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That’s not “musk’s strategy” though. That’s just common knowledge. If you change your own brakes, it’s cheaper than at the dealership. If you run your own servers, it’s cheaper than in the cloud. The reason people choose the cloud is either they don’t want to, or can’t, run their own server farm.
Generally speaking, if it wasn't cheaper for them to use the cloud, they probably wouldn't. Owning infrastructure comes with costs that amortize better at scale. If infrastructure is not a big cost in serving your customers, then it's probably cheaper to rent.
There are some costs that are cheaper when you go to the cloud because of scale. Things like bandwidth, redundancy, and physical security. But they are massively offset by how expensive renting the hardware is. I can rent a server for $500/month that I could build for $3,000-$4,000. That's 6-8 months before I'm in the red with the cloud. Think about those costs over one server's lifetime (roughly 5 years, depending on your needs). That's $26,000 over 5 years, or $5,200 per year extra, for one server. If your company is using 10 servers (assuming your costs scale linearly at this point), that's $52,000 per year, rather than just running a couple fiber lines into your office. And that's a small company.
So yeah, it's more expensive to go with the cloud, almost always. But yes, the cloud gives you benefits. This is pretty common knowledge in the industry, and musk didn't come up with the idea of bringing services on-site.
Something to add, since I colocate my own hardware in a datacenter: Just the cost of operating a server is non-trivial too. I pay $120/month for just 2U, 1gbps networking, and power usage (600W peak usage), providing my own hardware. Things get a lot cheaper if you can rent a whole rack space though. It's absolutely been worth it though, because to rent a similar specced server, it could easily be $1k/month.
That $52000/year isn't enough to pay for even a single full time IT person. So now you're probably either spending dev time on server admin (which is wasteful of dev salary, and it's a subject they aren't experts in, so you're literally paying more for worse results), or outsourcing to an entity that hires the cheapest employees it can.
Oooor, use a cloud provider. And if you're a small company, you can probably get away with cheaper shared hosting.
Oh I was talking about renting a VPS, not managed services. Managed services are much more expensive.
I just checked Digital Ocean’s pricing, and the server I was thinking of that’s about $500/month is $900/month for managed MySQL. That’s $107,400 extra per year if you want managed services.
And again, this is for a small company that only needs 10 servers. If we’re talking about something more like 5,000 servers, those cloud costs will be absolutely enormous.
How about Cloud (someone else's computers) vs. Colo/Data Center (someone else's cooling and UPS/Generators Your computers) - the cost of running a data center correctly is huge. This is not even counting the 24/7 availability of help or security on the site.
Of course, if you can get away with a 2 servers in a single rack more power to ya.