To make sure we’re all on the same page, as we continue to talk about “cloud,” our definition is pretty straightforward:

• It’s an operations model.
• It provides capacity on demand.
• It offers consumption-based pricing.
• It features self-service provisioning.
• It can be accessed and managed via an API.

Understanding those characteristics, when you hear about cloud in the hosting industry, you’re usually hearing about cloud computing instances in a public cloud environment. An instance in a public cloud is one of many instances operating on a shared cloud infrastructure alongside other similar instances that aren’t managed by you. Your data is still secure, and you can still get good performance in a public cloud environment, but you’re not managing the cloud infrastructure on which your instance resides … You’re using a piece of a cloud.

What we announced at Cloud Expo East is the next step in the evolution of technology in our industry … We’re providing a turnkey, on-demand way for our customers to provision their own Private Clouds with Citrix CloudPlatform, powered by Apache CloudStack.

You don’t get a piece of the cloud. You have your own cloud, provisioned in a matter of hours on a month-to-month contract.

For those who have looked into building a private cloud for their business in the past, it’s probably worth reiterating: With SoftLayer and CloudStack, you can have a geographically distributed, secure, private cloud environment provisioned in a matter of hours (not months). Given the complexity of a private cloud environment — involving a management server, private cloud zones, host servers and object storage — this is no small feat.

Those unbelievable provisioning times are only part of the story … When that cloud infrastructure is deployed quickly, it’s fully integrated into the SoftLayer platform, so it leverages our global private network alongside your existing bare metal, dedicated and virtual servers. Want to add public cloud instances to your private cloud as web heads? You’ll log into one portal or use a singular API to have that done in an instant.

Your own cloud infrastructure, fully integrated into SoftLayer’s global infrastructure. If you’re chomping at the bit to try it out for yourself, email us at privateclouds@softlayer.com, and we’ll get you on the “early access” list.

Before I sign off, I want to be sure to thank everyone at SoftLayer and Citrix who worked so hard to make SoftLayer Private Clouds such an amazing new addition to our platform.

-@nday91

• It’s an Investment

  Just like purchasing a new home, deciding to purchase a server is a huge investment. As you start shopping around, the costs may seem staggering, and while most servers don’t cost as much as a small home, your new server will be your business’s new home online. When you consider the revenue your site will generate (and the potential cost of not being able to properly support demand), you won’t want to skimp on the details. The truth is that like any investment, you can reap great rewards with proper planning and execution.

• You Have to Know What You Need

  One of the best tips I’ve incorporated in my home-buying process is the need to differentiate what you want, what you need, and what you can live without. Unless you’re royalty, you’re likely living on a budget. As cool as it would be to live in a 10-bedroom mansion with an indoor Olympic size pool, there’s a lot there that I don’t need. That sort of home palace also falls way outside of my personal budget. The same could be said about a business.

  I’ve heard plenty of stories about companies who slash their IT budgets in order to cut costs, and even the greatest IT departments have to live within their budgets. As you’re determining what your next server will be, you need to understand the purpose (and needs) of your workload: Will it be database server? An application server? Will it be an additional web head? Are you using it for mass storage? You need to plan accordingly. I’m sure you’d want a new Xeon E5-2600 server with all of the bells and whistles, but if you don’t need that kind of performance, you’re likely just going to burn through your budget quicker than you have to. Know your budget, know your needs and purchase your server accordingly.

• You Should Get to Know the Neighborhood

  I don’t intend on purchasing a home in a high-crime area, nor do I plan on moving into a neighborhood with exorbitant HOA dues for services I don’t intend to use. Your new server is going to have a “neighborhood” as well when it comes to the network it’s connected to, so if you plan on outsourcing your IT infrastructure, you should do the same research.

  You want your critical environments in a safe place, and the easiest way to get them in the right “neighborhood” is to work with a well-established host who’s able to accommodate what you’re doing. A $20/mo shared hosting account is great for a personal blog site, but it probably wouldn’t be a good fit for a busy database server or front-end application servers for an application dependent on advertising for revenue. A mansion worth of furniture doesn’t fit very well in a studio apartment.

• You’re Responsible for Maintenance

  Ask any homeowner: Continuous improvements — as well as routine maintenance &mdashl are a requirement. Failure to take care of your property can result in fines and much more costly repairs down the road. Likewise with any server, you have to do your maintenance. Keep your software up to date, practice good security protocols, and continue to monitor for problems. If you don’t, you could find yourself at the mercy of malicious activity or worse — catastrophic failure. Which leads me to …

• You Need Insurance Against Disaster

  Homeowner’s insurance protects you from disaster, and it provides indemnity in the event someone is hurt on your property. Sometimes additional insurance may be required. Many professionals recommend flood insurance to protect from flood damage not covered under a typical homeowner’s insurance policy. Ask any systems administrator, and they’ll tell you all about server insurance: BACKUPS. ALWAYS BACK UP YOUR DATA!!! The wrong time to figure out that your backups weren’t properly maintained is when you need them, more specifically in the event of a hardware failure. It’s a fact of life: Hardware can fail. Murphy’s Law would suggest it will fail at the worst possible time. Maintain your backups!

