New news from Netflix and why you should give more serious consideration to IaaS

-          Adoption by large enterprise is a reinforcing message to SME users.  What it means to you, even if you’re not a $3.5B player.  

Posts this week by ZDnet and Computerworld profiled Netflix’s new announcement and the big bet that the video-on-demand provider is making.  Netflix is moving 95% of its corporate IT operations to Amazon Web Services and plans to ultimately make a 100% transition.  

The stated goal of Netflix’s new VP of IT operations is to have a higher level of focus for his IT staff, and not to be managing hardware.  This is significant because they are a $3.5B operation, and now fully dependent on hosted infrastructure.  It’s a big pocketbook vote of confidence for public cloud Infrastructure as a Service (IaaS).  

So what does this mean for the rest of us?

Well, it moves the needle on the bulk of current wisdom about what business types IaaS is best suited for. Until now, adoption has been weighted toward e-commerce and virtual data center (VDC) usage for small-to-medium enterprise (SME).  Easy, rapid deployment and low capital outlay can be a big advantage for a growing business with minimal prior IT investment.

Most prior analysis, including IDC in its first Magic Quadrant for IaaS, has concluded there is no clear cost advantage for enterprise businesses that have already deployed infrastructure internally.  The cost of data movement in and out of the cloud is largely unpredictable, and a good number of other variables that are unique to every situation, like power, facilities costs, maintenance, upgrades and related staff as just a few, are hard to nail down.

Lets hope for Netflix to publish their own cost analysis on private/public hosting in the same way that they have made public their Open Connect Content Delivery Network.  

Also, enterprise IT planners are more apt to notice, correctly, that component prices have dropped far faster than the cost of operating on AWS, and they expect that much more competitive pricing should be offered.  Maybe true.  But still, it is hard to put a price on speed and, back to those associated hidden costs, much of that is also the included benefit of a hosted service. 

Now, more analysts are calling out 2012 as the start of meaningful enterprise cloud adoption. 

Two points in bringing this up;   1. accessibility and 2. new growth.

On the accessibility front, market forces move faster with enterprise purchase power in the mix, resulting in a quicker drive to commoditization.  This brings a big benefit back to SME. More affordable pricing means faster deployment of ecommerce capability and remote offices, wider supply chain access and greater participation in the fast, flat global economy.  

And this is why moves like the one by Netflix help to drive new growth.  SME’s, with faster access to wider markets, are able to operate alongside larger competitors well before hitting the revenue of a $B+ enterprise.

New well-funded entrants like Nirvanix, with solutions to support hybrid cloud and migration from private to public environments, and Joyent, that focuses on transaction speed and scalability (to name only a couple in the interest of space here) are adding to the available options.

In our travels at DCV we are seeing hosting service providers spring up with a number of innovations.  Some offer lower and more predictable cost structures, like no charge for in/out data transfer, and many are providing personal relationship and support confidence that goes beyond contractual service level agreements. The trusted advisor value that comes from knowing a customer’s current challenges and future business goals means a lot when it gets into navigating this new and rapidly evolving space.

If you are a potential user of IaaS, do this: Shop for price and solution value among service providers.   Some of the best options may be from ones close by. If you are a systems integrator or solution provider with a devoted customer base and aspirations to be hosting provider, look at some of the great converged infrastructure modular cloud blocks now available, and don’t underestimate the value of your ability to serve your customer base at a much more personal level.

Until next time, we'll see you in the cloud