What is more profitable – your own hardware or the cloud?
With your head in the clouds
Everyone knows that any business starts small: today you hire your first employee and issue invoices through online accounting, and tomorrow you will be surrounded by terms such as 1C, CRM, Dev, Test and Prod, and the company’s staff should be has been replenished with a whole list of new vacancies.
In an attempt to find answers to all emerging questions through search engines, targeted advertising algorithms promptly offer the services of cloud providers. In their offers, the clouds promise to take care of all the worries: install the OS, configure the network and install the necessary software. And all this for a “small” monthly payment.
In most cases, the above amenities win over the potential client, and the cloud provider gains a long-term relationship with the client. However, sometimes the laws of economics take over, and you decide to calculate how much the cloud costs, and you may come to very ambiguous conclusions.
Today we will talk about clouds and compare them with our own IT infrastructure. Let's question both paths of the company's development and try to draw a conclusion which path to choose.
Nuances of cloud services
Overcommit
Many providers use a technology called “overcommit”, its essence lies in the fact that more virtual resources are allocated than they physically have. The logic of the mechanism is as follows: not all clients will use resources at full capacity at the same time, which means that part of their resources can be allocated to those who need more of them. Or by default, with seemingly identical characteristics, depending on the tariff, overcommit will be configured differently, providing more resources to those who pay more. As a result, you may find that your virtual processors are not running at full capacity, and performance drops at the most inopportune times.
5GHz virtual machines
Sometimes there are more controversial marketing moves. For example, virtual machines with a processor speed of 5 GHz are advertised. This sounds impressive, but if you understand the server processor market, it becomes obvious that such indicators are practically unattainable within a cost-effective data center.
Server processors are easily scalable by increasing the number of processing cores, but increasing the clock speed remains a task with an asterisk for chipmakers. High frequencies require higher core voltages, which dramatically increases the heat dissipation (TDP) of multi-core chips. It is also necessary to maintain a high level of die rejection, which in turn significantly increases the cost of the final CPU.
In most cases, the 5 GHz frequency turns out to be the ill-fated Turbo Boost frequency, which is simply unattainable under significant server load.
What kind of iron do we have?
Additionally, it is often difficult to know exactly what hardware your virtual machines are running on. Providers do not always disclose complete information. You may not know which processors are used, what their real frequency is, or what server architecture is. All of these can have a significant impact on the performance of your applications.
Checking the actual processor frequency in the cloud is often difficult. The lscpu command may not display accurate information. You might see something like:
$ lscpu
Architecture: x86_64
CPU op-mode(s): 32-bit, 64-bit
Model name: "QEMU Virtual CPU"
CPU MHz: 3400.000
Hypervisor vendor: KVM
Virtualization type: fullAs you can see, there are no 5 GHz frequencies here. You may end up paying for resources without getting the performance you expect.
Own equipment: the company’s development path
Now let’s move from theory to practice, using the example of a business and its needs for IT infrastructure. In Russia, the path of many companies begins with the implementation of 1C, and the choice between the cloud and their own server becomes one of the first serious decisions for entrepreneurs. This choice can significantly impact business development, flexibility and financial performance. Let's look at how the needs for IT infrastructure change at different stages of business development and what advantages your own equipment provides.
Small Business or Startup Configuration:
Imagine a small mobile app development startup. A team of five people rents a modest office and begins their journey. The founders understand that they need a reliable system for accounting, project management and code storage, but the budget is limited. Most likely, in this case, the choice will fall on a similar configuration:
Dell PowerEdge T140 Server Platform
Processor: Intel Xeon E-2286G (6 cores/12 threads, 4.0–4.9 GHz)
RAM: 64GB DDR4 ECC UDIMM
M.2 SSD Samsung PM983 PCIe 3.0 960 GB (for databases)(50K IOPS)
2× SSD Intel S4510 960 GB in RAID 1 for OS and backups (36K IOPS)
DELL iDRAC interface for remote system administration
The cost of such equipment will be: about 170,000 rubles
This configuration copes well with 1C tasks, allows you to store the source code of projects, launch a task management system and a small portfolio website. The processor performance is enough to compile code and run several virtual machines for testing. SSD drives provide fast work with databases and file systems.
In the cloud, similar resources would cost 30,000 – 50,000 rubles monthly. Thus, your own server pays for itself in 5-6 months. But it's not just about the money. Own hardware gives the team full control over the data and the ability to fine-tune it to their needs. For example, developers can experiment with different configurations without worrying about overspending on cloud resources.
In addition, having its own server allows the company to ensure a high level of data security. This is especially important when it comes to developing applications for corporate clients who are very sensitive to privacy issues.
Configuration for medium business with high loads:
Three years have passed. The startup has grown into a successful company with a staff of 50 people. Large clients have emerged that require high performance and system reliability. The company develops not only mobile applications, but also complex web services with high load.
