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Good Foss Alternative to Slack?
(beehaw.org)
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To run an XMPP server you don't really need a beefy instance. 2 gigs of RAM, one core, 2TB of transfer per month (which I've yet to even touch given how much I use that server), 50 gigs of storage locally, a static IPv4 address, IPv6 addresses if I want them, snapshots, and enough traffic that I don't think I've even noticed it on my invoices.
Sure, if they are only ever going to do text over XMPP, that's plenty. If they ever want to do more than that, VPS will mean more money, whereas a self-hosted server won't. Shared docs, video or music streaming, e-book library, etc will murder a small or medium instance on AWS if you've got 30 people using it at once. Music and video especially, obviously.
Co-ops generally want to minimize costs and outside reliance, and "scale up on hosted cloud stacks as-needed" is sort of the opposite of that philosophy.