[stephbu]

It’s pretty hard to generalize this without qualifiers. Electricity can be the most expensive problem, but it requires carefully planned control of the other factors - e.g large scale with highly automated servers, network, and meat-reducing control planes to become true. Otherwise factors such as people and under-utilization can especially dominate smaller and/or less efficient facilities.

Thinking thru the factors, many seem obvious, but are often forgotten/ignored when comparing rental or IaaS costs.:

Space is a fixed cost driven by market rates and maximum Server Capital Costs i.e. floor space. Failing to fill the room increases your cost/server efficiency. Pretty common to run out of thermal/power before you run out space, as equipment efficiency increases through the lifespan of the facility.

Server and Power costs scale together, carry a minimum cost for keeping machines on, and vary based on utilization. Again if the servers aren’t doing work, your efficiency ratio will drop. Larger space typically have pre negotiated power commitments too - failing to consume that carries fiscal penalties. Servers unit costs are fairly cheap, storage not so much. Full utilization throughout capital/lease lifespan is the goal - anything less increases relative cost/server.

Network costs scale with Server Costs, and vary again by utilization - minimum invest rules apply, all servers need at least one network port, as well as upstream Core/TOR/Miniswitch gear. The network gear lifespan is typically longer than servers, but shorter than facilities. It usually incurs annual support/maintenance charges too. Bandwidth charges are variable as expected.

People costs scale with a step-function and numbers driven by minimum coverage requirements, task complexities, and level of human toil. Performing any task on a device by-hand is expensive in most markets - touches on tickets, change management, task time etc. Fully burdened S+R in Western cultures is typically ~2x the salary - a $80K employee probably costs around $150K by the time all the workplace costs, taxes, and benefits are paid. Network folk are typically premium resources compared to DC Ops. Sustainable 24x7 coverage looks like a staff of 3-4 people.

[vidarh]

The thing is, you can buy your way out of most of these considerations by either renting colo space or renting managed servers until/unless you're at a scale where there are savings to doing it yourself. This is a commodity service with margins a tiny fraction of AWS' margins. Buying services at those levels instead of doing hosting on prem still nets you 80%-90% of the savings vs. cloud. Sometimes it nets you greater savings because it makes it easier to move your workloads to cheaper locations (e.g. for a small company in London operating servers somewhere with low energy prices and low property prices is hard; colo space reachable from London in often 30%-50% above what it can be like many other places in Europe, and so you'll find managed servers from providers like Hetzner is often cheaper than on prem if your company is in a location like that)

[stephbu]

I think I covered those poin in calling out the cost model elements - renting the “bottom third” of the costs via managed facilities, BMaaS etc. helps in terms of reducing or eliminating capital expenses and some human toil especially in a more stable business that doesn’t benefit from per-minute lease terms or multi-year. As I called out elsewhere, sizing the hosting model to the economic model is really important.

Even in the pure rental or managed BMaaS, the human cost can quickly dominate the economic model. Owning machines and OS’s is expensive at anything more than a couple of racks of machines. Eliminating people and human change/release from touching things in the datacenter is probably the first priority. Otherwise it is hard to consistently drive that human number down and meet service quality expectations for 24x7.

[vidarh]

If human costs dominate, you're doing something very wrong, and in any case renting the services only obscure this, and you can externalise that just as easily with managed servers by outsourcing the management.

What is truly expensive is buying a bundled service with massive margins.

Sometimes you have the luxury of not caring, e.g. when building very high margin, low scale tools where human costs dominate due to dev or other parts of the business, but for anything that starts requiring hosting costs beyond even as low as a couple of k a month, you're leaving money on the table.