Server platform Supermicro AS-2024US-TRT
Processors: 2× AMD EPYC 7F72 (24 cores / 48 threads, 3.2–3.7 GHz)
RAM: 256 GB DDR4 ECC REG
5× U.3 SSD Intel D5-P5530 x 1.92 TB (75K IOPS)
6× SAS HDD 1.8 TB 10K RPM(RAID 5 for backups)
RAID controller: LSI 9361-8i 1GB
IPMI 2.0 for server management
Total cost: about 780,000 rubles
This system is able to cope with large volumes of data, highly loaded databases and many simultaneous users. It ensures the uninterrupted operation of the company’s increasingly complex infrastructure: CRM, ERP, analytics systems and much more.
Two powerful AMD EPYC processors allow you to run multiple virtual machines, which is ideal for the microservices architecture that the company uses in its projects. A large amount of RAM ensures fast work with databases and caching of frequently used data.
SSDs are used for frequently accessed data and operating systems, and HDDs are used for storing large amounts of data, such as logs and backups.
Renting such a configuration in the cloud would cost 150,000 – 200,000 rubles per month. Your own server pays for itself in 4-5 months, while the company gains full control over the data and can flexibly customize the system to suit its needs.
Importantly, such a powerful system allows the company to quickly deploy new projects and experiment with new technologies without having to negotiate cloud resource costs every time. This significantly speeds up the process of developing and bringing new products to market.
Configuration for virtualization:
The company continues to grow. Branches are opening in other cities, and there is a need for isolated environments for development, testing and production. In addition, some employees are starting to work remotely, and they need secure access to corporate resources.
Server platform H3C UniServer R4950 G5
Processors: 2× AMD EPYC 7713 (64 cores / 128 threads, 2.0–3.675 GHz)
RAM: 512 GB DDR4 ECC REG
4× U.3 SSD Intel D5-P5530 x 1.92 TB (75K IOPS)
4× SAS HDD 1.8 TB 10K RPM(RAID 5 for backups)
RAID controller: Broadcom 9560-16i 8GB
HDM(IPMI 2.0) for server management
Total cost: about 990,000 rubles
This solution allows you to deploy multiple virtual machines for different tasks: separate environments for development, testing and production, isolated systems for different departments. Remote workers have access to virtual desktops, which improves security and ease of use.
AMD EPYC processors are great for virtualization workloads thanks to their high core count and support for modern virtualization technologies. This allows you to effectively isolate the workspaces of different projects and departments, while ensuring high performance for each virtual machine.
SSDs host operating systems and virtual machine databases, which ensures their fast operation, while HDDs in RAID 5 store large amounts of data, for which storage reliability is more important than access speed.
A high-performance RAID controller with a backup module provides an additional level of data protection, which is critical when many virtual machines with different projects are running on the same physical server.
In the cloud, similar resources would cost from 200,000 to 290,000 rubles per month. The payback period for your own equipment is 4-5 months. But the main advantage here is not savings, but flexibility. The company can quickly create new virtual machines for new projects, allocate additional resources where they are needed, and quickly scale the infrastructure without additional costs.
Configuration for machine learning tasks and working with neural networks:
The company becomes the market leader in its segment. Management understands: in order to maintain leadership, it is necessary to introduce innovative technologies, in particular, artificial intelligence. A decision is made to integrate AI into the company’s products and use it to optimize internal processes.
Server platform Supermicro SYS-1028GR-TR
Processors: 2× Intel Xeon E5-2699v4 (22 cores / 44 threads, 2.3–3.6 GHz)
RAM: 512GB DDR4 ECC REG
2× SSD Intel S4510 x 1.92 TB in RAID 1 (36K IOPS)
4× NVIDIA Tesla A100 40GB
IPMI 2.0 for server management
Total cost: about 3,398,000 rubles
This powerful system is designed to work with artificial intelligence, big data analysis and computer vision. It allows the company to develop its own AI models to personalize content, automate sales, improve customer support and optimize business processes.
Intel Xeon processors provide high performance for data preprocessing and machine learning management. A large amount of RAM allows you to work with large datasets without constantly accessing the disk subsystem.
The main feature of this configuration is the presence of four powerful NVIDIA Tesla A100 GPUs. These maps are specifically designed for machine learning tasks and provide phenomenal performance when training neural networks. This allows the company to experiment with the latest neural network architectures and process large amounts of data in real time.
SSDs in RAID 1 provide fast access to data and protection against information loss if one of the drives fails. This is critical given that the process of training neural networks can take days or even weeks, and losing intermediate results would be catastrophic.
Renting comparable resources in the cloud would cost from 900,000 to 1,200,000 rubles per month. At these prices, your own equipment pays for itself in 3-4 months. But it's not just about saving. Owning your own machine learning equipment gives a company several key advantages:
Full control over your data. In an era where data is becoming a key business asset, the ability to store and process it on-premise is critical.
No restrictions on time of use. In the cloud, GPU rental costs can be very high, limiting your ability to experiment. With their own equipment, the team can conduct long-term experiments without looking at the counter.
Possibility of fine tuning. By owning the equipment, a company can optimize its operation for its specific tasks, which is often impossible in the cloud.
Predictability of costs. Cloud providers may change prices or introduce new tariffs. With its own equipment, the company is protected from such surprises.
