Fatal miscalculation for OnLive

Perlman told his workers that when the service started they were not sure how many servers would be required and they ended up with around 8,000 servers on three-year leases as well as the networking resources to support the gear. On average the company had only about 2,000 users online at any one time so it was not able to turn a profit.

8,000 servers can burn your money very effectively. I wonder why they decided to scale well in advance of the actual demand instead of scaling with the demand.

Sad thing, though, is that despite all the cloud hype still the only cost-efficient way to get substantial server resources is to lease them with the longest billing cycle possible.