Posts Tagged 'Business Model'

June 6, 2012

Today's Technology "Game Changers": IPv6 and Cloud

"Game Changers" in technology force a decision: Adapt or die. When repeating rifles gained popularity in the late 1800s, a business of manufacturing muzzle-loading or breech-loading rifles would have needed to find a way to produce a repeating rifle or it would have lost most (if not all) of it's business to Winchester. If a fresh-faced independent musician is hitting it big on the coffee shop scene in 2012, she probably won't be selling out arenas any time soon if she refuses to make her music available digitally. Just ask any of the old-timers in the print media industry ... "Game Changers" in technology can be disastrous for an established business in an established industry.

That's pretty intimidating ... Even for tech businesses.

Shifts in technology don't have to be as drastic and obvious as a "printed newspaper v. social news site" comparison for them to be disruptive. Even subtle advances can wind up making or breaking a business. In fact, many of today's biggest and most successful tech companies are scrambling to adapt to two simple "game changers" that seem terribly significant:

  • IPv6
  • "The Cloud"

IPv6

A quick search of the SoftLayer Blog reminds me that Lance first brought up the importance of IPv6 adoption in October 2007:

ARIN has publically announced the need to shift to IPv6 and numerous articles have outlined the D-Day for IPv4 space. Most experts agree, its coming fast and that it will occur sometime in 2010 at the current pace (that's about two years for those counting). IPv6 brings enough IP space for an infinite number of users along with improved security features and several other operational efficiencies that will make it very popular. The problem lies between getting from IPv4 to IPv6.

When IPv4 exhaustion was just a blip on the horizon, many businesses probably thought, "Oh, I'll get around to it when I need to. It's not a problem yet." When IANA exhausted the IPv4 pool, they probably started picking up the phone and calling providers to ask what plans they had in place. When some of the Internet's biggest websites completed a trial transition to IPv6 on World IPv6 Day last year, those businesses started feeling the urgency. With today's World IPv6 Launch, they know something has to be done.

World IPv6 Launch Day

Regardless of how conservative providers get with IPv4 space, the 4,294,967,296 IPv4 addresses in existence will not last much longer. Soon, users will be accessing an IPv6 Internet, and IPv4-only websites will lose their opportunity to reach those users. That's a "game changer."

"The Cloud"

The other "game changer" many tech businesses are struggling with these days is the move toward "the cloud." There are a two interesting perspectives in this transition: 1) The challenge many businesses face when choosing whether to adopt cloud computing, and 2) The challenges for businesses that find themselves severing as an integral (sometimes unintentional) part of "the cloud." You've probably seen hundreds of blog posts and articles about the first, so I'll share a little insight on the second.

When you hear all of the hype about cloud computing and cloud storage offering a hardware-agnostic Utopia of scalable, reliable power, it's easy to forget that the building blocks of a cloud infrastructure will usually come from vendors that provided a traditional hosting resources. When a computing instance is abstracted from a hardware device, it's opens up huge variations in usage. It's possible to have dozens of public cloud instances using a single server's multi-proc, multi-core resources at a given time. If a vendor prices a piece of software on a "per server" basis, how do they define a "server" when their users are in the cloud? It can be argued that a cloud computing instance with a single core of power is a "server," and on the flip-side, it's easy to define a "server" as the hardware object on which many cloud instances may run. I don't know that there's an easy way to answer that question, but what I do know is that applying "what used to work" to "what's happening now" isn't the right answer.

The hardware and software providers in the cloud space who are able to come up with new approaches unencumbered by the urge to continue "the way we've always done it" are going to be the ones that thrive when technology "game changers" emerge, and the providers who dig their heels in the dirt or try to put a square peg into a round hole will get the short end of the "adapt or die" stick.

We've tried to innovate and take a fresh look at every opportunity that has come our way, and we do our best to build relationships with agile companies that we see following suit.

I guess a better way to position the decision at the beginning of this post would be to add a little tweak: "Innovate, adapt or die." How you approach technology "game changers" will define your business's success.