I can’t claim that this is the guide to buying a server, but seeing the parallels with buying a new home might be a catalyst for you to look at the server-buying process in a different light. You should consider your infrastructure an asset before you simply consider it a cost.

-Matthew

Having been in their seats about six years ago when SoftLayer was born in a living room, the SoftLayer team is especially qualified to give insight about the struggles and successes of running a startup, and that aspect of our partnership is where we hope to provide the most value. Over the past few weeks, we’ve met with the current Tech Wildcatters participants and seen some of the amazing ideas they have in the works, and we’re pumped to see them succeed … By all accounts, we can’t really call SoftLayer a “startup” anymore, but our investment in this community reinvigorates the startup culture we’ve tried to maintain as the company has grown.

Recently, I had the chance to share a few “Keys to Success” with program participants, and since those thoughts might be interesting for other startups and small business users, I thought I’d share some of the highlights here. There are no “guaranteed win” formulas or “super-secret secrets to success” in business (regardless of what an infomercial at 3am on a Tuesday morning may tell you), but these ideas may help you position your business for success:

1. Hire people smarter than you.
Your goal should be to get people on your team who can handle specific responsibilities better than you can. Just because you’re running the business doesn’t mean you can’t learn from it, and the best people to learn from are brilliant people.

2. Hire a diverse group.
Different people think differently, and different perspectives lead to better conversations and better business decisions. Filling your organization with one kind of employee will lead to a lot of “That’s the best decision ever” moments, but whether or not that “best decision ever” decision is good for anyone else is a crap shoot.

3. Founders should put skin in the game.
With all of the startup company trials and tribulations, you want everyone on your team to have a vested interest in the business’s success. Clock-punchers and coasters need not apply.

4. Boot-strap the beginning.
Along the lines of the previous recommendation, if you’ve remortgaged your house or sold your car or maxed out your credit cards on a new business, you’re going to care a lot more if it fails. By boot-strapping your initial financing, you become even more accountable for your success.

5. Operate with financial sense, operational sense and common sense.
Balance your business responsibly. If you disregard any of those “senses,” your tenure as a small business owner may be relatively short-lived. When it comes to financial sense, I also recommend that you invest in professional accounting support and software to save you a ton of headache and heartache down the road when it’s time to go after “real money.”

6. CBNO – Challenging But Not Overwhelming
You can always do something more for the business. You and your team should be maximizing your efforts to grow the business but not at the expense of burning out. If you’ve got “skin in the game,” your threshold for what is overwhelming may increase, but you have to understand the need for balance.

7. Have fun and make money.
In that order. If you’re not having fun, it doesn’t matter how much money you make. Startups are run by passionate people, and the second you lose that passion, you lose a significant piece of what makes your business or idea great.

I touched on about a dozen more points when it comes to how to orient your business to your customers, but I’ll save that bit for later.

CBNO

-@lavosby

Let’s consider a mythical server that costs the company $10,000 to buy and the company depreciates it evenly over 3 years. After year one, the value on the financials is $6,667. After year two, its book value is $3,333 and finally $0 after three years. Suppose that the company deploys the server for five years. In reality, after three years, the server’s true value is certainly above $0, and the hosting company is shortchanged by not being able to reflect this value on its financial statements. Multiply this effect by thousands of deployed servers and you can see that there is significant value in hosting companies that just isn’t found on the financial statements.

So how should we reflect the value of a server? I would propose the use of a “capitalization rate” or “cap rate“. This is a common method of appraising real estate and the formula is simple: take the projected net cash flow over the next 12 months and divide by the cap rate, and that’s the value. So, what would happen if we applied this to a server?

Looking at our mythical $10,000 server above, for simplicity’s sake, let’s ignore any allocations of the switches, routers, generators, HVAC, etc., needed to operate it. Let’s also assume it produces net cash flow of $100 per month and will do so for 60 months. Its 12 month projected net cash flow is $1,200. We would divide this by the cap rate to find its value.

Naturally, the next question is “what do we use for the cap rate?” For a given investment, the cap rate is the lowest return that an investor will accept for the given risk of that investment. In our server’s case, the $10,000 investment produces a return of $1,200 per year. How much would an investor need to invest in lower risk alternatives to get the same return? For a risk-free investment of the same 5 year duration such as a 5 year Treasury Note at 4.25%, you would have to invest $28,235.29 to get $1,200 per year in return. If we use 4.25% as the cap rate in our scenario, the value of the server becomes $28,235.29. However, investors in hosting companies generally look for returns far above 4.25% and these returns are not without risk, so this is not the appropriate cap rate. For simplicity’s sake, let’s assume that the hosting company investor’s minimum acceptable rate for the investment is 10%. In other words, if his investment in the hosting company was expected to return less than 10%, the investor has other lower risk options to invest and get a 10% return and he would not invest in the hosting company.

So if we use 10% for the cap rate in our mythical server scenario, the true value of the server is $12,000 ($1,200 / 10% = $12,000). As long as the 12 month projected net cash flow stays above $1,200 then that value holds constant. Check out the graph below to compare the value of this server from both the cap rate perspective and the accounting rules perspective over the five year life.

From month 36 to month 49, there’s a $12,000 difference in value between the two methods. If a hosting company has a thousand servers like this, that’s $12 million in value that isn’t reflected in the company’s financial statements. That’s huge.

-Gary