Ask HN: When to buy vs rent servers?
5 comments
I am wondering, at what point does it make sense to own your own servers (and switches, routers, whatever) as opposed to rent them monthly through a VPS service?
When your cost of capital is less than the hosting company's cost of capital plus the hosting company's markup.
New startups have a very high cost of capital -- because there's a high risk of them not paying money back, investors demand high rates of return -- so for a young startup renting is generally better than buying. Large well-established companies have a very low cost of capital -- banks will happily loan them money at 5% interest -- so for them it's worth buying hardware.
Figure out where you are on the spectrum and do the math.
When your cost of capital is less than the hosting company's cost of capital plus the hosting company's markup.
New startups have a very high cost of capital -- because there's a high risk of them not paying money back, investors demand high rates of return -- so for a young startup renting is generally better than buying. Large well-established companies have a very low cost of capital -- banks will happily loan them money at 5% interest -- so for them it's worth buying hardware.
Figure out where you are on the spectrum and do the math.
In general, you should rent as long as possible. This allows you to focus on your product, unless, your product is web hosting.
There are however, three reasons, why you might consider buying over renting.
1. Cost -- Renting is more expensive than buying. At some point it probably make sense to buy. You can buy the individual machine and co-lo or you can buy the datacenter. Depends on your needs.
2. Control -- For whatever reason, you need more control. Maybe it's specialized hardware or something that you can't easily do on a rented machine.
3.Pride -- This is one that basically is asking to shoot your self in the foot. A lot of guys want to have the server closet. Once you are established, maybe it's worth it. Not from a cost or control standpoint, but maybe its worth it.
There are however, three reasons, why you might consider buying over renting.
1. Cost -- Renting is more expensive than buying. At some point it probably make sense to buy. You can buy the individual machine and co-lo or you can buy the datacenter. Depends on your needs.
2. Control -- For whatever reason, you need more control. Maybe it's specialized hardware or something that you can't easily do on a rented machine.
3.Pride -- This is one that basically is asking to shoot your self in the foot. A lot of guys want to have the server closet. Once you are established, maybe it's worth it. Not from a cost or control standpoint, but maybe its worth it.
I wouldn't necessarily agree with renting as long as you can.
You can buy a very cheap server that's much more capable than a cheap VPS server. Here are some decent servers for about $300; you can often find good servers for $150:
http://www.geeks.com/products_sc.asp?Cat=821
Colocation at a good facility costs $60-100.
So for $150-$300 upfront and $60-$100 monthly, you can have a capable server hosted at a good facility at a much cheaper cost than the equivalent "rented" server.
You can use a VPS or something like EC2 as a hot backup, setup replication, and have a very capable setup for not a lot of cost.
This assumes that you have sys admin skills.
You can buy a very cheap server that's much more capable than a cheap VPS server. Here are some decent servers for about $300; you can often find good servers for $150:
http://www.geeks.com/products_sc.asp?Cat=821
Colocation at a good facility costs $60-100.
So for $150-$300 upfront and $60-$100 monthly, you can have a capable server hosted at a good facility at a much cheaper cost than the equivalent "rented" server.
You can use a VPS or something like EC2 as a hot backup, setup replication, and have a very capable setup for not a lot of cost.
This assumes that you have sys admin skills.
If you are considering buying one of the servers listed at the above geeks.com link, take care in doing so.
The ones for < $890 are running NetBurst Xeons ... which means, at the youngest, they're nearly 4 1/2 years old.
The one at $890 uses a Xeon 5120 which at least gets you into the Core Xeon era, but you're still looking at a more than 4 year old processor.
If you are going to cheap-out, at least do yourself a favor and buy something low-end-but-new from somewhere like Dell. You can pick up a new PowerEdge T110 from Dell for $400 which comes with a only-released-a-year-ago Xeon X3430 which is going to be about 3 times faster than that Xeon 5120. Plus you're going to have a faster FSB, memory, drives, networking, modern interface to upgrade with, etc.
If you're looking at spending $1k/yr for colocating your server, make it worth it by co-loc-ing a server that's not 5 years old.
The ones for < $890 are running NetBurst Xeons ... which means, at the youngest, they're nearly 4 1/2 years old.
The one at $890 uses a Xeon 5120 which at least gets you into the Core Xeon era, but you're still looking at a more than 4 year old processor.
If you are going to cheap-out, at least do yourself a favor and buy something low-end-but-new from somewhere like Dell. You can pick up a new PowerEdge T110 from Dell for $400 which comes with a only-released-a-year-ago Xeon X3430 which is going to be about 3 times faster than that Xeon 5120. Plus you're going to have a faster FSB, memory, drives, networking, modern interface to upgrade with, etc.
If you're looking at spending $1k/yr for colocating your server, make it worth it by co-loc-ing a server that's not 5 years old.
Fair enough, but either option is going to be much more than you'd get in a basic VPS.
So for $150-$300 upfront and $60-$100 monthly, you can have a capable server hosted at a good facility at a much cheaper cost than the equivalent "rented" server.
If you're OK with the servers being hosted in Germany, you can rent a quite powerful dedicated server from http://hetzner.de for roughly the same amount of money.
Look for the EQ4-10 servers (http://www.hetzner.de/en/hosting/produktmatrix/rootserver-pr...)
I've been with them for almost a year now and I can only recommend them.
If you're OK with the servers being hosted in Germany, you can rent a quite powerful dedicated server from http://hetzner.de for roughly the same amount of money.
Look for the EQ4-10 servers (http://www.hetzner.de/en/hosting/produktmatrix/rootserver-pr...)
I've been with them for almost a year now and I can only recommend them.
I'd say when you're spending > $5k/mo on hosting you should sit down and evaluate the cost of bringing it in-house.
If you can live on a VPS or two you shouldn't even be thinking of buying.
If you can live on a VPS or two you shouldn't even be thinking of buying.
I've been using UltimaHosts (Windows VPS) for a while and its been great so far.
Also, which Windows VPS provider do you recommend?