-@gkdog

July 1, 2011

PHIL's DC: Fine-Tuning the Idea

When Lance opened the floor for SoftLayer employees to present their ideas for "innovative" approaches to the Internet, I put together a pretty ambitious proposal. As it turns out, the idea wasn't as fully baked as I may have wanted it to be, but I came to the decision to change gears a little and take a different approach.

Completely unrelated to that personal decision to adjust the direction of the project, I had a nice little chat with Lance on the phone. We decided that the world was underready for a revolution and that a more traditional nontraditional approach was in order:

The Internet needs data centers to hold all of your pictures. SoftLayer does a great job at being a data center, but I feel like there's still an opportunity for a revolution in data center design. I have a few ideas about how the world of web hosting can be completely redefined, and with the unique resources Lance has put at my disposal, I'm fairly confident that I'll be able to create a stellar hosting platform with an unbeatable discount price structure. PHIL's DC is the future of web hosting.

- PHIL

October 12, 2010

What Does it Cost (Part 1)

The Overview
I normally like to have a little fun in the blogs that I write and maybe even take the occasional jab at our CFO Mike Jones (all kidding aside about pink shirts and what not he is a really great guy). This blog is intended to have more of a educational goal, and since there is a lot to take into consideration I won’t be able to make any pink shirt cracks, and the reason for this is because I’ve had a lot of conversations over the past year or two in which the question that always comes up is “How does SoftLayer compare to colocation and what is the better move for me?” We’ll look into this further throughout the blog series.

I was fortunate enough to be invited to attend the Network World IT Roadmaps events in both New York and Atlanta earlier this year. Now what motivated me to put fingers to keyboard here is the perspective I gained from many people that I talked to during and after the conference. I consider myself to be fortunate to attend because it is rare that SLales staff is able to join in on the marketing campaign and work with people more on a face to face basis. Normally SoftLayer Sales member cannot really help our customers if we are not at our desk to take their calls, chats, emails, or tickets. I enjoy attending events like these because it seems that you can learn so much more speaking with someone face to face as opposed to just over a phone call or email.

Since this was not my first go around with the Network World events I was more familiar with the setup and I was able to take more in from the people speaking at the event. There are some common themes that can affect business from the technology side of things, and if you want to have growth you must invest into your own infrastructure and your own technology. If you are a small mom and pop shop that is fine with maintaining the status quo it may not be as vital for you, but then again you wouldn’t be reading this blog post now would you? The themes I saw (broken down into more simple context) were based around some basic principles.

  • A company is a grouping of people working for a common goal. Your people are your most valuable asset and it is important to put them in positions where they can be successful and ultimately you will be successful as well.
  • The Wayne Gretzky quotes of “A good hockey player plays where the puck is. A great hockey player plays where the puck is going to be”, and following that up with “I skate to where the puck is going to be, not where it has been” these have a common sense idea that if you are not looking to the future and figure out what is coming next then you will always be trying to catch up. If you are not innovating or growing then ultimately you are dying.
  • How can I get more? We are constantly pressured to do more with less, or at least get more out of what we already have. This is probably the biggest and most frequent question we all get no matter what our business model is and what we try to achieve.

There are, of course, many other themes than the ones I have just listed and more specific ones too. Even though I certainly took much more away these were some of the main takeaways that brought me back to an always evolving answer to the same question that every speaker seemed to dance around - “What does it cost?”

No matter how big you are or how much budget you have in place there will always be different options presented to you on how to build up your infrastructure. I have no doubt that you have asked yourself the question of what will it cost in relation to many things and possibly asked yourself in many different ways. Making comparisons to figure out what is the cost and what will give me the best possible results is the end goal we are trying to reach. But how can we get there? It can be very difficult to compare data centers to each other in an apple to apples fashion. There are simply too many variables to note in making this all come forth full stream. My goal is to try and help us all tackle this broad issue, and hopefully it will lead to more discussion about pros and cons so that it can be easier to determine the best course of action in future planning.

