Over the last couple years that we've been growing ENKI, we've seen how important it is for us to pick vendors that we're really excited about doing business with - vendors we can see as partners in our business that help it grow.  As a small business, our partners have a huge effect on our business and the overall impression we can make on our clients, so picking good ones is critical for us.  I was talking to Dave about this at lunch the other day and we realized there's a pattern to good and bad vendors that we could see early on and would help us pick partners that naturally fit in with our win/win business approach in the future. 

First of all, I'm not going to name many names here - that's not the point.  But if I rave about a vendor, you can take that as a recommendation :)  The best vendors are ones where there isn't any drama in our relationship: we can trust them to deliver their product or service and we never feel betrayed or taken advantage of by them, nor do we feel we have to keep asking (or begging) for some sort of change in our relationship in order to run our business.  We can always enthusiastically recommend them.  The worst vendors keep us constantly looking out for a replacement vendor, or wishing we could because we're locked in to a relationship that we can't easily extricate ourselves from.  It's hard to recommend them to others.  Unfortunately, despite our best efforts so far, the majority of our vendors fall into the group which we'd have trouble recommending.  (If you read my Small Business CRM Challenge blog articles, you can see how frustrating this can be.)

So by now you're probably wondering what the patterns are that we've seen, and how you can use them to pick your vendors.  The strongest and most determining pattern seems to be where the vendor lies on the scale of expedience versus complacency.  Both states seem to stem from their views of their own financial success.   The expedient vendors will put on a happy face and say what it takes to get your business, since they are on the financial edge and need business badly to stay afloat.  In their mind, doing anything for the sale is justified, but you rapidly become cynical of their promises since they can't live up to them - often because they're just too strapped to do so.  Just as troubling are the complacent ones, who have a history of success or a lock-in business model and think they're entitled to your business as a result, without working to earn it.  These vendors betray your trust by acting unilaterally in their own interest, since they think they're the only game in town. 

So how do you see these patterns in advance?  In my experience, the expedient vendors are visible up-front because they offer large discounts or a complex pricing structure with lots of add-on packages that obscure the final cost to you behind a low buy-in price.  In other words, they're thinking, "just sign the contract!!!"  The complacent vendors are more difficult to spot: you'll probably need to do some research on their existing customer base, perhaps by searching online discusion groups.  One telltale is a high buy-in price or inflexibility in negotiating a contract.  They're thinking, "we're the only game in town." It's not always easy to see these patterns, but I'm learning to be a more feel-my-way-through-it kind of guy and if I feel cynical or betrayed in my initial contacts with the vendor, I stay away, since these feelings are harbingers of what is to come.  What's going on here in either case is that the vendor or their representative is avoiding some sort of humiliating experience of loss by the way they're dealing with you - and that's a powerful motivator to keep on practicing this dysfunctional behavior.  So the ultimate thing to look out for is loss-focus (or its littermate, gain-focus.)

What about the opposite - a vendor you can't say enough good things about? If I'm to believe my own analysis, these are vendors who are neither complacent nor expedient.  What does that look like?  I thought about this for a long time and realized it meant that the preoccupation with the humiliation of loss isn't foremost in their minds.  They're having fun, they're passionate about their work and product, and they're connected to their source of internal strength and resources rather than in a relationship of dependence with their customers.  The one word I could think of to describe this was "Courage."  Good vendors exemplify courage.  I know this sounds like one of those kitschy motivational posters you sometimes see in executive offices, but there's some truth to it.  If your vendor is courageous, they aren't focused on milking your business like a cow, but rather building a partnership that benefits both parties: a win/win relationship.  The relationship stops being about them and how they can survive, and starts being about exploring success together because business is about drawing on each others' strengths.  This aligns with the practices that most highly successful executives embody.

OK, so how do you recognize a courageous vendor?  In my experience, they're willing to listen and then act on that listening - not just look like they're acting. This takes a lot of humility - knowing that you don't have all the answers - and that's rare. In our lives, we usually get humility from humiliation and given that we spend most of our time avoiding it, it's a dearly-learned state!   Lately, businesses have realized that looking like you're listening is important, and have created customer relationship management systems, customer surveys, and customer service agents dripping with faux humility to give the impression they listen.  Don't get me wrong: these are good practices, but they have to be backed up with the courage to truly listen and act.  As a small or medium-sized business principal, you know the value of relationships.  So it pays to create a personal relationship up-front and see if your vendor is listening.

