Tuesday, July 28, 2009

Newservers.com, Pt 2

In response to a comment, I wanted to take a moment to wax philosophic on the concept of the Infrastructure as a Service (IaaS) business model.

I have a silly little website, dougbunger.com, that is hosted on a virtual machine... Xen, of course. The VM does a few other small functions, but represents Platform as a Service (PaaS). To me, the physical machine is irrelevant, as long as I get a Linux platform.

From a business standpoint, the provider (VPSlink.com) is paying for the hardware, rack space, power, and telecom. These are fixed costs for a system with fixed resources. As long as his pricing is such that at 30% resource utilization, he is covering his fixed costs, then any VMs over 30% are profit. The main thing to remember is that after a stable customer base of >30% is achieved, when an "extra" VM disappears, it costs nothing. Effectively, the top 50% of the server is free.

(Yes, I'm 10% short, but when that box is at 90%, its time to worry... You don't want to degrade the "good" customer's VMs.)

Now lets consider the Newservers.com model. In this case imagine ten machines all with the same fixed cost. When a physical server is allocated to a customer, you are offsetting the fixed cost of the server. When it is not allocated, you are "loosing money". Yet, we can never allow the server farm to reach even 80% capacity, since the core of our business model is spare capacity. No capacity, no elasticity, as Amazon might say. This means that we always need two machines empty, and as such "loosing money".

To further complicate things, with VMs, we can always cross that 90% mark. We can let some customers be degraded to get us over a surge. With physicals, however, there is no way to sell eleven boxes, if all we have is ten.

In the end, the whole thing boils down to good capacity planning and accounting. My hope is that as the pricing models mature, we'll see more of the IaaS clouds. As for Newservers.com, they've already saved me the cost of an HP DL380 G5 that I need for the next 60 days.

BTW: Thanks for the comment!


  1. Scares me to think a VPS provider is taking away resources I paid for by cramming more users into the server.

    I don't really know what Newservers.com does with their servers which aren't allocated, but they're not necessarily "loosing money" [sic] with those servers. They could be running processes on those spare servers. Not a big deal if a sudden need for many of them comes along, those processes will just take longer. The needed servers immediately get repurposed and everyone is happy.

    I wonder if people would even be willing to pay a low price for servers that can be taken away at any moment (at which point you no longer pay)? There are plenty of situations where extra servers would be great for performance reasons, but not critical.

  2. Good idea... I didn't think of that: sell raw computing time. Sounds like a job for Beowulf.

    And sorry my spelling made you sic. I could correct those errors, but that would make *you* look weird. :)