Friday, February 11, 2011

Cloud Computing and Entrepreneurship

By now almost anyone reading this blog would have heard about cloud computing.  Cloud Computing enables a user consume computation service without knowing its exact location.  Cloud computing is divided into 3 main categories:  'PaaS(Platform as a Service)' , 'SaaS(Software as a Service)' and 'IaaS(Infrastructure as a Service)'.  I will explain each type as and when needed.  

According to The National Institute of Standards and Technology (NIST): 
"Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, servers, storage, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction." 

It has a lot advantages including scalability, agility and cost effectiveness.  There are a number blogs about what it is and what its advantages are and I would look to focus on how it promotes Entrepreneurship.  Entrepreneurship can be further divided to tech startups, small businesses, performance arts etc.  I will try to explain how cloud computing can be used to start/succeed in each field.

Technology Startups: Lets say someone has a cool idea about the next facebook or google.  They would write a web application and then host it.  If it becomes popular then they can start charging money or use ads.  To launch a website and make sure it is available all the time one has to provide redundant servers and power.  Policies for backups and load balancing strategy should also be in place.  And many times the servers has to be residing in multiple location to provide reliable service.  For a 1-5 person startup all these maintenance and administration activities drain a lot of energy and money.  They could also use some hosting services that provide the above mentioned services.  Many times it comes with a high cost and some other contractual commitments.  For someone studying in a college or from a developing nation these costs are inhibiting factor.  This is exactly where cloud computing helps.  One can use any of the 'Platform as a Service' provided by the vendors.  By platform it means raw computing power, storage and I/O bandwidth.  Some main vendors in this field are Google App Engine and  

Once we use a platform as a service from any vendor they would take care of all the redundancy and backups and load balancing.  They would make sure that the application/website is up and running at all times and provide us with monitoring tools.  What is even better is that they provide you some free usage.  Google provides free 1GBytes of incoming and outgoing bandwidth and 1GB storage.  So until your website becomes famous you are pretty much not paying anything to google.  Lets say you wrote a web application that will show the results of some lottery that takes only once every month.  And your website has a lot of hits only on that day, you can just pay google for that day and the rest will be free.  It is pretty much like our electricity bill.  You pay only what you use.

Some platforms such as will provide you additional features like social networking integration, drag and drop UI development,  mobile support etc.  These guys give one app for free and more than one app they will ask you to pay.  They also have app stores that already have a number of customer base.  So you can try to target then and start selling to them or let them try out for free initially.  So using these platforms you have access to potential clients.  Using platform as a service will make the tech startup entrepreneurs focus on their application and not the other maintenance stuff.

Small businesses:  Many businesses would like to have an online presence and maybe have an online order or status feature.  They would also like to have inventory management systems and also the ability to create invoices and manage expenses.  Providing support to the customers via phone, IM, twitter etc would also be a nice feature that would help them.  Normally small businesses would buy software from other and pay some consultants to make websites and get it hosted at some hosting service provider.  These kind of services would help them get more revenue.  But only by having more revenue one would be able to pay for these services.  Its like a chicken and egg problem.  Every small business owner would be facing this dilemma at some point in their life.  Cloud computing comes to the rescue again here.  These people would use something called 'Software as a Service(SaaS)'.  In SaaS you are rented an application.  You use an online application to fulfill your needs and you are charged based on your usage.

One can use website building and hosting services from the likes of wix or siteforce (many other alternatives available).  They come with different types of payment models.  Wix is free if you use their name on your site and agree to let them place their ads.  If you want to remove their name you have to pay about 10$ per month.  But they will help you to create and host your website and also provide you ecommerce solutions.  One need not hire a consultant to do basic activities.  So a small business can start with their own site initially and then once they make enough money they can use professional services to improve.  This way, chicken and egg is avoided.  For inventory management and invoicing one can use services from intuit etc.  They also have packages that are affordable to small businesses.(starting at 12 $ per month)  So one can just pay that as a utility and avoid high capital expenditure upfront.  For providing automated customer support one can use the tropo cloud.  They have some free usage and anything above that is pay as you go.  So if no ones the service no one pays.

Cloud has not only changed the way technology and business works. Now they started to change the way music is being made. Services such as Indaba, Soundation, Audiotool , Echonest could be used to collaborate, synthesize and release(on itunes store) audio albums over the cloud.  During Dreamforce 2010 was also raving about using cloud to produce music collaboratively.  

There are many other miscellaneous cloud tools such as dropbox, soundcloud, skytap, iCloud etc that provide other services for consumers.  Among all the services I use dropbox and google app engine very often.  I have used and but did not use the other services I have mentioned above. 

To conclude, cloud computing promotes entrepreneurship by providing below advantages:

  • No Capex (capital expenditure) and low Opex (operational expenditure) due to its pay-as-you-go model.
  • Worry about the your application or your business and not about the computing infrastructure
  • Scalability and high availability guaranteed.
One can say it is Outsourcing 2.0.  But it is not a passing fad as some critics says and it is here to stay.  Entrepreneurship is key for the global economy and Cloud Computing would enable that.  Cloud computing is also the most efficient way of computing.  This would help reduce overall energy consumption and hence reduce global warming.  
In short- Go for it.

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