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For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Archive for January, 2015

Oh Dear, the Green Pundits Don’t Understand the Cloud or Multitenancy

Posted by Bob Warfield on January 16, 2015

forestRecently I was drawn into a discussion of how Green the Cloud is where I responded as follows:

SaaS is going to come out ahead of any reasonably calculation of carbon emissions versus on-prem. Multi-tenancy is just a lot more efficient. Look at the data centers of companies like Google, Amazon, and Facebook. Most corporates wish they could come close as they watch these companies dictate every detail right down to the exact design of servers in order to minimize their costs. As everyone agrees, most of that cost is energy.

So choose SaaS if you’re worried about carbon, and yes, it could become another axis of competition in terms of exactly which Cloud provider does it best.

Tom Raftery immediately responded:

The answer is that it depends, tbh. It depends entirely on the carbon intensity of the data centre (where it sources its energy), not the efficiency of the data centre.

If you have a data centre with a PUE of 1.2, and it is 50% coal powered (not atypical in North America, Germany, Poland, and others, for example), it will have a higher CO2 footprint than a data centre with a PUE of 3.0 powered primarily by renewables – again I have run the numbers on this and published them.

Similarly with on-prem. If I have an app that I’m running in-house, and I’m based in a country like Spain, France, Denmark, or any other country with where the electricity has a low carbon intensity; then moving to the cloud would likely increase the CO2 footprint of my application. Especially if the cloud provider is based in the US which has 45% of its electricity generated from coal.

Tom is the chief analyst for Greenmonk, which writes about this sort of thing for a living.  He’s been quoted by others who are in the same camp such as Brian Proffitt on ReadWriteWeb.  And who wouldn’t love a nice juicy story to put those darned Cloud vendors in their place?  Those guys have been riding high for too long and ought to be brought down a notch or two, harrumph.

I have a lot of problems with this kind of math–it just doesn’t tell the whole story.

First, I can’t imagine why Tom wants to be on record as saying that PUE (Power Usage Efficiency) just doesn’t matter.  Sure, he has found some examples where CO2 footprint overwhelmed PUE, but to say the answer depends entirely (his word) on the sources of the data center’s energy and not on the efficiency of the data center just seems silly to me.  Are there no data centers anywhere in the world at all where PUE matters?  Did all the Cloud data centers with great PUE just magically get situated where the carbon footprints are lousy enough that PUE can’t matter?

I’m very skeptical that could be the case.  You must consider both PUE and CO2 per Kilowatt Hour, how could we not when we’re talking per Kilowatt hour and PUE determines how many Kilowatts are required?

Here’s another one to think about.  If this whole PUE/CO2 thing matters enough to affect the economics of a Cloud Vendor, we should expect them to build data centers in regions with better CO2 energy.  Since they put up new data centers constantly, that’s not going to take them very long at all.  Some are talking about adding solar to existing facilities as well.  Now, do we want to lay odds that corporate data centers are going to be rebuilt and applications transferred as quickly for the same reasons?  If you’re running corporate IT and you have a choice of selecting a Cloud Data Center with better numbers or building out a new data center yourself, which one will get you the results faster?  And remember, once we are comparing Apples to Apples on CO2, those Cloud vendors’ unnaturally low PUE’s are going to start to haunt you even more as they run with fewer Kilowatt Hours.

Multitenancy Trumps all this PUE and CO2 Talk

But there’s a bigger problem here in that all data centers are not equal in another much more important way than either PUE or fuel source CO2 footprints.  That problem is multitenancy.  In fact, what we really want to know is CO2 emissions per seat served–that’s the solution everyone is buying.  Data centers get built in order to deliver seats of some application or another, they’re a means to an end, and delivering seats is that end.  The capacity they need to have, the number and type of servers, and hence the ultimate kilowatts consumed and carbon footprint produced is a function of seats.  Anyone looking purely at data centers and not seats served is not seeing the whole picture.  After all, if I run a corporation that has a datacenter, it’s fair to charge the carbon from that datacenter against my corporation.  But if I am subscribing to some number of seats of some Cloud application, I should only be charged the carbon footprint needed to deliver just those seats.  Why would I pay the carbon footprint needed to deliver seats to unrelated organizations?  I wouldn’t.

Corporate data centers have been doing better over time with virtualization at being more efficient.  They get a lot more seats onto a server than they used to.  The days of having a separate collection of hardware for each app are gone except for the very most intensive apps.  But that efficiency pales in comparison to true multitenancy.  If you wonder why, read my signature article about it.  I’ll run it down quickly here too.

