Recently we saw how Dropbox saved nearly $75 million over 2 years, undergoing what it called an “infrastructure optimization” project — including migrating off of AWS, and primarily into their own datacenters. This process allowed them to see an increase in their gross margins, and improvement in their free cash flow.
Can you too see the same cost savings using private cloud? As Dropbox noted, they reached a threshold where it was more cost effective using their own infrastructure, rather than public cloud. Simply put, there’s one less hand in the cookie jar now. How did Dropbox know it was time to move on from AWS?
Surprisingly it wasn’t just due to costs. Rather they craved complete control over their infrastructure — something we discussed in a previous blog post. They felt they could build something on their own, with better performance and reliability, simply because they know own system so well.
Dropbox isn’t the first company to move off of AWS or other ‘big box public cloud providers.’ Groupon actually moved off of AWS in 2011, stating the month-to-month OPEX costs began to add up, and that longer term CAPEX purchases made more sense.
It’s not just mega-scalers seeing benefits moving off of big box public clouds. On a much smaller scale, Blippex, a search engine marketing company, noted that as they scaled their application out, the charges quickly rose. They decided to move to OVH, where they were able to save about $800 monthly, going from paying AWS $1,000 to just over $200 monthly at OVH.
Finally, analysts love to speculate – could Snapchat have saved money by building their own infrastructure? For now they’re locked into a contract paying Google $2+ billion over the next 5 years. As much as they now rely on Google Cloud, they even list it as a potential risk for their company stating, “any significant disruption of or interference with our use of Google Cloud would negatively impact our operations and our business would be seriously harmed. If our users or partners are not able to access Snapchat through Google Cloud or encounter difficulties in doing so, we may lose users, partners, or advertising revenue.”
Former Reddit CEO, Yishan Wong, believes Snapchat would be better off using their own infrastructure, learning from MySpace, who had a long term contract with Microsoft for infrastructure. Yishan believed this caused a significant scalability issue, as Microsoft was never going to create infrastructure catered to MySpace’s requirements; their end-goal was to always sell a bigger package. MySpace never overcame that problem when combined with other scalability challenges. Likewise, even at $2+ billion, SnapChat will never be Google’s primary concern.
I am not proposing everyone start with a private cloud. Being able to scale up as necessary is a tremendous resource the public cloud offers. However, before you run to big box public clouds to host your new project, I suggest checking out the huge rang of OnApp-based public cloud providers out there.
Finally, think using a private cloud is right for you? Lets talk – at OnApp we’re making private cloud easy and cost effective for SMBs and Enterprises, too.