If it really was more cost effective to run your own infrastructure, then I wonder why Netflix is going out of their way to migrate all of their infrastructure to Level3 and AWS. They're even discussing the details at the last cloud computing meetup: http://www.meetup.com/cloudcomputing/calendar/14476942/
Unless you are ruthlessly disciplined (Craigslist), it rarely makes sense to roll out your own infrastructure. When you start to sustain IT Systems in a corporation, the real costs are not only what's visible, but also the cost of managing, hiring, budgeting, change control, procurement, etc...
Plus - you get to ride on all the scale discounts of your cloud hosting company. And, huge win - you don't have to chose the "Safe" technology solutions (Cisco + HP + EMC, or Juniper + Dell + Hitachi) - but you can let your cloud hosting company go spend a fortune on vetting an inexpensive, innovative, but unproven technology, and then ride on their investment in that vetting process.
I disagree. Amazon's cloud is great for getting started, no doubt about that. And yes, they take care of all the administration. But the hardware and bandwidth costs are absurdly expensive. Probably somewhere between 2x - 10x as much. Netflix is outsourcing it because they are rich and can afford the scalability that Amazon offers.
The mantra at every large company I've ever been at once we get past the initial "Get it done" phase, is, "Do it cheaper, cheaper, cheaper."
I think the thing that everyone overlooks when they price AWS out is they are looking at the cost of the bare metal. They aren't pricing their Network Engineers, their DBAs, their Storage SysAdmin, Their Data Center Ops Manager, the finance overhead required to buy/track all this gear.
Forget about the fact that no company over 200 employees I've ever been involved in could add 30-40 servers in less than 30 days.
The reasons to not go to AWS have to do with things like control, security, customization. Cost is the #2 reason everyone I've talked to is looking at moving their infrastructure over to AWS. (Ability to quickly scale is usually #1)
"Netflix is outsourcing it because they are rich and can afford the scalability that Amazon offers." - You honestly think that Netflix is getting an economy of scale from AWS? I think it works the opposite way. Perhaps they took the time to actually examine the hidden costs instead of using a calculator for 15 minutes on Tiger Direct.
As someone else stated, AWS doesn't provide you systems administrators. Storage administrators sure, but that's not difficult to absorb.
So taking that out of the equation, you're left with hardware and bandwidth. I imagine Netflix didn't get the same off-the-shelf price you or I would, so speculating on what their TCO is and how it would compare to a local build-out is probably fruitless.
For a small business, you can keep your hard costs (hardware/cabinets/power/bandwidth) under $10K/month and get a terabyte of memory in a pair of Dell R910s, a triply redundant 44TB SAN, a couple beefy Dell R610s with 96GB of RAM for database servers, Flash for the table-spaces and SAN read/write caches.
You can't come close to that kinda of power at AWS pricing.
Sure there may be cases where AWS makes sense at scale, but there are many more where it simply doesn't. Look at Basecamp. There's a reason they're switching (switched?) to a local SAN vs S3. It's insanely expensive to store anything more than tens of gigabytes in the cloud if you need DAS-like performance.
When it comes to bullet-proofing a system, automate the hell out of it, and skip the service contracts. Buy redundancies.
[Edit: Slides for Adrian's Talk on Netflix->AWS Here: http://www.slideshare.net/adrianco/netflix-on-cloud-combined...
Video of his talk here:http://blip.tv/file/4252897 ]
Unless you are ruthlessly disciplined (Craigslist), it rarely makes sense to roll out your own infrastructure. When you start to sustain IT Systems in a corporation, the real costs are not only what's visible, but also the cost of managing, hiring, budgeting, change control, procurement, etc...
Plus - you get to ride on all the scale discounts of your cloud hosting company. And, huge win - you don't have to chose the "Safe" technology solutions (Cisco + HP + EMC, or Juniper + Dell + Hitachi) - but you can let your cloud hosting company go spend a fortune on vetting an inexpensive, innovative, but unproven technology, and then ride on their investment in that vetting process.