[kkielhofner]

As has happened many times throughout history (back to mainframes and thin clients of the 90s) there are swings/trends in how infrastructure is hosted.

Listening to the “All In Podcast” yesterday even those guys were talking about revenue drops in the big cloud services and noting we’re currently in the midst of a swing back to self-hosting/co-location/whatever thinking and migrations out.

IMHO those building greenfield solution today should take a hard look at whether the default approach from the last ~10 years “of course you build in $BIGCLOUD” makes sense for the application - in many cases it does not.

It also has the added benefit of de-centralizing the internet a bit (even if only a little).

[lolinder]

As others have mentioned, there was no revenue drop, there's been a reduction in growth. AWS's 20% growth rate is still very respectable, more than double the 9% growth rate the company had overall.

I would be hesitant to attribute slowed growth to a return to self hosting, it's much more likely that it's caused by companies dialing back their cloud growth after spending a few years going ham digitizing everything during the pandemic.

[DyslexicAtheist]

parent still has a very strong point considering that a drop in growth (not revenue) quickly translates in projects / features being cancelled. That's a good thing to FailFast from a start-up pov but when me as a start-up needs to make a bet about building on top of certain features this adds to my cost/benefit calculation when deciding if I want to jump on new features (device-shadows, digital-twins, or whatever else is the latest innovation the cloud announces).

From that pov I expect my platform to behave like a utility (never change or only change with strict backward compatibility). That level of control simply is against the business model of the cloud.

[lolinder]

But there are so many degrees of ratcheting back cloud costs before we get back to self-hosted.

Sure, companies are probably less interested in wacky new cloud features then they were before, but that means going back to basics like EC2 and RDS, which do function like utilities, not going back to their own data centers.

[kkielhofner]

Ah yes, sorry, slower than expected growth was the data point. In my defense I had a screaming toddler in the car!

That said I think the point generally remains - one could argue slower than expected growth in cloud services is a revenue drop (in a way) vs expectations. The market responded accordingly[0] - "However, Azure growth is decelerating." Note that this is all including the explosion in "2023 AI hotness" which is almost certainly offsetting what would be larger losses due to the shift I'm arguing. As the All In Guys noted "you won't see a pitch deck without the letters AI in it" - and a good chunk of that is still going to cloud providers as (in my opinion) there are long tails to these changes and many existing solutions/applications getting "AI" slapped on them are effectively trapped in $BIGCLOUD.

Self-hosting AI is also significantly more difficult and upfront more expensive when you start looking at dealing with (typically) Nvidia hardware costs and software stack complexity. I can definitely see many of these "pivots" to "something AI, we need to throw AI in this" the more well understood and initially faster and "cheaper" utilization of cloud services will continue until the AI trend stabilizes.

From what I could hear (and process) over the screaming the All In Guys presented the argument I tend to agree with - a resurgence of self-hosted infrastructure.

Companies are also dialing back cloud spend because they're realizing for many applications it's very expensive relatively and can actually be limiting compared to self-hosting[1]. Per usual when the cheap money and economic boom retracts they start actually looking at costs they were once happy to just keep writing checks for.

I'd like to reiterate there's a lot of calculation and strategy when it comes down to selecting infrastructure hosting. Again, I think we're in a period where there's a bit of a sea change/wakeup from the past decade of "of course you always build and host everything in $BIGCLOUD" - without even remotely considering alternatives. It's been the default for a while and it isn't as much anymore - and I'd argue that trend is accelerating. There is no "one size fits all".

[0] - https://www.investors.com/news/technology/msft-stock-microso...

[1] - https://www.linkedin.com/pulse/snapchat-earnings-case-runawa...

[lolinder]

I think you're still jumping to conclusions to think that the ratcheting back is going to take any significant portion of the market all the way back to self-hosted. I suspect that companies are less willing to invest in fancy new platform features that drive more revenue than VPSs and managed DBs, but I have a very hard time believing that EC2 or RDS are flagging.

[kkielhofner]

I should have been more clear on this - in terms of total install base I don't know that it's going to be "significant" in terms of customer count.

However, I do think it will be at least "noticeable" in terms of individual customers with large spend. Total GCP revenue in 2022 was roughly 65 billion and Snap leaving alone is 1.5% of total revenue.

Especially looking at ML cases where cloud GPU pricing is wildly expensive - retail on-demand instance A100 pricing is at least $3/hr which practically speaking with the AWS pricing model is can be twice that all-in. This is for an instance with 32GB of RAM and 8 VCPUs - which for a lot of A100 use cases is useless. Need 32 vCPU and 256 GB of RAM? That's more like $20/hr.

A single A100 machine that's above and beyond more capable can be had from Dell for roughly $50k, which even factoring in hosting based on colo pricing I've seen has an ROI of ~15 months for constant usage. For the equivalent hardware (and still vastly improved performance - 32vCPU and 256GB of RAM) that ROI gets to less than six months.

