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For a startup, what are the pros and cons of cloud versus physical servers?


After starting with physical servers, when and why a transition to the cloud would make sense?


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Opened by Antoine Fournier, Head of ECM, Input and Output management, Zurich Insurance
Oct 3, 2012.



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Franck Sidon Principal, TaxAssist Accountants
Oct 12, 2012

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I think the real question is probably in the other direction. I would say the vast majority of startups will start in the cloud for many reasons but mostly because the model does not require any capital outlay. At some point they might find limitation in the cloud offering they are using and might look at bringing tech inhouse. But in most cases it's going to take a while because there is so much you can do now with either SAAS, PAAS or IAAS.

And even if a startup decides to build the infrastructure inhouse, in most cases it will do it just for their core business offering and leave most of the backoffice in the cloud (ie. mail, CRM, customer service etc...)
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Martin Goetze Senior Consultant, ISIS Papyrus Europe AG
Oct 12, 2012

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As the "Cloud" is simply a new marketing term for a broader spectrum of hosting services by new players on the market, which are combined with improved service level agreements and different packages and backbone technology, i would argue that there is almost no startup really starting with "physical servers" anyway.

I can not really think of a scenario where it would make sense at all for internet startups or high level online application providers economically to actually buy computing-hardware and put it in an own server room with leased lines to internet backbone. Server Hosting providers offer all types of systems since many years and before Amazon, Oracle and the like coined a new term in order to offer products which made their underused and expensive hardware infrastructure and server farms more profitable (or better: less costly).

If your business is not to sell raw computing power, but to offer high level application services, it will always be advisable economically to "start in the cloud and stay in the cloud" and concentrate on your core business, enjoying clearly calculable and scalable infrastructure with minimized administration effort.

Only very special requirements demand for own hardware infrastructure, lets say for example research ventures or scientific groups in academia, users who constantly need to redefine basic technology in order to facilitate specifics,or work in fields of high performance computing, which are not covered by rented and managed hardware and operating systems.

Every company who can facilitate their online business or application services on the most commonly used platforms (processors, operating system, programming languages, application level components) would start with hosted services and stay with it as long as up-scaling is sufficiently served by this. If the services are called "Cloud Services" or "Hosting Services" is only interesting for marketing folks.
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Martin Goetze Senior Consultant, ISIS Papyrus Europe AG
Oct 12, 2012

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Its maybe worth adding that far more important than the question "Managed Hosting Services or Cloud" for an online startup is the assessment of the application infrastructure with regards to up-scaling (or down-scaling on demand).

- which effects will load increase have on the application infrastructure
- which features are offered in application server, application structure and the used technology in order to support up-scaling
- what effort and cost is to be expected for certain scaling scenarios

Virtualization is basically the state-of-the-art answer to on-demand scaling needs and both, Managed Hosting Service Providers and Cloud Service Providers offer certain features based on virtualization in order to support on-demand sizing.
Products like Amazon EC2 however are a little bit ahead of traditional hosting providers concerning flexibility and scalability, recovery and workload portability. They lack however some parts of the dedicated services you may require on hardware level, which you can only get with IaaS or Managed Hosting services (dedicated OS, full access storage/network sharing etc).
A good start to figure the differences of the models is for example this PDF.

Another article of David Cummings confirms also Franck's view (start in the cloud) and summarizes like this:
Cloud
* Good for starting out when server needs are unknown and it’s easy to scale up and down quickly
* Best for environments that have differing scale needs on a regular basis (e.g. imagine you normally need 20 servers but for a few hours each night you need 100 servers to crunch data)
* Great for an on-demand infrastructure backup (e.g. replicate the database data but don’t turn on all the other necessary servers unless another facility goes down)
* Higher latency on average
Managed
* Best for the core infrastructure in a 3 – 25 server environment where a relatively constant amount of horsepower is needed (most startups operate this way) and capital is not as plentiful (renting a server is more capital efficient than buying it when getting started)
* Cheaper than the cloud on a per-server basis but more expensive than colocation assuming a low cost of capital
Colocation
* Best for maturing startups that can afford acquiring servers and personnel to manage them
* Requires more effort and management compared to cloud and managed
* Maximum flexibility regarding the hardware used (e.g. fancy servers and storage configurations)
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Andrew S. Baker Virtual CIO (Expert Technology Consulting Services), BrainWave Consulting Company, LLC
Oct 15, 2012

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For a start-up, the pros of cloud computing come down to 4 major things:
-- less initial outlay of funds for major expenditures
-- less risk as it pertains to sizing and capacity planning
-- less need for excellent credit history to obtain needed equipment
-- speed to deployment
There are other things like licensing that are better in the cloud, but my top 5 would be above.

The cons are that over time (4+ years), cloud computing can generally cost more than a properly sized on-premise infrastructure, assuming nominal growth. Also, there is not as much control, and any issues with cash flow could interrupt your access to vital services.

If an organization already has an on-premise infrastructure as a startup, then there is still some usefulness in considering cloud options, as there are probably all sorts of solutions that a startup will not have addressed in the first year, such as ERP, CRM, and even possibly some infrastructure management functionality.
Leaving the on-premise hardware to manage the local office, and managing almost everything else in the cloud will greatly aid an organization in its flexibility.

-ASB: http://XeeMe.com/AndrewBaker
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