Bread is a great example! You can buy a loaf for $3-4. It is not a 50x markup. Like growing your own veggies, baking bread is for fun, not for economics.
But the cloud is different. None of the financial scale benefits are passed on to you. You save serious money running it in-house. The arguments around scale have no validity for the vast, vast majority of use cases.
Vercel isn't selling bread: they're selling a fancy steak dinner, and yes, you can make steak at home for much less, and if you eat fancy steak dinners at fancy restaurants every night you're going to go broke.
So the key is to understand whether your vendors are selling you bread, or a fancy steak dinner, and to not make the mistake of getting the two confused.
That’s a tremendously clarifying framework, and it makes a lot of sense to me. Thank you.
I wonder, though—at the risk of overextending the metaphor—what if I don’t have a kitchen, but I need the lunch meeting to be fed? Wouldn’t (relatively expensive) catering routinely make sense? And isn’t the difference between having steak catered and having sandwiches catered relatively small compared to the alternative of building out a kitchen?
What if my business is not meaningfully technical: I’ll set up applications to support our primary function, and they might even be essential to the meat of our work. But essential in the same way water and power are: we only notice it when it’s screwed up. Day-to-day, our operational competency is in dispatching vehicles or making sandwiches or something. If we hired somebody with the expertise to maintain things, they’d sit idle—or need a retainer commensurate with what the Vercels and Herokus of the world are charging. We only need to think about the IT stuff when it breaks—and maybe to the extent that, when we expect a spike, we can click one button to have twice as much “application.”
In that case, isn’t it conceivable that it could be worth the premium to buy our way out of managing some portion of the lower levels of the stack?
In that case, you don't want cloud; you want an MSP, whose core competence is running those IT services. They, in turn, have the skills to colo a rack at a DC or to manage rented servers, amortized across a number of clients.
In practice, there are two situations where cloud makes sense:
1. You infrequently need to handle traffic that unpredictably bursts to a large multiple of your baseline. (Consider: you can over provision your baseline infrastructure by an order of magnitude before you reach cloud costs)
2. Your organization is dysfunctional in a way that makes provisioning resources extremely difficult but cloud can provide an end run around that dysfunction.
Note that both situations are quite rare. most industries that handle that sort of large burst are very predictable: event management know when a client will be large and provision ticket sales infra accordingly, e-commerce knows when the big sale days will be, and so on. In the second case, whatever organizational dysfunction caused the cloud to be appealing will likely wrap itself around the cloud initiative as well.
But the cloud is different. None of the financial scale benefits are passed on to you. You save serious money running it in-house. The arguments around scale have no validity for the vast, vast majority of use cases.
Vercel isn't selling bread: they're selling a fancy steak dinner, and yes, you can make steak at home for much less, and if you eat fancy steak dinners at fancy restaurants every night you're going to go broke.
So the key is to understand whether your vendors are selling you bread, or a fancy steak dinner, and to not make the mistake of getting the two confused.