Yes, the A100 is typically used for training (and cloud definitely still makes sense there) but more and more models require the performance and VRAM of a V100/H100 for inference (24/365 availability). Do it at any kind of scale/redundancy and ROI catches up even faster. An equivalent to this approach is reserved pricing, which over the 1-3yr term of a lease vs. reserved instance self-hosting becomes almost comically more cost and performance effective. With the extra benefit of actually being more flexible.

Financing and leasing is readily available and with various tax incentives (like Section 179 leasing) you can pretty quickly pay for a FTE to manage the infra for you - which is probably a wash anyway because at any kind of "real" scale or complexity you almost certainly already have dedicated human resources just to manage cloud. You don't even ever need for an employee to go to the hosting facility because most will rack and provision your hardware for free. Combined with remote hands and standard warranty support any (in my experience very rare) hardware failures just get handled.

I should note that this model almost eliminates the tendency for cloud spend to balloon to many X anticipated/budgeted spend - the all too common story of "sticker shock" from clouds on bandwidth alone that cloud has ridiculous markups on. Colo pricing and leases are fixed cost (with all you can eat port speed bandwidth included or so cheap at 95th percentile billing it's practically a rounding error).

I have significant experience at CTO level with both approaches (and hybrid, of course). In many situations the benefits of "self-hosting" vs cloud are dramatic.

The extremely effective marketing that has created and perpetuated an industry wide fear of self-hosting and hardware (especially with the "always cloud always" generation) is fading. I think the uptime and reliability promises of cloud are also fading - this thread started off with discussion of yet-another cloud outage. My background is in healthcare and telecom and I'm shocked at the cavalier attitude of just accepting these outages and being down while standing around helpless wondering when your big cloud will acknowledge, communicate, and resolve them. A few machines in a few rack units of space across a couple of facilities generally trounces cloud in reliability and uptime.

I love HN and the overall knowledge and quality of discussion here but when it comes to hardware and self-hosting many have completely drunk the cloud Kool-Aid and have zero experience with self-hosting - so no idea what they're talking about. Not saying you personally, just generally.

[GreedClarifies]

In isolated cases companies can reduce costs by self hosting. Usually this is a combination of very specialized requirements or shockingly technically competent early employees or founders.

However even in these exceptional cases there are hidden costs that will likely arise.

For most companies the very concept of self hosting is comical. This is a one way train.

[kkielhofner]

By it's very nature HN is pretty startup focused (you're talking about founders). When I say "greenfield" I'm mostly talking about a startup (and beyond) that's survived the ~first year of chaos/infant mortality - which should be well before the significant technical debt of the solution and Hotel California nature of cloud take hold.

For an established real business there's almost no question.

Do you have any experience with self-hosting and examples of hidden costs? In my experience with both and hybrid approaches cloud has substantially more dramatic hidden costs. From a cost and pricing perspective cloud has many more foot guns - it's routine at this point for people to report exceeding their monthly budgets and billing notifications literally overnight.

[ranman]

The parent comment is neither factual nor advisable.

You build greenfield in cloud precisely because it is greenfield and the utilization isn't well understood. Cloud options let you adjust and experiment quickly. Once a workload is well understood it's a good candidate for optimization, including a move to self managed hardware / on prem.

Buying hardware is a great option once you actually understand the utilization of your product. Just make sure you also have competent operators.

[ctvo]

AWS is a 75 bln a year business still growing 20%+ YoY. It’ll break 100 bln this year. I would examine the numbers yourself.

[kkielhofner]

I have - and the numbers show that much of the big cloud growth is in AI services. The "we need to throw in AI somewhere" concurrent trend is heavily bolstering what would other wise be much more drastic retractions in growth.

I would argue as the AI trend (eventually) wanes and many AI startups and projects within existing companies inevitably eventually fail to materialize the much longer and more general trend of migration out of $BIGCLOUD will be more drastic and obvious.

I don't buy individual stocks but I would happily bet a dinner on big cloud growth showing substantial reductions/losses in coming years as the overall situation stabilizes.

[ctvo]

> I have - and the numbers show that much of the big cloud growth is in AI services. The "we need to throw in AI somewhere" concurrent trend is heavily bolstering what would other wise be much more drastic retractions in growth.

Can you share where you got this? Which numbers? I didn't think AWS (or any cloud provider) released details of their operation at that level of granularity.

[kkielhofner]

While the clouds don't break-out revenue numbers at that level of granularity the communication from many of the big cloud providers (to the investment/financial communities at least) acknowledges lower than expected revenue growth overall while pointing to the explosion in "AI" (ML) as a rapidly growing area that will (hopefully, to them) turn that ship around - with already realized promise. I tend to agree with this (obviously).

As one example, the headline here is actually "Microsoft points to AI to drive the next wave of cloud, revenues"[0]. While not hard revenue breakout numbers Microsoft is investing heavily in OpenAI and rapidly (already) integrating it everywhere they can - search, Azure, etc. The investment, utilization, and published pricing are the numbers I'm talking about here.

The real hard numbers and position that supports my thesis (unsurprisingly) comes from Nvidia[1]. Since at least May 2022 Nvidia has been touting their revenues attributed to big cloud demand. Interestingly, Nvidia is rapidly moving to disintermediating big cloud in launching their own "AI cloud"[2]. It's going to be interesting to see how that shakes out...