I had an experience this week with a vendor I already am enthusiastic about: Kerio Technologies.  Their product just works, and is easy to use.  Their support is effective and doesn't waste your time.  Their pricing is reasonable and easy to understand.  We went to their offices to talk about sales synergies and while we were standing in the hall, their CEO, Scott Schreiman, walked by on his way to get a soda.  He stopped, and listened.  Really listened.  And then he asked us into a conference room to listen some more, without making our time together about him or his company.  He wasn't selling or trying to get rid of us, even though we're a small customer of his.  He was relaxed and open to what was transpiring.  It just reinforced my desire to do more business with his company.  I know that whatever partnership I create with him, even if it isn't working at the time, will be able to move forward because of that orientation to listen.

Finally, my personal observation is that Gandhi's famous words, "Be the change you want to see in the world," still apply more than ever to your business dealings.  If you can be courageous, you'll attract similar partners to yourself since you will all know what's important in a relationship.

Introduction

In response to requests from customers, I'm going to start a series of irregular blog articles on making the most efficient use of cloud computing resources, such as those provided by ENKI's Computing Utility.  I will use examples from our customer base, as well as from the storehouse of experience the staff at ENKI have from working at start-up and enterprise companies.

Ultimately, making efficient use of resources in the Cloud, where computing resources are utility-billed, is very similar to simply dotting your Is and crossing your Ts with respect to efficiency in in any computing environment: you want to use your allocated resources as effectively as possible.  But there are also some interesting new problems and opportunities that come with being able to resize or re-allocate your computing resources on demand.  Today I am going to write about bursty loads, such as those involved with media transcoding, image processing, and database-intensive tasks. 

Many of the applications I created in the past, and those of customers who come to ENKI, are developed and possibly deployed on fixed hardware such as a PC under their desk, or a physical server in a data center.  In this case, the hardware is typically dedicated to the application and runs all parts (or tiers) of the application.  If the application is too slow, the choices are to improve the efficiency of the code (which Dave wrote about in Data Center Power Consumption, Part III: The software), buy a bigger server, or split the application into parts, each running on a different server.  With ENKI's Computing Utility service, you can increase the size of your server on demand, but it won't increase the efficiency of your application, only your monthly bill!  Splitting the application is where you can get some big efficiency gains from utility computing.

Before we dig into the numbers, please remember that this discussion involves a tradeoff between the cost of the computing service and the user experience.  If you make the wrong choices, you may no longer have a business to optimize!

A bursty batch processing example 

Let's take a look at a sample application which transcodes stored video files into a customer-selected format for download.  We will start by assuming that a standard server can process 1000 videos an hour.  If you deploy this server to transcode a video when a user requests it, the user would have to wait (60*60/1000) = 3.6 seconds to be able to start downloading it, which is not a problem. Suppose we deploy the application this way and observe how the users use it.  For most of the day, requests come in once a minute on the average, which means that our server is only at 6% utilization.  However, in the evenings, there are peaks where users are submitting a request about once every 2 seconds for periods of up to 15 minutes. In this case, after 15 minutes, the last requestor has to wait for their video an amount of time equal to the number of backlogged requests submitted times the processing backlog on each video: 15*30*(3.6-2) = 720 seconds or 12 minutes.

Whether this 12 minute delay is a problem for your business or not depends on how you set your users' expectations.  If they have to sit and watch a spinning film reel, they'll go away and not come back.  If you tell them you'll send them an email when their processing job is ready to download, they will most likely accept that.  The very successful (until the RIAA killed it) music download service, AllofMP3, allowed you to transcode your music this way, and their customers were delighted.  Similarly, NetSuite submits long-running reports for background execution, notifying you when they are complete.

