Ahh the eternal question, well it seems that way for the time being, there are hundreds of blogs and forums discussing this question and most of them seem one sided, but enough on that for now that start with the basics, What is Could Computing and Dedicated Servers, well:

Dedicated Server:
That’s start with the traditional way to outsource your servers, Dedicated Servers. This is when you buy a server in a data center somewhere and pay for it monthly, generally between $50 and $100 per month for a basic server. When you buy one of these there is generally a setup time as someone needs to go into the data center and install/setup your server.

Cloud Computing:
The new kid on the block, this is the new way of outsourcing your servers and runs on virtualisation software. There is large datacentre running virtualisation servers and these servers can produce large amounts of “Virtual Servers”. For the user these virtual servers look like a dedicated server, however they could be running on a variety of different servers. So it’s just like having a dedicated server but you don’t know what hardware it’s running on.

So what’s best, well that’s start with cost per server/instance:

It looks like cloud computing is cheaper, but not by much and it does depend on how much data you store and transfer each month, however the nice thing about the Cloud, it has no cap, you just get charged for how much you use.

So how about performance, well to be honest I believe it about evens between the two, well sort of. There is no doubt you can by fast Dedicated Servers and Fast Cloud Compute instance, see my ec2 benchmark post, and the two are probably just as fast as each other for the cost. But as you’ll possibly know computers have a tendency to slow down over time, this is because they get ‘dirty’, full of useless programs, log files, temp files and so on. This is no different for servers, so if you have a dedicated server it’s going to slow down due to all the stuff that ends up on it.

Now you can say the same is true for a Cloud Compute instance too, but it shouldn’t be because it’s take no time at all to start up a new instance so cloud systems should be designed so they can be duplicated onto a new instance. So if you instance starts slowing down you just move it to a new one leaving behind the “dirty” instance. This leads to another, frankly brilliant, advantage of Cloud Computing, scalability. If you design your servers correctly you can run a cheap instance when there is low traffic, i.e. overnight, when you start experiencing a high load you power up a few faster (more expensive) instances and hay presto you’ve managed your load problem without having to pay out for large expensive server’s that sit there most of the day waiting for something to do.

Then there is reliability, this is probably the biggest area of debate in this area, most people seem to like the idea if you have a Dedicated Server in a datacentre and it fails someone will immediately run to it and fix it. Well I’m sure that’s what the datacentre sales team will tell you, but in reality it won’t be an instant fix, this is because someone’s actually got to fix the problem and this takes time. Now the cloud is a more complicated solution so it’s more likely to fall over rite, well yes your probably rite, however amazon boasts 99% up time, pretty much the same as you’ll get from any managed solutions. The difference with the Cloud is that its providers have many data centres located all over the world, so if you instance goes down, or even an entire datacentre goes down, you just start up a new instance somewhere else, the problem is solved in a matter of minutes.

Because of Cloud Computing’s scalability and reliability I believe it’s the better overall solution. Now I do like the idea of having my own physical servers in a datacentre I don’t think it’s the best solution and that’s why I’ll go with the cloud every time. But that just I if you’re still undecided read some of these excellent articles on the subject:

http://www.erikhoward.net/cloud-computing-vs-dedicated-server/
http://www.cloudhostingmag.com/2010/03/cloud-hosting-vs-dedicated-hosting/
http://www.brilliantthinking.net/2008/08/25/cloud-computing-vs-dedicated-servers/
http://blog.taragana.com/index.php/archive/dedicated-hosting-vs-cloud-computing-infrastructure-which-should-you-choose-when-and-why/