Google has also been caught somewhat flat-footed and is simultaneously investing even more in "AI" with what will almost certainly be significant revenue opportunity with GCP. I don't follow AWS as closely but I don't see how they could be excluded from this trend - other than having first-mover advantage in cloud services with many more (at this point legacy) customers forever trapped in AWS.

I tend not to try to prognosticate on things like this but it's one of the rare instances I'm very confident in my thesis here. Obviously I'm just some random HN guy but like I said I'd make a friendly bet here.

People need to remember AWS is over 20 years old. There's not a good historical track record of any computing platform/architecture/approach maintaining a strangle hold much longer than that (except maybe Windows, which I'm not sure is comparable).

[0] - https://archive.is/tKLOz

[1] - https://www.reuters.com/technology/nvidia-forecasts-fourth-q...

[2] - https://www.crn.com/news/components-peripherals/nvidia-tease...

[outworlder]

> IMHO those building greenfield solution today should take a hard look at whether the default approach from the last ~10 years “of course you build in $BIGCLOUD” makes sense for the application - in many cases it does not.

When one buys a house, they should take a hard loo at whether the default approach of paying for utilities makes sense, versus generating their own power.

While that's a bit snarky, the reasoning is similar. You can:

* Use "bigcloud"(TM) with the whole kit: VMs, their managed services, etc * Use bigcloud, but just VM or storage * Rent VMs from a smaller provider * Rent actual servers * Buy your servers and ship to a colo * Buy your servers and build a datacenter

Every level you drop, you need more work. And it grows(I suspect, not linearly). Sure, if you have all the required experts (or you rent them) you can do everything yourself. If not, you'll have to defer to vendors. You will pay some premium for this, but it's either that, or payroll.

What also needs to be factored in is how static your system is. If a single machine works for your use-case, great.

One of the systems I manage has hundreds of millions of dollars in contracts on the line, thousands of VMs. I do not care if any single VM goes down; the system will kill it and provision a new one. A big cloud provider availability zone often spans across multiple datacenters too, each datacenter with their own redundancies. Even if an entire AZ goes down, we can survive on the other two (with possibly some temporary degradation for a few minutes). If the whole region goes down, we fallback to another. We certainly don't have the time to discuss individual servers or rack and stack anything.

It does not come cheap. AWS specifically has egregious networking fees and you end up paying multiple times (AZ to AZ traffic, NAT gateways, and a myriad services that also charge by GB, like GuardDuty). It adds up if you are not careful.

From time to time, management comes with the idea of migrating to 'on-prem', because that's reportedly cheaper. Sure, ignoring the hundreds of engineers that will be involved in this migration, and also ignoring all the engineers that will be required to maintain this on-premises, it might be cheaper.

But that's also ignoring the main reason why cloud deployments tend to become so expensive: they are easy. Confronted with the option of spinning up more machines versus possibly missing a deadline, middle managers will ask for more resources. Maybe it's "just" 1k a month extra (those developers would cost more!). It gets approved. 50 other groups are doing the same. Now it's 50k. Rinse, repeat. If more emphasis would be placed into optimization, most cloud deployments could be shrunk spectacularly. The microservices fad doesn't help(your architecture might require that, but often the reason it does is because you want to ship your org chart, not for technical reasons).

[esperent]

> When one buys a house, they should take a hard loo at whether the default approach of paying for utilities makes sense, versus generating their own power.

Yes, people do. They install solar panels and use them to generate at least some of their own power. Near future battery tech might allow them to generate all of it if they get enough sunlight, in which case this will become a genuine question to answer: how much to install and maintain the panels and batteries over their lifetime, vs expected cost of purchasing power from utilities.

In a similar manner, cloud vs self hosting is a valid consideration that changes over time. We now have docker and similar tools which make managing your own infrastructure much easier than it was ten years ago. I fully expect even better tools will come out in the future so this consideration does change over time. Maybe in another ten years there'll be almost no benefit to using the cloud (except maybe as a CDN).

[kkielhofner]

> In a similar manner, cloud vs self hosting is a valid consideration that changes over time. We now have docker and similar tools which make managing your own infrastructure much easier than it was ten years ago. I fully expect even better tools will come out in the future so this consideration does change over time.

Excellent point. AWS is 21 years old. Docker (essentially the foundation for most self-hosting these days) is 10 years old. I think we're going to see many more self-hosted K8s control planes (as one example). This isn't considering even more modern tools built on these fundamental components that make self-hosting even easier.

[camhart]

All in podcast mentioned growth slowing, but not revenue dropping.

[knorker]

Revenue drop? Google Cloud is still growing 30-40% year on year.

[rcme]

AWS also had 20% revenue growth last quarter.

[knorker]

Yeah. Google Cloud was the only one I knew off the top of my head. I'm sure other clouds (not just MSFT) are growing too. Maybe the second derivative is going down, but it's absolutely not even close to a drop.

Public cloud will grow a lot more. I'd expect a slowdown when they're all ~10x what they are now.