startupi

Startupi received this very interesting article, written by Brian Requarth and Thomas Floracks. They are the directors of VivaReal Network, a real estate marketplace, which has started operating in Brazil (and 12 other countries). Take a look at what they had to say:

In a time where the world economy has struggled, increased investments in smart technology have been made with the goals of reducing costs. As an entrepreneur that in has primarily worked in the US, the last couple years have inspired me to look at opportunities abroad.

Earlier this year we decided to launch our project in Brazil because we recognized the incredible opportunities that the country presents in terms of a growing economy, increased internet penetration and a consumer that spends a lot of time online. Using Cloud Hosting helped us keep our costs down as we did our  launch of VivaReal in one of the most exciting markets worldwide. I write this article, to give other web startups a heads up on what’s out there and how you can benefit from it.

Most companies rent or buy their own servers. For startups with a limited budget, this can be a huge cost. Also, replicating an environment for stress testing used to be extremely expensive. I don’t know about you, but when we started looking at doubling our cost each month on hosting just to replicate a test environment, it made me cringe. We thought to ourselves, there has to be another way.

Welcome to the world of Cloud Computing!
Let’s break things down into a few categories:

• Infrastructure as a service
• Platform as a service
• Software as a service

The key word here is “service”. The industry has changed from buying or renting the hardware to contracting the service from a provider. We are going to take a look at one specific provider, Amazon Web Services (AWS) and how we used them to host our web application.

How does it work?

The EC2 (Amazon’s Elastic Compute Cloud) infrastructure is a virtualized data center and server farm. What I really like about this concept is that on top of this virtualization layer we can launch server instances through simple API calls or a web interface. An instance is a virtual server with predefined hardware characteristics. When launching an instance there are different options for the hardware characteristics of the server - CPU, memory, disk space, 32bit/64bit and I/O performance. This flexibility was one of the key factors why we chose to use EC2 for hosting. As a startup we were often unsure about hardware requirements and we had no time or resources to do extensive load testing or scalability simulations. So we just had to jump in and hope that everything goes well.

The Utility Concept

For billing out EC2 and S3 (Amazon Simple Storage Service) use, Amazon uses the utility computing concept, in which you “pay as you go.” I like the fact that we only pay the resources we actually use. EC2 resource use is billed on an hourly basis and the S3 use is based on the amount of storage we use. For all Amazon services, customers also pay external (Internet) traffic per GB transferred.

Advantages over classic hosting

Every startup is looking for an advantage of cost savings. Cloud Hosting is a key component to keeping costs down, but at the same time being able to scale growth. The advantages over a classical rented or collocation hosting are:

• no upfront investment
• no long term contracts
• payments per hour of server (instance) use

Other Cloud hosting providers

Of course Amazon is not the only provider of infrastructure as a service any more. Many other companies are offering similar services some more specialized than others:

• Rackspacecloud
• LocaWeb
• Microsoft Azure Platform
• Sun Cloud

This article was provided in English by Brian Requarth for publication in Startupi. For more information read:

How cloud & utility computing are different (at GigaOm);
2010: o ano em que a gestão vai para as nuvens (in Portuguese, at Saia do Lugar);
The blog Cloud Computing
The Open Cloud Manifesto