Advantages of own equipment
When you have your own equipment, you know exactly what is installed and can customize everything to suit your needs. There are no surprises with “cut down” processors or limited memory channels. You know all costs in advance – no hidden fees or unexpected rate increases.
Your resources belong only to you. There is no problem of “noisy neighbors” where other clients can consume most of the server's power. The data is stored on your equipment, you control access to it and are responsible for its safety. You can add resources when needed, upgrade the system, change components. And all this without unnecessary overpayments and dependence on the provider.
Flexibility and scalability: myths and reality
The cloud is often touted as an infinitely scalable solution. But in reality the picture may not be so rosy. Additional resources may not be available when needed, or their cost may be unexpectedly high. With your own hardware, you plan for scaling in advance, add components as your business grows, and always know what it will entail.
For example, if you urgently need to increase power during peak periods, the cloud provider may offer to do this, but at an increased rate. With your own equipment, you can reserve power in advance without fear of any limitations other than high start-up costs.
What is often forgotten
When estimating the cost of cloud, additional costs are often overlooked. And they can be significant. Many providers charge for incoming and outgoing traffic. At high loads this can become a significant expense. Data backup services are often paid separately. Extended support packages and SLAs can also significantly increase the final bill.
For example, if your application processes large amounts of data, the cost of traffic may be a significant portion of your overall costs. Some providers charge for both incoming and outgoing traffic, which can be an unpleasant surprise at the end of the month.
Disadvantages of on-premise solutions:
Despite all the advantages, on-premise solutions also have their disadvantages, which should not be forgotten.
High start-up costs
The first thing a company faces when switching to its own equipment is a significant initial investment. If you pay gradually in the cloud, then here you need to pay a large amount at once. For smaller companies or startups, this can be a major hurdle. However, do not forget about such options for financing the purchase of equipment as leasing, installments and credit, the monthly payment for which may be similar to the cloud provider’s tariff, and at the end of the payments, unlike the cloud, you will not lose access, but will have full ownership of your hardware .
In addition, you need to take into account not only the cost of the servers themselves, but also the costs of organizing a server room or colocation in a data center: cooling systems, uninterruptible power supply, fire extinguishing, etc. All this requires additional investment.
Personnel issue
For small and medium-sized businesses, personnel costs to maintain their infrastructure are often limited to one single system administrator or DevOps engineer, however, even for small and medium-sized businesses, the infrastructure grows and becomes more complex over time. And also a small business tends to become medium-sized over time, and a medium-sized business becomes large, and here one DevOps/Sysadmin starts to simply physically not cope.
Larger infrastructure requires more skilled maintenance. You will need additional system administrators, security specialists, perhaps even an entire IT department. This means additional costs for salaries, social packages, and staff training. At the same time, there is a shortage of truly qualified personnel in the IT field in the labor market. Finding a good professional who can properly set up and maintain your infrastructure can be difficult. And if such a specialist leaves, replacing him can become a serious problem.
But on the other hand, in large companies no one will entrust the cloud infrastructure solely to a cloud provider, and you still can’t get away without your IT department. In addition, the number of employees required to service growing capacities does not rise exponentially, but gradually, sometimes even reaching a plateau thanks to automation and optimization of processes.
Infrastructure Responsibility
When you use cloud services, the responsibility for the health of the infrastructure lies with the provider. In the case of on-premise solutions, all responsibility falls on you.
You need to independently provide:
Uninterrupted operation of equipment
Timely software updates
Protection against failures and attacks
Data backup and recovery
Scaling to meet growing business needs
Any failure or downtime can lead to serious financial losses and reputational risks. And the only guarantor of stability in this case is you and your team.
Difficulty with scaling
While we've talked about the flexibility of on-premise solutions, scaling can be a challenge in some cases. If you suddenly need to significantly increase capacity, this may require time to purchase, install and configure new equipment or upgrade old equipment. In the cloud, this process usually happens much faster. However, if you have organized a cluster with excess capacity in advance, then it will not be difficult for you to scale its resources; the process will be comparable to that of renting a cloud.
Conclusion
So what is cheaper and better – your own hardware or the cloud? There is no clear answer. It all depends on the specific situation, needs and capabilities of your business.
Owning your own equipment may be more profitable in the long run, especially under high and stable loads. It gives you complete control, predictable performance, increased security and customization flexibility. But it requires significant initial investments and qualified personnel for maintenance.
The cloud, in turn, allows you to start with minimal costs, easily scale and not have to worry about maintaining the infrastructure. But with long-term use and high loads it may be more expensive. In addition, you lose some control over your data and are dependent on the provider.
The optimal solution often lies somewhere in the middle. Many companies choose a hybrid approach, combining their own infrastructure and cloud services. This allows you to get the advantages of both options and minimize their disadvantages.
Whichever path you choose, the key is to carefully analyze all the factors and make the decision that best suits your business needs.
What choice would you make? Share your thoughts and experiences in the comments. We're interested in hearing how you decide between the cloud and your own infrastructure.
