Cloud Costs Skyrocket

Published · Jun 08, 2021

Andreessen Horowitz published a research paper on the rising costs of the public cloud. The authors, a tech venture capitalist firm, state businesses are losing billions on cloud infrastructure bills.

Large companies usually spend more on renting cloud infrastructure and management than it would cost them to run the same workloads on-premises—even when taking into account the costs of migration.

The experts estimate some $100 billion is lost among the top 50 software companies. The global loss might be in excess of $500 billion. And since there are only three major players in the industry with a high barrier to entry, the chances of the prices dropping are slim.

What Are the Alternatives?

Transferring to an on-premises or hybrid setup can lead to massive savings for organizations. Conservative estimates for companies spending over $100 million on infrastructure are a 50% cost reduction, including engineering costs.

The authors of the paper admit migrating workloads from the public cloud can be a cumbersome process.

However, the projected savings are more than likely to be worth it.

The primary example in the article is Dropbox. The company saved $75 million in two years after moving away from Amazon Web Services and effectively doubled its profit margins.

One thing that the researchers neglect to mention, though, is that Dropbox had about 600 petabytes of data in cloud storage. That means it could afford to design specific software and data centers for its own needs.

The engineers at Dropbox stated that it wouldn’t make sense financially for many smaller companies to try and run their own infrastructure.

The authors behind the paper agree with the sentiment. They claim that the on-demand resources, flexible infrastructure, and zero hardware management troubles are too good for most startups to pass up.

Running Your Own Cloud Infrastructure Has Many Benefits

Cloud infrastructure makes it beyond easy for new companies to deploy projects and scale as soon as users roll in.

The real trouble starts once the workloads increase exponentially and the companies aren’t prepared to move to a different type of infrastructure. Suddenly, they spend tens of thousands monthly while having to handle as many engineering problems as with on-premises infrastructure.

But what are companies to do?

Avoid public cloud altogether?

Not according to Andreessen Horowitz.

The researchers suggest taking advantage of all the benefits of cloud hosting but being ready to move away when necessary. Tactics like tracking and optimizing spending and preparing for migration in advance are essential.

The authors of the paper put a particular emphasis on modular solutions using tech like Kubernetes. These can be migrated gradually and much less traumatically than huge monolithic setups.

Running microservices on top of smaller virtual machines or containers can save you a lot of trouble if you want to switch cloud providers or move everything in-house. Having a savvy strategy from the get-go can save a lot of headaches in the long run.

Branko Krstic
Branko Krstic

Branko is a round-the-clock tech geek and loving it. His ideal vacation destination is the Akihabara District (or really any place he can take his computer). If there’s a server out there, count on him to find out what it’s made of… and tell you all about it.