So you had a badly planned transition, did it in a single big switch (why?), overprovisioned when already having cloud experience instead makes you perfectly placed for under provisioning, and it sounds like you paid up front for no good reason?

Sounds like lots of valuable lessons there, but assuming from this that cloud was better for you seems flawed.

1. Don't do migrations at once. In a large deployment you likely have multiple locations anyway, so do one at a time, and/or rack by rack.

2. Verify usage levels, and take advantage of your ability to scale into cloud instances to ensure you only provision tiny headroom on your non-cloud environment. Doing so makes the cost gap to a cloud environment much bigger.

3. The advantage is being able to tune servers to your workload. That you had to fight for SSDs is already a big red flag - if you don't have a culture of testing and picking based on what actually work, yeah, you may actually be best off in the cloud because you'll overpay by a massive factor no matter what you choose and in a cloud you can at least rapidly rectify the repeated major mistakes that will be made.

4. Don't pay upfront unless you're at a scale where it brings you discounts at a return that makes it worth it. Rent or lease to own. For smaller environments, rent managed servers. The cloud provider dropping prices 2 years in shouldn't matter because by year 3 you should have paid off the hardware at an average cost well below anyway, and start cycling out hardware as your load requires and as/when hardware fails and/or it's not cost effective to have it take up space in your racks any more. Depending on your setup, that might be soon, or you might find yourself still running 6+ year old hardware you paid off 3 years ago for many tasks.

If you can't beat cloud on TCO, you're doing something very wrong. I use cloud for lots of things that aren't cost sensitive, but there are extremely few scenarios where it is the cost effective option.

Hardware beyond 3 years starts to be inefficient due to the space and power cost. paid off servers aren't free :) Otherwise, we did mortgage the servers in the backend - buying upfront gave us around a 50% discount on top of the steep discounts you get from buying direct from an integrator vs. Dell et. al.

On the rent-to-own topic, the people time cost of the migration was budgeted at around 10-20% of total TCO if I recall correctly, but we were in the realm of "we will have to hire people to maintain this project at 24/7 uptime". As the people time was relatively fixed to manage a sane on-call rotation - shrinking the infra footprint would have simply increased the people time portion of the TCO. If the footprint had shrunk by 75% - the maintenance cost would have become problematic. Due to the higher intensity work of build outs vs. maintenance, the people time factor would have risen had we started in more experimental amounts. As it happened, tech salaries also rose ~2x over the 3-5 years that Colo existed.

On the workload front, as happens with many large organizations - there are teams who have the attitude of "don't touch my stuff". At the time that the buy was initiated, there were several estimates indicating that we would need 4x the hardware we were buying in 5 years time.

Whenever someone says that they are beating cloud TCO, I'd suggest you do the following math.

- Sum up all costs related to the on-prem hardware, include smart-hands, power, Racks/network gear, power adaptors.

- Calculate a depreciation schedule for the existing hardware targeted to 3 years.

- Add a 10% cost of capital to depreciate future savings

- Amortize all "non-server" hardware costs onto your principal bottleneck (be it CPU/Network/Memory/Storage)

- Project how your savings compare against cloud costs under different assumptions of future cloud discounts. Both negotiated and public.

- Project how your savings compare under different utilization assumptions.

- Add a bus factor into the investment, what happens if your team leaves/hardware gets smashed/Workload becomes more efficient/Other crises occurs

Next, and more controversially

- Add in the people cost of everyone involved in the maintenance of your on-prem infrastructure.

- Project what happens under varying assumptions for how much of a raise they will ask for. What happens if tech compensation rises by another 2x over the next 3 years?

- Explore what happens if on cloud you needed X% fewer engineers. Depending on what you are doing X could be 0%, or even a negative percentage - but for many shops some fraction of existing work can be automated or avoided.

It was this math that made me turn away from non-cloud offerings. I still use cloud alternatives for some personal projects - but I don't bill myself in that setting.

> Hardware beyond 3 years starts to be inefficient due to the space and power cost. paid off servers aren't free

Hence my caveat, but racks are typically rented at a fixed price per rack, and most places never even reach a scale where they need a full rack per location, so my experience is that for most people it pays to keep servers quite a bit longer because most people have spare space in racks that are already being paid for.

Once you're at a scale where you typically will have whole racks aging out at once, it shifts the calculation somewhat, but then to it really varies greatly depending on e.g. your balance between storage and compute. It's very rare it pays to throw out hardware on the 3 year mark, except in markets where the power and real-estate cost is unusually high, but then moving your hosting wholesale often pays off - e.g. I've in the past moved entirely workloads from London to cheaper locations.

> Otherwise, we did mortgage the servers in the backend - buying upfront gave us around a 50% discount on top of the steep discounts you get from buying direct from an integrator vs. Dell et. al.

Either you loan-financed the hardware or the earlier mention of the "use of VC funds" was irrelevant, then. And nobody gives you a 50% discount for paying up front. You might have paid 50% less than the full cost of the purchase price + interest rate, sure. That's not a discount, that's not having to pay interest. In the end, whether you buy on credit, rent, or lease to own, you either way get a cost-curve per server per month, and that is what is relevant to plug into your models.

