Virtualized Data Centers – A Practical Example from a Startup Perspective

This article was originally posted at as an assignment for course MS&E 238 at Stanford University 2017.

It was only 20 years ago when the dot-com era ruled that virtualized data centers became accessible and over time started to be used by companies all around the world. As a fresh-of-the-ground-company before the dot-com era, your only option for storing, computing and manage your technical product information was by purchasing your own hardware, which was a big investment. In business, we call that a barrier to entry (from Porter’s Five Forces (1980)). Having a barrier to entry means that new companies trying to enter a market have a hurdle before they can compete on the same level as the other players in the market. The accessibility of virtualized data centers changed this and allowed companies to try out their product without making big investments into hardware and the maintenance of it. The landscape of cloud solutions is overwhelming and my points here will focus on the full solution service provided by companies like Azure (Microsoft), Amazon Web Services and GCP (Google Cloud Platform).

I wanted to put cloud computing and virtualized machines into a context to better allow for an understanding of the benefits, by giving an example I am very close to. 2 years ago, I founded a startup where this technology was one of the core reasons we were able to grow like we did.

The company is called Simply Events and it is an event ticketing platform for managing everything related to your event’s online presence. Most importantly, we facilitated the ticket sales for events. The problem we were trying to solve in the beginning was about ticket capacity, not in the venues but in the sales channels. Online sites would regularly crash when there would be a lot of people trying to purchase tickets at the same time. This is still a recurring problem for huge festivals like Tomorrowland, ticket platforms like Splash, and funny enough even for my student association at my old university. To solve this problem, one of our biggest assets was our servers at Amazon Web Services. Big ticket releases like Tomorrowland’s and our student association’s big events didn’t happen often. We would be using 1% of our first server on average but then there were these spikes where Amazon were able to smoothly just scale up with more server capacity for our product in that moment, and we would only pay for what we used.

We wouldn’t have been able to add this kind of value to our customers if it wasn’t for the technology barrier in this area being as low as it is. And that’s what enabled us to be as good as we are.

What other barriers to entry can we remove to make it easier for companies to try out their product or their business? Can we add an abstraction layer on top of research facilities, allowing one research facility to be the hub for companies in need of research all around the world? Anything that is not used to its full capacity today could be next. What would you bet it to be?

If you want to read more about Simply Events, you can do that here:

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