Inside a New York City loft in 2006, two entrepreneurs are working on the software to launch a new dot.com business they call Animoto. In 2009, however, these entrepreneurs have a new alternative that was not available to startups of the past. This will allow them to retain more ownership in their fledgling company, hopefully keeping millions of dollars in their pockets instead of the venture capitalists' pockets. They can launch their company "in the cloud." They can tap into the "cloud computing" services offered by a big vendor like Amazon.com, relying on Amazon's ability to purchase hardware cheaply, maintain it reliably and staff it competently. Cloud computing service providers have made their systems so inexpensive to use and easy to access, that there is little reason that companies should not be exploring this option for providing data and services that are not proprietary to their business.
INNOVATION FOR INNOVATORS Roger Smith COMPUTING IN THE CLOUD Inside a New York City loft in 2006, two entrepreneurs pany “in the cloud.” They can tap into the “cloud com- are working on the software to launch a new dot.com puting” services offered by a big vendor like Amazon. business they call Animoto. They hope to offer a service com, relying on Amazon’s ability to purchase hardware that will allow people to turn a series of photographs cheaply, maintain it reliably and staff it competently. into a simple movie with a nice sound track in the back- ground. Although their business offers an online version Cloud Computing Poster Child of something found in most photo viewing applications, they hope that the ability to send the ﬁnished product to Animoto has become one of the poster children for the friends and relatives will make their service a hit with cloud computing concept. This producer of online slide- millions of amateur photographers. Our entrepreneurs shows was able to launch without purchasing millions have ﬁnished the basic functionality of the software, but of dollars worth of computer equipment, hiring an IT their next major hurdle is attracting enough venture cap- department, or selling majority ownership to venture ital to purchase the server farm and network bandwidth capitalists. As a start-up, they really had no idea how big necessary to go live on the Internet. Unfortunately, this a customer base they could attract, and therefore, did not will require them to give up signiﬁcant ownership and know how much IT equipment they would need to pur- control of their company to venture capitalists. But this chase. But Amazon.com’s cloud computing service, is how all dot.com companies get started, hoping to known as Amazon Web Services, offered a means to rent make it big like Yahoo!, YouTube or MySpace. this capacity by the compute hour, storage gigabyte and network gigabit. In 2009, however, these entrepreneurs have a new alter- native that was not available to startups of the past. They Amazon also offered to scale up and down as the cus- can rent the necessary computing, storage and commu- tomer demand increased or decreased. This was perfect nication capacity from a large service provider that al- for Animoto since they could not predict demand—and ready has all of these assets connected to the Internet. since the demand they actually experienced varied widely They can pay only for the volume of these services that as their service was featured in various press stories. Over they use, they can quickly add or subtract resources from one three-day period they rocketed from 25,000 registered their order, and they never have to take possession of the users to 250,000 as the result of a posting on the popular hardware and all of the technical support headaches as- web site Slash.dot. In a one-week period they ramped up sociated with it. This will allow them to retain more their usage of Amazon computers from a couple of dozen ownership in their ﬂedgling company, hopefully keep- machines to nearly 5,000 machines (Figure 1). ing millions of dollars in their pockets instead of the venture capitalists’ pockets. They can launch their com- What is it? Cloud computing has become a hot term in the last few years, but a clear description of what it is, what it can do, Roger Smith is the chief scientist and chief technology and why companies might use it is often difﬁcult to ﬁnd. ofﬁcer for U.S. Army
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