> On the rent-to-own topic, the people time cost of the migration was budgeted at around 10-20% of total TCO if I recall correctly

Migration is a one off, so this only makes sense given a time frame to write it off over. 10%-20% written off over 1-2 years wouldn't be completely crazy, though high. If your time horizon is so short that this matters to you, then you have organizational problems.

Put another way: While I did consulting in this space, I'd often offer to do the transition for clients for a percentage of their savings for the first few months, because I knew exactly how much these transitions would take us, and the clients would take a look at the proposals and accept my hourly rate instead when they realised how much they'd save, how quickly.

Reduction in egress fees alone often paid for my fees in couple of months (one system I migrated, which was admittedly atypical, saw hosting costs drop 90% thanks to egress fees alone), and we usually saw devops costs drop at the same time. Most of my clients outsourced 100% of their devops so the costs were easy to quantify.

> If the footprint had shrunk by 75% - the maintenance cost would have become problematic.

This is backward thinking. If the footprint drops by 75%, the cost for that drops. If your maintenance costs don't drop as fast, it doesn't matter - your total cost is still lower, but if your maintenance cost isn't elastic, you have an organizational problem.

And while whether or not the proportion spent on each factor then changes might be a political consideration, but if you then surrender savings because the budget "would have become problematic" then it's no wonder you ended up with a failed transition - if there are incentives to avoid savings to maintain numbers that were broken from the outset. This sounds more and more dysfunctional to me.

> Whenever someone says that they are beating cloud TCO, I'd suggest you do the following math.

Done all of these many times, and never once had cloud come out remotely competitive.

To your "controversial" point, what I usually see when people think their cloud setup is comparative is that they carry out no accounting of how much time they actually spend maintaining cloud-specific things. When they get to the point of handing it over to someone specializing in it (as I did for years), it's often a surprise to them just how much time they offload from their teams.

A few of the other things that seem to shine through here is 1) an assumption of capital outlays. Not needed capital outlays for coloed environments in any setup I've done in the last 20 years - did it for a handful before that; the cost of financing directly with the provider or via a leasing company is priced in when I compare costs with cloud because otherwise it wouldn't comparable. If you then want to pay upfront, that's a choice, not a necessity unless your credit is absolutely worthless.

2) Comparing only colo vs. cloud instead of adding in hybrid or managed hosting. If you build a pure self-honest environment a lot of the price advantage gets eaten up because you need to assume a far higher amount of spare capacity, which will drive up your cost even if you get it right, but people often end up far too conservative here and assume peaks far higher than what they ever need.

The moment you have a hybrid setup that can scale into cloud instances as needed, which is typically little extra effort to set up (you're going to be using an orchestrator anyway), you can easily double (or triple, if people were being conservative) the typical load on your colo servers, and cut the hardware and rack cost accordingly, and usually when people do this they still end up hardly ever actually spinning up cloud instances, because most peoples traffic varies far less than they'd like to think.

Even more so given there are now plenty of providers that offer you a seamless transition from colo, via managed server, to vps's to cloud instances, with often surprisingly little difference in time to spin up extra capacity. Your setup just has a method to register a new resource anyway, irrespective of what is underneath - I've deployed systems that way for nearly 20 years, now, with hybrid setups spanning the gamut from colo, via managed server, VPSs and AWS instances in a single setup.

The net effect tends to be to have to defend retaining the capability to scale into cloud because of how rarely it ends up being used.

3) an assumption that you need to hire people vs. e.g. outsourcing. Most companies never reach a scale where they need even a single full-time person doing hands-on ops - you're better off leaning on colo support, and retainers for monitoring and out-of-hours support for fractional scaling until you reach a scale where staffing several dozen full-time staff becomes viable. I've never had a problem scaling this up/down on an hour-by-hour basis with commitments for base-level needs on a month-by-month basis. For years I used to provide fractional support for companies to facilitate this type of thing.

4) an assumption that you can't automate the same things in a colo environment as in a cloud environment. For a well-managed colo environment, past racking hardware, if you can't boot the system via IPMI etc. straight into an image that automatically enrolls the server in your orchestrator, you're doing something wrong. If your cost of physically managing your servers are more than a rounding error, you''re doing it wrong.

Yet, the flexibility of public cloud environments is like the gold ticket for people doing devops consulting - when I was consulting in this space, the one constant was that the clients in cloud environments ended up paying me 2x-3x as much for assistance for similar size and complexity workloads. And I still usually cut their costs significantly compared to what they used to pay. E.g. the time that goes to maintaining network setups in a typical cloud setup that's solved by plugging things physically into isolated switches is staggering. Yes, usually people could do it cheaper than they are in public cloud setups, but the risk of getting it wrong also tends to be far higher.

I don't get why you'd do this. This sounds like a false choice. If you want a company to deliver racks with hardware to you, plenty of companies do exactly this. You don't need cloud for that.

The choice is not between "do all hardware and building" and "cloud". There's a whole spectrum in between. In fact, it's quite hard to do the building. You can go colo (building + power + electrical done by vendor, optionally network), dedicated (servers done by vendor), hybrid hosting, hyperscaler (you get VMs), ...

As soon as you move above colo, you don't have the hardware issues mentioned here. Or, well, you do have issues, but you "just" file a ticket.