Cloud Computing Pricing

For my current employer, we are doing a migration to AWS of our complete infrastructure. It was a while I looked into the pricing of cloud providers, and I was a bit shocked to hear that the type of servers we needed would cost a pretty hefty price due to the required CPU and memory requirements. When I looked into it though, I noticed that even when you only use very limited resources, the prices are still rather high.

In my mind, it was pretty normal to be able to rent some server capacity for a couple of dollars per month. This is however not possible with any of the three big cloud providers. There are some smaller cloud providers that have some cheaper options and may be better suited, but in this blog post I want to focus on the big three: AWS, Google and Azure.

Let's first look at the cost of renting a server (typically with some small boot disk):

	2 vCPU / 8GB	4 vCPU / 16GB
AWS	$23 - $54	$46 - $107
Google	$32 - $70	$63 - $140
Azure	$23 - $60	$46 - $121

The range of the price is caused by pricing reductions when you commit to the instance for 3 years. This is not something you want to do when you are just starting up your business since you don't know how your usage will evolve or whether or not you will even have any business in a year from now. I also don't know how these providers handle requests to increase the capacity of a reserved instance. Can you upgrade the instance and still keep a reduced price? Or do you have to cough up the entire price + the cost of the new instance?

In my case, we could definitely figure out a size that we can use for the next 3 years (which will be a lot more than the 4 vCPU / 16GB that is listed here). But even in the discounted price, it is not that cheap. The monthly price may throw you off and may it make seem cheap, but let's calculate how much you will spend in total for those 3 years: $46 x 12 x 3 = $1,656

That may still not seem that much, but this is only for the server instance, you will still need to have some attached disk to actually store data.

	250GB	1TB
Amazon	$22	$90
Azure	$11 - $19	$41 - $76

Paying this much each month for a hard disk seems crazy. I can buy an decent 1TB SSD for less than $100. Assuming the disk will survive for 5 years, it means it will cost you less than $2 per month. If you want to make sure your data is save, you will of course want to have some RAID configuration, meaning you have to buy at least 2 of it, but even then the cost is just $4 per month.

A disk is something that you can easily calculate whether or not it is a fair price. The prices charged here, do not seem fair to me. I created my own NAS for about $1,000 (server + disks), which has a total capacity of 20TB with redundancy to prevent data loss. A 20TB storage on a cloud provider would cost that much each month.

An actual server is a bit more complex to calculate, but we can make perform some basic calculations:

• 16GB DDR5 ECC = $100

• AMD Ryzen 7 9800X3D = $600

These two components are not the only ones you should consider, but are the most important parts of your server. Based on this, I would be confident to say that you can build your own server for about $1,000 (not including storage). The CPU used here has 8 cores, which is more than what we looked at for the cloud providers, and the price at the cloud providers was $1,656 for 3 years. Do you really think your server will go down in as 3 years?

There are of course some other caveats, such as the required hardware to setup the network. What about redundancy and failover? What about the maintenance cost of managing all this hardware yourself? All of this are valid points, and should be considered. The thing is, you may not have that much overhead to manage the hardware as you may not need 99.99% uptime and automatic failover.

For a startup however, I understand that investing $1,000 in hardware may already be too much and paying a monthly cost is much easier. Just know that the very low cloud computing prices seem to be a thing of the past. So how did we come here? And what could be a reason for these high prices?

One reason of course, is the maintenance cost that these cloud providers have. They have to pay people to manage the hardware. They have to make sure everything stays up and running and they have to keep investing in new infrastructure, pay the energy bills and such.

But I think there is something else that has happened as well, something that may be more important to this evolution. The idea of cloud computing started by companies renting out the server space they had left. They already made the cost of buying the server. The idea of renting out the capacity you are not using is just an optimisation strategy. You already decided to buy the server for your own business, but you currently don't need all of it. Instead of just having it go to waste, you could just rent it out.

This has changed, there are now complete data/server centres that are build with the sole purpose of renting it out, to provide all of it as cloud servers. This means that the entire cost of the server now has to be charged to the actual users, and this not only includes the cost of the server, but also the cost of the building in which the server is located.

Moreover, companies have gotten much more familiar and eager to use cloud computing. It seems that we no longer want to have our own servers, and we are willing to pay the price for that, no matter what. In recent times, there have been however some bigger companies that have pulled out their applications from the cloud and started running it again on their own dedicated servers, saving them lots of money.

I believe that cloud computing is something very valuable for startups, scale-ups and small companies. But as your requirements start to increase, it becomes more and more important to re-consider whether or not the cloud is still the best option.