In the Clouds

Cloud Computing is a fancy term these days that applies to many different things. Concepts such as Software as a Service (SaaS), On-demand Computing, Utility Computing, Managed Services or even older ones as Hosting or Outsourcing, seem to all fall under the Cloud buzzword.

The basic concept is that the Cloud provides IT infrastructure (processing, storage, database or applications) on-demand, on a pay-per-use basis. The most renown examples of Cloud Computing are Google App Engine and Amazon Web Services. Microsoft recently launched Live Mesh, enabling users to upload files, folders, and sync PCs and devices info through the Live Mesh cloud. Web applications such as Salesforce.com or even Facebook, are often referred as clouds, providing SaaS, and Facebook giving APIs to develop applications. Even the recent HP bid to acquire EDS, has been tagged as a move to reinforce HP position in the Cloud market.

A vivid example of what Cloud computing can represent for an online startup can be found in NYT’s article Cloud Computing: So You Don’t Have to Stand Still.

[…] Animoto, an 18-month-old start-up in New York that lets customers upload images and music and automatically creates customized Web-based video presentations from them; […] earlier this spring about 5,000 people a day were trying it.

Then, in mid-April, Facebook users went into a small frenzy over the application, and Animoto had nearly 750,000 people sign up in three days. At the peak, almost 25,000 people tried Animoto in a single hour.

To satisfy that leap in demand with servers, the company would have needed to multiply its server capacity nearly 100-fold, says Stevie Clifton, 30, a co-founder […]. But (they) had neither the money to build significant server capacity nor the skills — and interest — to manage it.

Instead, they had already worked with RightScale, a cloud services firm in Santa Barbara, Calif., to design their application for Amazon’s cloud. That paid off during the three-day surge in growth, when Animoto did not buy or configure a single new server. It added capacity on Amazon, at the cost of about 10 cents a server per hour, as well as some marginal expenses for bandwidth, storage and some related services.

The example illustrate the opportunities that Cloud Computing represents for entrepreneurs for prototyping applications with little investment. Startups can launch without the risk of being killed by success, as they are able to easily adapt IT infrastructure capacity to their growth. See “Cloud” price lists from Amazon and Google below:

Amazon Web Services pricing in USA:

    Storage
    $0.15 per GB-Month of storage used
    $0.100 per GB – all data transfer in
    Data Transfer
    $0.170 per GB – first 10 TB / month data transfer out
    $0.130 per GB – next 40 TB / month data transfer out
    $0.110 per GB – next 100 TB / month data transfer out
    $0.100 per GB – data transfer out / month over 150 TB
    Requests
    $0.01 per 1,000 PUT, POST, or LIST requests
    $0.01 per 10,000 GET and all other requests*
    * No charge for delete requests

Google App Engine provides 500MB storage and up to 5 million pages per month on the free package. ReadWriteWeb discloses that App Engine price will be:

    $0.10 – $0.12 per CPU core-hour
    $0.15 – $0.18 per GB-month of storage
    $0.11 – $0.13 per GB outgoing bandwidth
    $0.09 – $0.11 per GB incoming bandwidth

The old promise of Outsourcing to convert CAPEX into OPEX is now at the service of the entrepreneur. Clouds can be a true engine for innovation.

Picture: Ricardo Carreon

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