Consider using virtual machines to run 10 apps.  Through the magic of the VM, we can install 10 copies of the OS, 10 copies of the Database Server, and 10 copies of the app.  Voila, we can run it all on one machine instead of 10.  That’s pretty cool!  Now what does Multitenancy do that the VM’s have to compete with?  Let’s try an example where we’re trying to host the same software for 10 companies using VM’s.  We do as mentioned and install the 10 copies of each kind of software and now we can host 10 tenants.  But, with multitenancy, we install 1 copy of the OS, 1 copy of the Database, and 1 copy of the app.  Then we run all 10 users in the same app.  In fact, with the savings we get from not having to run all the VM’s, we can actually hose more like 1000 tenants versus 10.

But it gets better.  With the Virtual Machine solution, we will need to make sure each VM has enough resources to support the peak usage loads that will be encountered.  There’s not really a great way to “flex” our usage.  With Multitenancy, we need to have a machine that supports the peak loads of the tenants at any moment in time on the system.  We can chose to bring capacity on and off line at will, and in fact, that’s our business.  For a given and very large number of seats, larger than most any single corporate application for most corporations, would we rather bet the corporation can be more efficient with on-prem software in its wholly owned data center or that the SaaS vendor will pull off far greater efficiency given that its software is purpose-built to do so?  My bet is on the SaaS vendor, and not by a little, but by a lot.  The SaaS vendor will beat the corporate by a minimum of 10-20x and more likely 100x on this metric.  You only have to look to the financials of a SaaS company to see this.  Their cost to deliver service is a very small part of their overall expenses yet most SaaS apps represent a considerable savings over the cost of On-Prem even though they carry the cost of delivering the service which the On-Prem vendor does not.

Conclusion

Raftery says, “energy use” and “emissions produced” have been conflated to mean the same thing.  I say he’s absolutely right about that but hasn’t seen the bigger picture that it is not energy use nor emissions produced in isolation, it’s seats delivered per emissions produced.  Itt’s having the flexibility to make a difference rapidly.  And that is why we bet on the Cloud when it comes to being Green.

Posted in cloud, data center, enterprise software, saas, strategy | 1 Comment »

What Can a Poor Dumb Engineer Do That Most Marketers Can’t?

Posted by Bob Warfield on January 12, 2015

This is a tale of bootstrapping and bucking the conventional wisdom.  This is a tale of applying an Engineer’s overly top down facts sifted through logic lens to what is traditionally a touchy feely shoot from the gut discipline.  This is the story of how my little one man bootstrapped SaaS company competes with giants in marketing, even though I am but a poor dumb engineer.  And yes, the title is pure link bait.  Many marketers can do and do-do (uncomfortable with that) this sort of thing.

My company is called “CNCCookbook.”  We are a niche SaaS software company focused on CNC (Computer Controlled) Manufacturing.  Both the CNC and SaaS within the CNC world are very much niche plays.  Public companies in manufacturing software are few and far between, and most VC’s wouldn’t touch it with a ten foot pole.  To paraphrase a more colorful turn of phrase, they wouldn’t invest in it with YOUR money, let alone their own.  Most of the software here is not SaaS–it arrives on a bunch of CD’s and is after much installing, dongling, and license keying, you’re left with a vintage 90’s User Experience.  I love this niche because what I know from working in more progressive markets gives me an edge that I bring to Manufacturing software.  I love it also because it is my hobby–yes, Virginia, I use CNC machines to make things for fun.

I’ve been at it in this marketplace for a while now.  I grew the business to the point where it pays me as much as I have made at any Silicon Valley Startup except those where stock options mattered.  I should know, CNCCookbook is my 8th trip unto the breach, dear friends.  Now what’s all this about competing with giants in marketing?

Let’s start by looking at how CNCCookbook is marketing.  I came across this great infographic from Marketing Tech Blog that shows the conversion rates of various B2B marketing techniques:

B2BMarketingChannels

B2B Sales Channels via Marketing Tech Blog

Strictly speaking, CNCCookbook is both B2B and B2C since the hobby CNC market are decidedly “C’s” while the business CNC market are “B’s.”  No matter.  The takeaway from the article is that a lot of the marketing world is a bit surprised at how some of the tried and true techniques are not working so well any more.  If we look at what CNCCookbook does from this list, we have tried Webinars and Paid Search and found both to be unprofitable and ineffective.  Today, we’re totally focused on our Website/Content Marketing and Facebook/Twitter.  You could call it luck that we wound up on two of the highest converting channels, but we did test an awful lot of different possibilities and I have had the luxury of seeing how things worked for other companies.  The latter meant that I was unlikely to try event marketing, trade shows, partners, or sales cold calling (it’s just me in this company, I don’t have time to cold call), for example.

The Facebook and Twitter work is almost 100% automated–I simply co-announce any new blog posts to those channels automatically with a WordPress plugin and I make sure any non-blog content I publish is also announced in a blog post.  Simple, and effective.  I monitor these and many other channels for opportunities to engage with my customers, but the rest is automated.

