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Bill St. Arnaud is a consultant and research engineer who works with clients around the world on a variety of subjects such as next generation Internet networks and developing practical solutions to reduce CO2 emissions such as free broadband and dynamic charging of eVehicles. He is an author of many papers and articles on these topics and is a frequent guest speaker. For more details on my research interests see

Tuesday, August 17, 2010

How clouds and R&E networks can help small startups

[Many of today’s hot Internet companies like Twitter and Slideshare got an early kick start on their aggressive growth because they built their applications around clouds. The following 2 articles clearly demonstrate that clouds can have a major benefit in helping the cash flow requirements for small startup. The next big application area for clouds will be to support the next generation of mobile applications enabled by devices like the Android and iPad using 4G and 5G networks. See for more details As I also discussed in my paper “Personal perspectives on R&E networks” clouds and R&E networks can not only help academic research but they can expose young budding entrepreneurs at our universities to the new programming paradigm of clouds and their economic benefits. Projects like the UCSD Ocean Observatory Cyber-Infrastructure program are a good example of this approach. The click-compute revenue model used by some cloud providers such as Amazon also can result in a new revenue stream to support academic research. R&E networks can also play an important role in providing the high bandwidth connectivity to major peering points to interconnect to clouds that is needed for many academic and small business applications. CENIC and ESnet are good examples of networks that are providing this type of service – BSA]
How Cloud Computing Impacts the Cash Needs of Startups
Cloud computing has been a key enabling factor in the latest generation of web startups, letting them start with small amounts of capital and scale quickly in response to demand. Startups don’t care about a lot of the factors that slow adoption of cloud computing. New startups don’t own anything yet, so they don’t have a legacy investment in physical infrastructure. They also don’t have IT departments, who often have a stake in the old way of doing things. So, if you want to see what the future of IT infrastructure looks like, look at what startups are doing today.
Cloud computing is more of a pricing innovation more than a technological innovation. After all, cloud computing is really just virtualization (a la Xen or VMWare) that’s hosted by somebody else. The technology isn’t such a big deal. The mind-blowing thing is the ability to pay for computing like it is a utility. This offers two big advantages over owning and operating your own hardware, and even over renting servers by the month.
Advantage 1: Success-Based Scaling
When something is a utility, you pay for it based on the amount you use. System use ishopefully related to revenue-generation (if not, be afraid! This means your startup doesn’t have a business model), so cloud computing costs fluctuate in tandem with revenues. If you have big infrastructure costs this month, it’s because you have big revenue this month. This is a big advantage when compared to dedicated hosting, where you’d pay for the maximum capacity that you might need this month.
Advantage 2: Cash-Flow Positive Infrastructure
When something is a utility, you pay after using the service, instead of before you use it. Think of the difference between when you pay your rent and when you pay your phone bill: that’s the difference between dedicated hosting and cloud computing. […]

Advantage: Startups
What these two advantages mean for the startup using cloud computing is that its business has the potential to be inherently cash-flow positive. When your infrastructure costs track how many customers you have, and when you can collect money from those customers before you have to pay vendors, your need for outside capital dramatically decreases, and the risk of running out of cash goes down dramatically.
Cash is the oxygen of business, and cloud computing allows companies to inhale the oxygen (by collecting revenue) before they exhale (pay their vendors). No wonder that in the last few years, web-based startups have grown like weeds even as the broader economy collapsed!
Meet The All-New Structure Blog
The big web infrastructure makeover, which includes the rise of cloud computing, has been an area of much focus for us. From our coverage of the industry to our industry-leading Structure conference, we have been trying to cover what our dear friend and well-known author Nick Carr calls – the big shift.

On the blog, we’re not only covering some of the daily developments in the industry, we’re also looking to profile people behind many of these companies, as well as look deeply into how startups can use cloud computing to their benefit. As part of this effort, we have invited folks like Jon Boutelle, chief technology officer of SlideShare, to share the lessons learned from building a startup by using Amazon’s Web Services.

Enabling innovation for small business through clouds and R&E networks

Personal Perspectives on the Future of R&E networks

The changing nature of traffic on R&E networks

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