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Cloud vs Dedicated: Action plan for tech start-ups (India)!

So you have a good tech idea. If executed right it can make you a very rich person. But to transform and idea to reality, you need money. Not a whole lot in the beginning but none the less, you need money. You believe in your idea so you decide to use your own money. The first thing that comes to your mind:

What should I call it?

Your brainstorm over a few beers and suddenly in an inebriated state, you think of a “killer” name. Now you;

Start looking for the domain name.. ($0.00)

Is there a .com available? Crap, its being squatted on by a site trying to sell you everything you don’t need. But .in ain’t that bad. There you go

You buy you first http://www.[mydream].in ($12.99/year)
Then you start designing your logo and bang you have successfully combined your idea into an attractive colorful brand image logo.

Your feeling high on life, inspired to finally become a part of the elite entrepreneurial club.
As easy at the above may sound, now starts the real work.
1.  Company registration – ~$600
2. Lawyer Fees – ~$100

Now comes the big question:

Should I host my application on the Cloud or Dedicated Single Server Set-up?

Now that you have spent close to a $1000 on the initial setup, financial decisions need to be worked into projections and budgets. I am going to present my thoughts on what a start-up should do if its:
1. Seed Funded (upto $10,000)
2. Bootstrap strategy to save on rent and other additional costs
3. Software application development

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CLOUD SET UP:

So there are many cloud options for a start-up; Rackspace, Amazon EC2 etc..

For the sake of this article I will use Netmagic has an example.For those who don’t know, Netmagic Solutions is a Mumbai based datacenter services company offering Cloud hosting services.

Package: Simplicloud

Description As per site: Netmagic SimpliCloud is an Enterprise grade IaaS (Infrastructure as a Service) Cloud platform built on latest-gen virtualization techniques. This means that you can grow your business to reach new markets without worrying about upfront CAPEX of physical hardware.

Sub-Package: SimpliCloud Large
Features: 4 VCPU, 4GB RAM, 40GB Disk Space, 40GB Data Transfer, 1-IP Address, Windows 32-bit, MS Sql 32-bit blah blah
Pricing (1st Year): $2072
Pricing (2nd Year): $2072

One major (and some might think its the greatest) advantage of going with a cloud set up allows you to scale up on the fly by adding bandwidth and server speed. Also there is no capex involved.

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DEDICATED SERVER SET UP

A dedicated server set up includes:
1. Hardware Procurement
2. Space in a data center
3. Bandwidth
4. 1 Static IP
5. OS and DB

For the sake of this article, I will consider Cyquator Technologies, again, a Mumbai based datacenter specializing in hosting and internet services.

Package: Simple Hosting
Pricing (1st Year):
1. Hosting: $327/year
2. Bandwith (120GB/year): $218
3. 1 Static IP: $27/year
4. Linux OS: $0.00
5. MySQL: $0.00

Total Hosting Cost: $572

1 HP DL 120 with a Quad Core processor and 500GB HDD: $ 2909

Total cost for the 1st year: $3481

Total cost 2nd year onwards: $572
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MY VERDICT: While the Cloud offers a great scaling option, the costs right now are just not that favorable. With a low cost of ownership on Dedicated Hosting, start-ups would prefer investing in their own infrastructure to preserve costs and focus on driving revenue.
India is still leagues away from nations such as Singapore, United States and major European nations. Bandwidth is a valuable commodity as the the internet penetration is much lower than what it should.

But at the end of the day Cloud evangelists will curse me for this and present 100 arguments. But as they say, seeing is believing.