in the public cloud. But things like databases — that need really high performance, in terms of [input and output] and reading and writing to memory — really belong on bare-metal servers or private setups.”

This demonstrates the need to be flexible, knowing that if the need arises, you might need to jump off of the cloud bandwagon for the sake of your company's bottom line. Do you rely on the cloud? Do you see that situation changing in the next few years?

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