Amazon Web Services: should you stay or should you go?

Amazon(s amzn) Web Services is the default, go-to IT infrastructure of choice for startups, right? Right. Er, well not always. Amazon Web Services

No one disputes that AWS provides an impressive and ever-growing array of compute, storage and networking resources. Update: it just launched AWS Activate, a program to help startups build and run scalable AWS implementations, for example.

Most nascent startups would be nuts to buy infrastructure when they can “rent” AWS especially when they don’t really know what resources they will need. But there are times when it behooves a startup to go elsewhere — to bring workloads in-house or maybe to another provider.

A lot depends on the type of workloads; whether they are stable or spiky; how much IT expertise and gear the company already has in-house; and how smart the customer is about leasing options that can slice hardware costs.

“If you’re constantly launching and destroying instances with no stable demand that fluctuates daily/weekly/monthly (e.g., traffic spikes, batch processing) then it makes sense and is cost effective to use Amazon. Startups are especially like that because they don’t know what they need,”  said David Mytton, CEO of Server Density, a server monitoring and cloud management vendor.

But when the load gets predictable and consistent, “it’ll always be cheaper to switch off the cloud,” he said. That’s a contention AWS would — and does dispute — if you read on.

When is AWS not the best option?

At Structure: Europe last month, Dell(s dell) cloud exec Nnamdi Orakwue said companies often start looking at alternatives when their monthly AWS bill hits $50,000. Since Dell competes with AWS with its cloud, I took that with a grain of salt, but several startups later said that number actually makes sense.

“$50K a month is actually a good inflection point,” said Dave Anderson, manager of site reliability engineering for Integral Ad Science, a New York-based vendor. “The servers you get on AWS would probably cost you $1,500 to $3,000 to buy and, if you need $50,000 worth of resources, you could probably buy  [all the servers you need] outright for $200,000 or cheaper with a lease agreement.”

Integral Ad Science helps big companies make sure their ads run on the right sorts of sites — ensuring that ads for a children’s entertainment company, for example, don’t show up on porn sites. That work requires very fast interaction. “We sit in the middle — the end user browser hits us before the ad loads and we have to decide in that split second whether that ad should display on that site,” he said.

“Internet performance can be bad enough and AWS is even more inconsistent because of the shared infrastructure,” Anderson said, adding that it is fine for less latency-sensitive applications.

Another problem was that Integral needs to interface with third-party ad servers and that interaction generates a ton of data which must then be pulled into its on-premise analytics systems. Putting that data into AWS and then pumping it out all the time got prohibitively expensive given Amazon’s data egress charges, he said.

“If you can keep everything in AWS including your data processing, it would probably make sense, but with the amount of data processing we do and the amount of time we spend reporting on it, we have data analytics running 24 X 7, so it won’t work for us,” Anderson said.

What’s the cutover point?

Paris Georgallis, VP of platform operations for RMS, which builds catastrophe risk models for insurance companies, also put some credence in the $50,000 per month cut off, although he cautioned that every user’s needs vary. “$50K a month equates to $1.8M of capital spend over 36 months [and] an experienced IT team can work miracles with $1.8M in infrastructure, especially in a mid-to-large enterprise,” he said via email.

AWS: ReinventRMS started out with AWS because well, its developers loved AWS. That appeal is Amazon’s ace in the hole. AWS “is winning the developer war much like Microsoft did in the 90s — by creating simple tools and eliminating infrastructure as a concern for developers that attraction is high,” Georgallis said.

The problem with that is developers tend to treat AWS as an all-you-can-eat-buffet which is fine — to a point. But  poor management of virtual machines and storage means costs can and often do skyrocket.

In another scenario, a consultant said one client company is moving its Elastic Map Reduce (EMR) work off of AWS to save money. The customer, which he would not name, is spending about $80,000 a month on AWS — about 20 percent of which covers the cost of running the EMR cluster on large AWS CC2.8XL machines. The compute session runs briefly overnight, every night, and by moving it to a co-location facility, the company expects to save $250,000 to $300,000 over two years while also getting round-the-clock access to compute capacity as needed.

The allure of on-prem

Joe Emison thinks $50,000 a month  is too high a bar — and that companies spending $10,000 a month on Amazon services should start looking at alternatives — again depending on their workloads. “AWS says that on-prem never makes sense because cloud is always cheaper in the end. I think that’s BS,” said Emison, although he used stronger language.

Emison is CTO at BuildFax, an Asheville, N.C. company that collects and parses property information for the insurance industry. “We have an internal data processing pipeline that only our employees use. We’re fine with RTO/RPO of 4 to 5 hours on these, shooting for 99 percent business-hour uptime,” he said referring to recovery time objective and recovery point object which is, roughly translated, the amount of time a company expects any disrupted resources to be available again.

“If AWS made it really easy to ‘sleep’ servers at night and didn’t charge so much for storage — think 10 to 25 TB that we may need at any time — then maybe it could be cost competitive, but we don’t need AWS-type security or uptime or redundancy for these servers,” he said.

As a result, BuildFax now pays less than 50 percent of what it used to pay using AWS Reserved Instances for those workloads —  and gets more capacity and better performance, he said. It’s important to note that use of Reserved Instances because, typically, when Amazon talks price comparisons, it counsels that companies using RIs — which rent for a period of one or three years — and are cheaper than on-demand instances. The caveat is that if you end up not using those reserved instances, you pay for unused resources. (Amazon now lets people sell off fallow RIs on a marketplace,)

Amazon says AWS now, AWS later

Amazon clearly thinks AWS remains the best infrastructure source for most — if not all — startups. Asked for comment, a spokeswoman said that many fast-growing startups were born on AWS and remain on AWS. Such companies include Dropbox, AirBnB, Instagram, Pinterest, Foursquare, Mailbox, and Dropcam. She wrote:

“One of the reasons these start-ups overwhelmingly stay on AWS as they grow is that they actually save more money on AWS as they scale. In virtually every case we’ve seen, AWS offers significant cost savings – up to 80 percent – over equivalent on-premise options. We have a range of options that let customers optimize costs according to their usage patterns while still retaining the flexibility and scalability benefits of the cloud.”

For more on this topic, check out dueling blog posts from Blippex and from Codeship. One thing’s for sure, when or whether startups should leave AWS will be a continuing debate. Note: This story was updated at 5:38 a.m. PDT with information on AWS Activate program.