Joyent

Utility? Or Generator in the Back Yard?

I don’t get the Start-up Essentials program at Sun. Understand, I follow the part about cheaper hardware for companies of a certain size, revenue stream, employee base. Fantastico. Joyent qualifies, and we plan to take advantage. However, what I don’t follow is the connection between, on the one hand, Jonathan Schwartz avowing an interest in focusing on companies that view infrastructure as a competitive advantage versus those that see it as a cost (this is an important, and in my view correct self-analysis, and one that I believe will be very fruitful for Sun), and, on the other hand, the dynamics of the many technology start-ups and software companies I and my colleagues interact with and serve on a daily basis. These companies absolutely consider infrastructure as a cost, plain and simple, not as a competitive advantage. Even Google operates in this fashion, the poster-800-pound-gorilla that has become so canonical in describing the post-bubble new-bubble way-things-should-be-done. Paul Graham says start-ups can get going on $10,000. How? They aren’t buying Sun. (Not that Sun is expensive. But no one knows that, or believes it. Joyent knows otherwise.) These start-ups are on a 1U server they bought on woot.com with a copy of Ubuntu installed. But let’s face it: if you’re running your start up on Linux and some white box brand, you don’t view infrastructure as a competitive advantage. It is a cost. These companies view their software as the advantage, and they can’t buy that from Sun. Examples are all over the place: here and here are just two.

I also don’t get the emphasis at Sun on selling computing as a utility/service (while I completely agree with this direction), when selling physical machines seems like something different. And no, start-up companies don’t really want the service contract. If we have lots of problems with the equipment, we are going to move on to another vendor.

What about start-up companies backed by a Venture Capitalist (as a proxy for any company that raises a significant A round)? Serious? A word to the entrepreneurs at that company. I’ve been there. Don’t spend your money on infrastructure, unless it is for competitive advantage (which it probably isn’t, as we have already learned). That Venture Capitalist wants to give you more money in a follow-on round so that they can get more of your company. Be very efficient with your money. Besides, you’ll be hocky-sticking real soon, and won’t qualify for the Start-up Essentials program anymore.

What could the calculus have been at Sun, then, to introduce the Start-up Essentials program? Again, most start-ups that I deal with don’t want to run their infrastructure. (Besides the fact that many of them can’t run their own infrastructure once they get beyond the development phase.) The issues of better power, even cheaper costs (offered by the discounts in the program), can’t be that attractive all-in-all. Under Start-up Essentials even a couple of Sun X4100s (web and database), a Sun X4500 (for storage), switches, router, rack, will cost the start-up ~$45,000 just to start. Ouch. Lease? 15% down is $7500 plus monthly lease payments plus the SysAdmin for a minimum of $65,000 per year. Are you calculating with me? We offer the same infrastructure (X4100s, X4500) at Joyent for ~$1000/month and the start-up doesn’t have to hire a SysAdmin. In fact, we can provide a start-up with great infrastructure (web+database+storage+redundancy) for as low as ~$250 a month. And it just works. Rackspace does the same thing. So does MediaTemple. So does Amazon Web Services. Etc. Etc. (But none of these services offer Sun infrastructure, natch.) And Joyent offers scale and redundancy services and on-demand software for the team to build the next-great-thing.

Joyent is the utility, Sun’s Start-up Essentials, while aggresively priced, is still like building a generator in your backyard. That you have to maintain. Do you really want that? Joyent does, we sell infrastructure, but do you?

[End note: So how does Sun transition from selling boxes to selling cycles and spindles? I think one answer is Jonathan Schwartz and other thought leaders at Sun blogging, which triggers responses from customers on their own blogs. This becomes an education for Sun. That might seem obvious, but it is not how it always was. When I used to work on Wall Street, if we wanted to get something done that was politically/strategically tangled/thorny, we would hire McKinsey & Co. to come in, do a “study” and tell us what we already knew we wanted to do. “We have to do this. Hunter Reed from McKinsey told us in the blue book it is the thing to do.” Well, my name isn’t Hunter, but I’m just saying.]