> You're paying for all of that whether it's the cloud or on-prem. The only real difference if you're a large company is whether you're paying another company's profit margin as well.

So, then why even provide the distinction of rent vs own if thats the case?

> you are paying Amazon enough to buy that much physical space, power, bandwidth, IT staff, etc.

And you're also sharing the costs with other people. Clearly FedEx is saving $400M/year while also funding Bezo's trips to space, no?

> But any Fortune 500 transitioning to the cloud is literally just taking their money and burning it, because the alleged cost savings of efficiencies of scale are being completely absorbed by the cloud provider's profit margins.

This is literally not the case without the details so stop speculating. Every F500 should (and probably is) be doing a rent vs own calculation and determining the TCO, and then making the decision from there. It's not unilaterally the case, it has to be assessed.

> Clearly FedEx is saving $400M/year while also funding Bezo's trips to space, no?

I wonder how much they'd save if they rebuilt their infrastructure with own DCs. There are huge savings in decommissioning mainframes, switching to free software and automating more. At the scale of Fedex, I don't think they'll spend much more on hardware and ops than AWS.

The profits by cloud providers are still limited by a competitive environment. Multiple cloud providers have a strong incentive to compete and keep prices low. It's much more difficult to switch from in-house data infra so they aren't as focused on efficiencies.

Today I learned that economies of scale and specialization are not things.

Please whenever you envoke any model, have a sense of scale or region of applicability of the model, no model is true in all cases unless you're religious. The point the GP is making is at the scale of a F500 it starts to make less sense especially if you already have the infrastructure, the expertise, the experience, and so on. AWS is going to manage your VM better than you at your 3 person start up, but the economy of scale / specialization arguments work less well when you have an experienced workforce and developed system in place already and you're one of the world's largest logistics companies.

You're ignoring the massive ecosystem of vendors, managed service providers, colocation facilities, consulting firms, etc. whose profit margins are paid to manage most on prem deployments. Very few entities are doing it all with in-house staff.

There are a couple comments pointing this out, but that's not unique to on-prem: Cloud providers are also buying hardware from vendors, employing contractors, buying or renting facilities, hiring consultants, etc. All of that you are going to pay for either way.

The cloud just offers an additional middleman that also gets a profit margin.

Yeah but you pay one invoice instead of 100 invoices, you have one sales representative OK maybe a couple to deal with instead of 100s.

You get your support in one place instead of Hodge pogge of ... yeah we rent server from X but software that runs on it is from Y and in reality provider Z is support so now C has to agree for physical access to the server and now align stars to get all 4 working together instead of shifting blame around to fix anything.

Sure, you pay an Amazon employee to manage that for you instead of paying an employee of your own. Either way you're paying for that, and with the cloud you also pay for Bezos' spacecraft fantasies.

And you hope the Amazon employee makes decisions that are favorable to your business, even though they do not care about it.

I feel like everyone in this discussion is missing the forest for the trees, especially given the way most public company executives think and operate, which is quarterly.

The problem with building out a new state-of-the-art datacenter - or several of them - is the enormous capital expenditure you've just put on your company's books, not to mention the operating expenditure of all the people that will be required to run it. Yes, it's true that as time goes on, you can claim some tax advantages in the form of depreciation, etc. on some components of this new huge outlay, but at the end of the day, when the company misses quarterly or yearly expectations from Wall Street and the stock price takes a 10% hit, the "blame" gets squarely laid at your feet - you are, after all, "the problem". You spent a shitload of money provisioning future resources for the company's (expected) growth.

Meanwhile, in Cloud Cuckoo-Cuckoo Land, your rival has migrated all or nearly all existing infrastructure to the cloud, thus including a significant op-ex, but not nearly as large as the enormous cap-ex you've just incurred. They're hailed as a hero. A goddamned visionary! Look at all that money they're going to save the company! Nevermind the fact that they explicitly instructed the IT department's head to provision only the necessary resources for current operations, after all, the "promise" of the cloud is that you can just spin up whatever you need in a few minutes, anyway. And besides, the cloud deployment of all the company's servers and the necessary expansion won't incur a significant turning of heads until long after our visionary executive has jumped ship to another company for more pay, a corner office, and a better stock compensation package. Best of all, he say that he saved the company $XX millions of dollars over your plan, and it can be said legitimately, even though it is, of course, inaccurate.

If you're huge, it's never cheaper to farm out the administration of your critical infrastructure to qualified experts. But because of the dominance of the Quarterly Report Cycle in modern business, this gets swept off by the wayside as "outdated thinking".

I say this, by the way, as an IT professional building out cloud solutions for companies. For a lot of small-to-medium sized businesses, and startups especially, the cloud makes sense. If someone at Federal Express thinks the cloud makes sense, they're looking out for themselves, not the company.

> benefit from the ability to rapidly scale on cloud platforms

Big companies need this too. Some team wants to spin up some new service to try out some idea? In cloud-land they push a button. In "rack & stack" land they have to wait for Ops to purchase the hardware and provision it.

Cloud makes it cheap and easy to try out new stuff.

Assuming you're doing dedicated machines for services. My company runs on-prem with a big cluster scheduler & maintains headroom in it; small deployments of new services and modest scale-ups of existing services don't require explicit capacity requests. Only if you're going to provision a huge number of instances do you need to wait for infra to buy machines. Which also requires advance planning with the "elastic" cloud anyway.

As any cloud, you should always have spare capacity on-prem. Spinning up a VM on-prem doesn't have to be slower than in the Cloud. At this scale, you're just your own cloud provider.

“Paying for another company’s profit margin as well”

All transactions, no matter if in the cloud or on prem, go towards another company’s profit margin.