Purchase servers for my start up, or build them ourselves?

Question

I'm working on a web startup that would involve us hosting and streaming a lot of large files, such as video files, and I'm just wondering if it'd be better, cheaper, etc. to purchase the dedicated servers from a hosting company, or to build them ourselves?

Answer 1

Purchase.

It's usually cheaper since your large 1u rack server companies are buying by the 1000s and you're not. Additionally when you need more the next month, they show up in five days. As a startup your time is better spent on building features, doing performance testing, etc which are all things you can't buy.

Answer 2

Depends entirely on how much time you want to spend futzing with servers and hardware. 'a lot of large files' is a bit indeterminate, but offhand I'd start with something like a small box from Linode with possible extra 'disk' provided by S3 or SpiderOak or somebody if you end up needing really big storage.

When you're doing a startup, the main way to decide build or buy should be: is this our core competency? or just a step along the way that buying will save us getting lost in the details of providing?

So if storage is one of your core business propositions (ie. you're doing a backup play like backblaze/spideroak/S3/etc) then yeah, maybe building something (like backblaze's Storage Pod) is the Right Thing. Otherwise, just buy it.

Answer 3

I reccomend purchasing servers from a trusted brand. Such servers have been tested for stability and usually come with at least some basic hardware support services that will help minimize downtime. Also, unless you want to build something out of the ordinary, custom built servers tend to be more expensive.

If you're buying full hosting, you might aswell go with the brand provided by the hosting company. They will be familiar with the hardware, administration and the vendor's support ogranization. Typically they will also have better prices, as suggested by pjz.

Answer 4

Startups need to manage their cash very tightly. At the same time, like pjz said, you don't want to stray from your core. I suggest you look at buying refurbished or used gear from Dell or HP. Keep things as homogeneous and consistent as possible.

Answer 5

I would recommend (at least for the real start up phase) to go with renting as you need. The cloud offers some highly dynamic storage systems (like S3), which can grow during the initial phase. Once you have made some money and know the real need for hardware, you could then switch to your own hosting. Then you will have enough knowledge of your needs and systems to manage that.

Nothing worse for a start up than under-equipping and then ending up with a lot of frustrated users once the servers give out.

Answer 6

To reference the process for the S[OFU] sites: http://blog.stackoverflow.com/2008/12/server-hosting-rent-vs-buy/; and the followup - http://blog.stackoverflow.com/2009/01/new-stack-overflow-server-glamour-shots/

Answer 7

Actually I'll give a non-technical answer:

Estimate the costs and technical benefits of either and then ask your accountant. There are lots of seemingly illogical things about business finance that they are familiar with. To wit, depending on your finances, either renting (recurring expense) or purchasing (capital expense leading to asset) may be a better fit. And then there's tax law, which you certainly want your accountant (and possibly lawyer) to comment on.

IANAL, nor an accountant, but I did get good marks in Business 1001 once upon a time.

hth
adric

Answer 8

Remember that hardware fails from time to time. Are you prepared to get up in the middle of the night and head out to your colocation facillity to replace faulty equipment, just so your 100 paying users can access your service? To never go away for the weekend because your server might go down? Once you get to a point were you're making money you can probably afford to hire some more people to share this burden with / invest in heavy redundancy / etc, but until then you should think long and hard before taking on these kinds of responsibilities. I think the price difference, at least on a smaller scale, is worth it for the flexibility and peace of mind it brings you.