There are a lot of things to consider in the cost of running a data center. It seems like a never ending list of essential things that cost both money and time (which in some cases can be more valuable). In this series of blogs we’ll break specifics parts of a data center down into the basics of several areas that you’d need to consider. Once we get into the basics we’ll want to look back to ask “what does it take to run a data center?” Most often people only look at the most tangible items with the easiest metrics to apply which essentially comes down to the server hardware, power, space, and bandwidth. Sometimes these are the only things that people look at in making this decision.

Depending who you are and what you want to get out of your data center this could be close to what you’d need to consider, but for 99% of the population who has any business with a data center this only covers the basics. As a society convenience plays an ever increasing role in what we look for and in addition to this 99% looking for data center infrastructure crave things like uptime, speed, reliability, and space/opportunity for scalability and expansion. Each of these things are more than just desires, they are verified needs.

So in getting to the meat of what this blog is about I’ll quickly discuss the different things that add to the total cost beyond the obvious things of Hardware, Space, Power, and Bandwidth. I know this is already pretty long for a blog so I am turning this into a short series and I will follow up with addition blogs to go into more depth about each portion and how they can relate to each other. I will work to add insight from other customers who have asked this of themselves before in addition to giving my own experiences on this topic.

Opportunity Costs
I consider the idea of Opportunity Costs to be amongst the highest and least quantifiable aspect in running a data center. This isn’t something that will have its own blog post because of its broad nature, so instead I’ll simply tie the idea of Opportunity Cost into each other blog and how it relates to the overall discussion.

There is often a simple truth to knowing or stating that if we choose option “A” it will negate the value, relevance, and in many cases the existence of any other previously viable options. Nearly all Opportunity Costs relates back to What Does it Cost by determining what is potentially to be either gained or lost with that decision. This idea can be further broken down into risk vs. reward, and a simple business decision in knowing that if you wish to take on less risk, you’ll need to pay more for it or get less in return. The same can be said for intangibles other than risk like convenience, reliability, and speed.

Human Resource costs
Earlier, I mentioned that one of the main topics of discussion that guest speakers emphasized was that Our people are our biggest assets, but at the same time they can also easily be one of our biggest costs. I think that a lot of businesses can agree with this statement, however, the impact from how we develop our infrastructure does not often take our people and associated costs into account. Every business should have a growth model the cost of growth (or your growing pains) is often overlooked in the planning stages. We’ll look at specific situations and take into account amount of people needed running everything yourself and what that will wind up costing from just the HR standpoint.

This can get more into what is the cost of adding one more qualified employee. This is one of the biggest aspects often overlooked, because it not only takes new people you would need to hire, but how it can monopolize time and production you would get otherwise from people you already have on staff.

The value of "On-Demand" and the cost of not having it.
Have you ever heard the phrase “time is money”? What does this mean to you? What can this mean in a data center? Here we’ll focus the conversation on efficiency and the compare certain costs and benefits between different ways about achieving our goals.

We can take a look at standard processes that we may have to go through if we wish to add capacity as well as integrating new solutions with existing ones. Time has a huge value in today’s business world, and we’ll determine how having on demand infrastructure has the ability to positively impact the bottom line immensely. Having necessary tools in a truly on-demand and versatile environment will be a major point of focus in everything moving forward, and it is an important intangible factor that we should not lose sight of.

Cost of Uptime/ Redundancy
Uptime is one of the most common themes near the top of everyone’s list for data center management. We can all agree that uptime is important, but how important is it to us each individually? We will look at scenarios where if a catastrophic event were to happen we should ask ourselves what it would cost not only in terms of monetary value, but also what would that mean long term and on a strategic level.

Downtime will eventually happen in all things, but if you can plan around this to have redundancy or failover then you can alleviate this risk. So we must again ask ourselves “what will this cost?” Simply put Redundancy can and will be expensive. Generally it will cost much more than just the sum of its parts and it is easy to over look certain aspects of where you may have a “single point of failure”. At the same time we should consider what will the cost be for each additional level of redundancy that we incorporate?

Contracts
In this blog we will relate focus heavily on two main ideas: The value of time in making long term decisions and Opportunity Cost. We’ll be able to look at what having long term commitments really cost in ways that include scalability, large capital costs, accounting on physical resources and their benefits as well as limitations. Once we have this established we can also more easily determine how this can affect your decision making and your ongoing ability to do the right thing for your business.