So, how can we change the deployment of this application to save you money during most of the day when your server is only being used at 6%?  The trick is to move the transcoding to a separate virtual machine instance (called an "Appliance" at ENKI) which is dedicated to processing only the transcoding tasks, and implementing a processing queue to allow the instance to manage its backlog.  You can then set the amount of CPU allocated to the instance to control your maximum queue length at peak periods.  A side benefit of doing this is that you can reduce the resources allocated to the Appliance with the remaining tasks in your application (UI, downloading, etc.) because it no longer has to process transcoding jobs quickly.

For example, if you chose to set your CPU allocation to 12% of one standard CPU for your queue processing Appliance, your processing time for one video would increase to (1/0.12)*3.6 or 30 seconds.  In this case, using the math above, users would have to wait a maximum of 210 minutes at a peak usage time.  However, most of the day their wait would be 30 seconds.  In return for this increased delay, you save 88% on your resource charges.  You could even look at the queue length and offer them the option of waiting or getting an email when it was done if they had to wait longer than 30 seconds.

Making the cost vs. speed tradeoff 

This is a tradeoff that you will have to make based on the best information you have about your business.  You need to know what kind of user experience is required for your business to succeed before you can analyze performance numbers. You may want to conduct a focus group or user feedback study. There may be automatic ways to check if performance is unacceptable, such as correlating abandoned sessions to changes in resource allocation, for example.   If you are an internet startup company or an internal IT department rolling out a new application, you only have one chance to make a first impression, so it's probably wise to start with a generous allocation and reduce it over time while checking back with your users to make sure they aren't too frustrated.  However, by setting the users' expectations correctly, such as with the email-on-completion method listed above, you can take a lot of pressure off of your application.

In the next article, I'll write about another technique for making efficient use of utility-billed computing, which is varying the breadth (the parallelism) of your application as deployed in the Cloud in response to increasing load. 

There's been a lot written about Cloud Computing being the wave of the future, but here at ENKI we're seeing that it can save our customers big money right now and enable them to sign a larger number of profitable deals.  We're seeing an increasing number of SaaS (Software as a Service) companies interested in our Computing Utility service, many of whom offer middleware services like data translation, data communications services, or data aggregation and reporting.  They sell their software as a service to end customers.  Most of them have large customers, so their typical sales cycle has been:

1. Sell and sign the business
2. Engage their professional services and IT departments to build out their own data center or a new data center for the customer
3. Set up the application software on the new new data center
4. Activate the software and deliver it to the end customer

This has worked well for them, so they haven't been too focused on cost or time to market; but as you can see provisioning a data center or adding significantly to one can take weeks to months, and involve a great deal of labor and capital costs.  However, they have been unable to profitably address smaller end customers: imagine using the process above if all you need is a one and a quarter server's worth of computing power!  So, they were focusing on a few larger deals and leaving the many smaller deals on the table (the infamous "Long Tail", named for the asymptotically dropping curve of price versus quantity of customers.)  And now, with the economy slowing, this ponderous process is beginning to look too expensive to SaaS providers, even when they provision an application for a large customer, due to the large capital outlays required to sign business that might not be around long enough to pay off the data center.

However, using our pay-as-you-go cloud computing technology based on AppLogic, ENKI can reduce the sales cycle for SaaS to look like the following:

1. Sell and sign the business OR use a portal where the customer can sign up and pay via self-service
2. Automatically provision a new copy of the application in a virtual data center sized to the customer's needs
3. Automatically activate the software and deliver it to the end customer 

By eliminating manual steps including hardware and software provisioning, the turnaround on the sales cycle drops from months to as little as minutes.  Also, the cost - both of the sales cycle and of provisioning the resources - drops dramatically due to the reduced labor component and the fact that resources are allocated without waste (no extra capacity is needed to provide for future growth or redundancy for reliability!)  This allows SaaS providers to profitably sign customers in the Long Tail and greatly increase their market.

I've found that the biggest obstacles they encounter in switching to cloud computing are internal resistance from departments who are used to doing things the old way, and switching their financial models from lump-sum expenditures to flow-through cash-basis, often paid with credit cards or ACH rather than invoice and check.  But this is a small price to pay for increasing your market penetration and profits.

If you'd like to learn more about cloud computing, there's an excellent summary in a blog article here.