Quick take
Your startup isn’t Netflix. Use managed cloud services and ship your product.
Stop Pretending
I keep meeting startup founders who want to run their own servers. They pull up a spreadsheet showing that a dedicated box costs less per month than the equivalent EC2 instance. They are right about that one number and wrong about everything else.
Running your own hardware means you’re now in two businesses: whatever your startup actually does, and running a small data center. Most teams can’t do one of those well. Trying to do both is how you burn six months and ship nothing.
The Math Nobody Wants to Do
A decent server costs around $5,000. Two for redundancy, so $10,000 up front. Now add the parts people skip.
Colocation: $500 to $1,000 a month for power, cooling, and rack space. Call it $750.
An infrastructure engineer who can keep those boxes alive, patched, and secure. In 2016 that’s $120,000 a year minimum, fully loaded. Probably more. Even part-time, you’re spending real money on someone whose job isn’t your product.
Networking gear, firewalls, backups, monitoring. Another few thousand a year if you’re doing it properly. More if you aren’t, because you will pay for it later in downtime and data loss.
Add it up for one year: $10,000 hardware plus $9,000 colo plus $120,000 engineer plus maybe $5,000 in miscellaneous gear and software. That’s roughly $144,000 to run two servers.
The same capacity on AWS runs maybe $300 to $500 a month depending on instance type and reservations. Call it $5,000 a year. Even with managed database, load balancer, and S3 you’re probably under $15,000. And you didn’t hire anyone whose job is keeping hardware alive.
The gap isn’t subtle. It’s an order of magnitude.
But What About Scale
Yes, at serious scale the economics shift. If you’re running hundreds of servers at steady load around the clock, owned hardware can make sense. That’s a real conversation for companies with predictable workloads and existing ops teams.
You’re a startup. You don’t have predictable workloads. You don’t have an ops team. You might not have product-market fit yet. Optimizing infrastructure cost isn’t your problem. Shipping fast enough to survive is your problem.
The Hidden Cost That Kills You
The real damage isn’t even the money. It’s the time.
Provisioning a new server in your colo takes days or weeks. Ordering, shipping, racking, imaging, hardening. On AWS you have a new instance in minutes. When you need to test a hypothesis, run an experiment, or scale for a launch, that difference is existential.
I’ve watched startups spend months building infrastructure that AWS would have given them out of the box. Months they didn’t have. Some of them are gone now.
When I Would Consider It
You have a stable, profitable business with predictable load. You already employ infrastructure engineers. You have compliance requirements that make cloud genuinely harder. You’re processing data volumes where transfer costs dominate.
If none of those apply, you shouldn’t be thinking about this.
For a startup in 2016, running your own servers is almost always vanity dressed up as frugality. The cloud isn’t cheap, but it’s cheaper than hiring ops staff, renting rack space, and losing months of engineering time to problems that are already solved.
Use AWS. Use managed Postgres. Use managed Redis. Ship your product. Worry about optimizing infrastructure costs when you have the kind of revenue that makes it worth optimizing.
Spend money on the problems that are actually yours. Infrastructure is someone else’s problem until your revenue proves otherwise.