Accounting
Different accounting practices can make a great difference in your bottom line. Carrying on additional debt, taxes, and taking depreciation can have a lot of costs that go beyond the normal operating costs. For this section I’ll warrant the help of some of our experts who have already previously run several scenarios and may be a bit more qualified than I am to speak on such matters.

In the end this study can make it easier to compare and see if SoftLayer is the right solution for you or someone you may know. I can say that SoftLayer will not be the entire solution for some companies compared to doing things yourself, however, we do make sound business sense in about 95% of cases at some capacity if not full capacity.

-Doug

Categories: 
October 6, 2008

My Take on the Financial Crisis

The Congressional debate over the infamous $700 billion bailout plan this week reminds me of what two guys down the hall in my college dorm once did. They both wanted something that they couldn’t afford – a Domino’s Pizza.

These guys colluded and ordered a large pizza – about $7.50 back in the Dark Ages of my college years. One of them presented the Domino’s driver with a check (tip included) for $8. It was a hot check and both guys knew that they didn’t have enough in both their accounts combined to pay for the pizza.

Back then, banks did not immediately process checks electronically and you could play the “float”. It took 3 or 4 days for your account to have funds disappear after you wrote a check, but when you deposited a check, the bank would immediately allow those funds to be drawn against other checks coming in. Don’t try this today, boys and girls. It’s not the same nowadays.

So, the second guy wrote a check for $8 to the first guy who waited two days and then deposited the check. Consequently, the check to Domino’s got paid to Domino’s. Then, the first guy (who wrote the check to Domino’s) had to write another check for $8 to the second guy so that his hot check to the first guy would be covered. Two days later, the second guy has to write another hot check to the first guy to cover his prior hot check to the second guy.

These guys kept covering each other’s hot checks for a couple of weeks until they got another paycheck from their part time jobs. Then one of them finally convinced the other to cough up $4 cash. At that point an $8 check was allowed to clear successfully and the original cost of the $8 pizza was effectively split between the two.

There are a lot of parallels between this story and the current credit market mess that we face. Let’s say that “Joe Homebuyer” wants a house that he can’t afford. “Bob the Broker” finds the money for Joe to buy the house and signs Joe up to a payment plan where the payments jack up to an unbearable level in three years. Then Bob the Broker sells the loan to “Riskmanager Randy” who hedges his risk and buys credit default swaps from “Issuer #1” to cover himself in case the homeowner can’t handle the unbearable payments that are coming. Then Issuer #1 buys credit default swaps from “Issuer #2“ to cover himself in case he ever has to pay Riskmanager Randy for the credit default swaps that Riskmanager Randy bought. Issuer #2 covers himself by buying credit default swaps from “Issuer #3”. Issuer #3 buys credit default swaps from “Issuer #4”. And the chain continues. And what’s worse is that all these Issuers sell far more credit default swaps than they can pay for should they all come due.

All in all, it’s like a bunch of folks getting together to cover each other’s hot checks. But rather than $8, the credit default swaps amount to something like $62 trillion. And now that Joe Homebuyer can’t make the unbearable payments, Riskmanager Randy has found that Issuer #1 can’t pay out on the credit default swaps. This has started $62 trillion worth of dominos (no pun intended) toppling and now we’re betting that $700 billion taxpayer dollars can work like the paychecks that came to the guys in the pizza scam above and stop the collapse.

I’m really glad that the hosting business model is pretty simple at its core. Provide gear, connectivity and services to customers who pay you monthly to use it. If the customers don’t pay, simply turn them off and sell it to someone who will pay. There is no need for hedging. No credit default swaps. No dominos ready to collapse.

The hosting business is certainly not without risk. We hedge electricity risk with UPS units and generators. We hedge bandwidth risk by using a portfolio of providers. But these hedges are tangible, not some nebulous financial market derivative outlined on a sheet of paper.

Bottom line: don’t stretch to get something that you know you can’t afford. Even if it’s a pizza.

-Gary

Categories: 
Subscribe to business-model