What do I spend most of my marketing time doing?

The answer is writing articles for the blog and web site.  I alternate between blog posts and what I call “Cookbooks.”  Cookbooks are in-depth go-to resources that consist of many articles.  I try to introduce a new Cookbook every year and we’re up to 5 of them at this stage. They’re solid traffic producers and what the marketers like to call “Evergreen Content.”  Good reference content seldom goes out of style and accretes links very well.

And how much time is spent on marketing?  My days and weeks divide roughly into 20-40% marketing with the rest focused on software development.  Since I believe Good Customer Service is critical to marketing, I charge my Customer Service time to Marketing as well.  FWIW, I work 7 days a week and often a fair number of hours, but the business is such that I can do the work almost anywhere–from a Cruise Ship Cabin or a leased Condo on an Exotic Caribbean Island (both are real examples).  As long as I have a decent but not spectacular Internet connection, I get by.

That’s a bit about how it’s done, now what’s been accomplished?  What can one poor dumb software engineer working part-time (20-40% time) accomplish by way of marketing?

There are a lot of ways to look at it.  Ideally, one should look at leads, but it’s hard to find out how many leads the other organizations you want to benchmark against are getting.  As a reasonable proxy, I like to use SEO Traffic.  Who doesn’t love free (heh, we won’t count all those hours writing content!) over the transom leads that come from searchers finding your opportunity for the first time via Google or some other search engine?

To do this comparison, I like to use SEMRush.  It’s been a valuable tool for me in a lot of ways (keyword research, understanding pay per click which I ultimately have given up on, etc.).  You can get quite a lot from it for free even.  Here are a set of comparative SEO stats drawn from SEMRush that compare CNCCookbook’s traffic to others in our industry:

SEOIndustry

CNCCookbook vs Industry Comps for SEO Traffic…

Pardon the length of the list, but I do this for my own analysis purposes and didn’t want a cherry-picked list.  These are real companies that are big names or names of interest to me in the CNC Manufacturing world.  Some will be familiar like Autodesk, but most are probably unknowns unless you happen to be familiar with this market.  We can pick out some highlights though:

–  Makezine and Hackaday reflect the popularity of the Maker Movement, and so I wanted them here to gauge my impact on that world.

–  Practical Machinist and CNCZone are the two biggest online communities in the space, so were obviously of interest.  Amazing to see CNCCookbook is doing better than CNCZone as it is quite a big community.

–  Haas Automation is the world’s largest maker of CNC Machines and has in excess of $900 million a year in revenue.

–  IMTS is the industry’s largest trade show and an online magazine as is mmsonline.

–  Kennametal, which ranks immediately below CNCCookbook is a $3 Billion a year company that makes cutters and other tooling for CNC.  Iscar is a tooling company that Warren Buffet paid $2 Billion for not that long ago, and I can assure you that tooling companies don’t have zillion to one valuation ratios nor would Warren Buffet buy one if it did.

The point is there are a lot of solid businesses on the list.  Many are quite large and no doubt have large marketing staffs and budgets.  Yet CNCCookbook has been able to make its mark by joining their ranks, at least in terms of search engine traffic.  What a triumph for content marketing–if ever there was a reason to believe in it, seeing a guy work part time to deliver these kind of results ought to be it.

Here’s another list, this time with names that will be more familiar to Smoothspan Blog readers:

TechComps2

Startups, Tech Marketing, and other Tech Related Comps…

These are startups, tech marketing companies, software companies, and other tech related startups I wanted to compare to.  A lot of these are talked about a lot.  A lot of them are in the business of telling others how to do marketing (sometimes I wonder if I should be in that business too, lol).  Considering the amount of resources available to these companies and the fact that as many of them are marketing companies selling to marketers who therefore should know a lot about how to do this, I feel good about how CNC Cookbook ranks alongside.

What Should We Conclude From This?

There’s only one takeaway I would encourage you to have: engineers with limited resources can successfully market their bootstrapped companies.  There are broader ramifications perhaps for broader markets and audiences, but I’ll let others decide whether they want to jump to those conclusions.  I know what I did for my market and what results that produced and I’m very happy with them.  We live in a time when this sort of thing is much more achievable than it once was because the Internet is so much more ubiquitous.  For those who want to follow a similar path I would urge you to choose your market carefully and find one where content marketing (also called inbound marketing) can be extremely effective.  You don’t need to be the world’s great graphic designer (I am so not that!), but you need to be a good writer, you need to have passion for your subject matter, and you need a market whose audience never gets enough content to satisfy their thirst for more knowledge.  If you can put all that together, it’s hard to see how you wouldn’t build a following.

If you’d like to learn more about how I grew CNCCookbook, check out my Entrepreneurship blog: BobWarfield.com.

Posted in bootstrapping, business, Marketing, strategy | 5 Comments »

 
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