Server Hosting In The Cloud - What does it mean?

I've been intending to write about this for some time, but have been so busy with the doing I haven't had time for the writing.

Cloudsourcing means hosting part or all of your applications or even server infrastructure on Virtual Server Instances which run on the robust, commoditized hardware of large Internet presence companies like Amazon.  If you have a Yahoo or Gmail account, you've cloudsourced your own email, which nowadays is very common.

Application Cloudsourcing Companies like Google and Zoho have gone further and provided hosted apps for all office productivity needs, from word processing, spreadsheets and presentations, to Customer Relations Management.  What's really remarkable is that the apps are free for small groups of users, and very reasonably priced for business users.

Server Cloudsourcing In the process of launching P3iSystems we looked at several alternatives.  Some of the most successful Technology Support Service Providers in the Small and Medium Business space started out by building their own infrastructure and buying their own bandwidth, spending into seven figures for startup costs.  These competitors of ours are very proud of their facilities, and rightly so.  They've done a masterful job of building an infrastructure to serve their clients.

We didn't have that kind of startup capital - we had decades of collective experience providing solutions to business users in large enterprises, and we wanted to bring enterprise-class technology services and support to SMBs.  We wound up cloudsourcing our main management server for several reasons:

• We needed constant, reliable connectivity with all of our clients with good bandwidth.
• We needed a fairly robust server which we could scale as needed.
• We needed access not only for internal office workers, but also for homesourced employees (that's another article in itself.)

After considering our alternatives we considered the costs of building our own server and having it inside our office:

• Management Server Hardware:  $2000
• Mail Server Hardware:  $2000
• Server Operating System:  $719 (Microsoft Windows - our Management Center runs on Windows and the mail server runs on Linux, which is free)
• Server Rack:  $1500
• UPS: $450
• Business-class Internet:  $120 monthly

These and other ancillary costs for a server that would meet our needs throughout its hardware lifecycle added up quickly.  These plus the costs of the software we use for centralized management, monitoring and alerts, and service automation quickly added up to more than $10,000.

We figured we could cut down on the cost by renting dedicated server space in a data center.  This allowed us to cut the purchase cost of server hardware and rack, but we still had the cost of OS software in addition to our own application software.

Enter Cloudsourcing.  Then we looked at the Amazon Elastic Compute Cloud.  We already offer backup to Amazon S3 Storage, so we were familiar with some of the aspects of their offering, but being from traditional in-house server shops, we hadn't considered the cloud, as we didn't think it was a mature technology.  But once we checked it out we were impressed.  Amazon uses robust servers running RedHat's Xen Hypervisor.  They offer various instance sizes which can be scaled up if need be.  If you run out of space on a volume, you can simply create a new volume that has headroom enough for your data, snapshot the data from the volume you're replacing onto it, mount the new volume, and press on.  This is a real boon for those of us who remember doing data migration in the old days (remember those long nights of waiting for data to copy from drive to drive or to restore from tape?).

Best of all were the costs.  Amazon's EC2 instance already had more bandwidth to the Internet than we needed, power and cooling taken care of, no need for rack or UPS.  And Amazon provides the Operating System License for Microsoft Windows, so that cost is not a factor.  I for one am happy to let Jeff Bezos pay Steve Ballmer.  Here are the comparative startup costs:

• Management Server Hardware: $0
• Mail Server Hardware:  $0
• Server Operating System:  $0
• Server Rack:  $0
• UPS: $0
• Business-class Internet:  $120 monthly (we still need this)
• Two EC2 Instances and storage:  $200 monthly

Good News for Startups?  You Bet!

Using cloudsourcing our initial startup costs went down to the cost of our Service Management Software plus about $100 a month for each instance we started up with.  We can scale up when the business grows, but amortized out over the expected lifecycle of a physical server, the cost of cloudsourcing still comes out ahead.  And since it's all services, it all goes straight into the operating budget - no need for capital expense accounting or depreciation.

Sure there are startups that start out with venture capital or perhaps are begun with the revenues from the sale of another company.  But if you're bootstrapping, chances are you're undercapitalized.  The startup costs of the Cloud begin to look pretty attractive when you have a limited amount of startup capital and lots of areas where you need to invest your initial equity investment.

We know.  We've been there.  We've crunched the numbers.  Thus far we're very happy with our decision.  If anything changes, you'll be some of the first ones to find out about it.

Until then, if you haven't considered cloudsourcing, maybe you should.  And if you want someone with experience to help you set up and run your cloudsourced server, we can help you with that also.  We're on the same journey you are.  Hang on tight - it's going to be an exciting ride.