Tech, Startups, Capital, Ideas.

When it comes to building product, “it just works” is key. All too often, technology makes life more complex. This time it’s different.

It’s been a while since my last blog entry, and that’s because it’s been an action-packed fall. I was involved with several new MDV deals, follow-on rounds of funding, and recruiting. As I continue up the venture learning curve, working with exceptional entrepreneurs in exciting markets continues to be incredibly rewarding. Time is more precious than ever, but I wanted to get in a post on technology that’s really making life easier.

Most often my relationship with the wireless carriers is a love/hate one: I love being able to access my e-mail, calendar, and contacts — and, how could I forget — even make the occasional phone call on the road. But I hate dropping yet another call on a well-traveled road like I-280.

Just recently, the IT people at MDV switched me over from my old, bulky, and slow Treo 700 to the Blackberry 8300. What a difference. It crashes less and browses faster. But the really cool feature is the Verizon Navigator application. It’s awesome.

You may be thinking — GPS — where have you been? In fact, I have a Garmin Nuvi 660 that serves me well. But I’ve just never gotten used to taking it on the road and it still takes a while to boot up and figure out where it is. A while back I bought a GPS kit for the Treo 700 but it never really worked for me; the application was slow, I couldn’t make calls reliably while it was running, the Bluetooth connection was intermittent, and I was always searching for the separate GPS device.

With Verizon Navigator on the 8300, there is no separate device and it finds my location just about immediately. It can also look up contacts in my contact list and has a remember my location function so I can easily get back to wherever I started out, which is particularly helpful when trying to get back to a rental car drop-off location or an airport in an unknown city. Since I always have my phone with me, I now always have a GPS - and it’s built right in. For $10 a month, it’s a great investment.

The other great piece of wireless technology I got recently was a Verizon wireless broadband card for my laptop. It’s so great I barely use 802.11 anymore. It’s simply awesome to be able to show up for a meeting early, turn on my laptop, and be connected. No need to get access to the wireless net - I’m already connected. Similarly, at the airport I can turn on my laptop and be on in a minute. I don’t have to find the wireless network and go through the account login hassle.

Whether I’m on the road, in my car, or at a company, everything from email to entertainment is now accessible. That’s the basis for a huge new wave of tech investing that I wish I could tell you more about. But there’s still one place I can’t get online. I’ve got to run. My flight is boarding.

Taken at the Sony Metreon in San Francisco over the weekend. Ironic.

As any web administrator will tell you, there are just three factors that determine how your infrastructure will scale: price, performance, and the often-forgotten but ever so critical architecture.

Architecture

If you have inherent dependencies on everything running on one machine, for example, you can “scale up” by buying a dual proc quad core server with lots of memory, but eventually you’ll still run out of capacity. Similarly, if you’re at scale and your application has to run within a single data center, you’ll eventually have to architect to run in multiple data centers.

Performance

If you’re planning to “scale out” (that is, run your application or web site across many lower-power servers), you can focus on price and performance.

Assuming your application is architected to scale, performance can be purchased. With the right location and connectivity, you can run “on the Internet,” making access to your servers a non-issue. You can also place servers closer to your users or partner with content delivery networks to deliver even better responsiveness.

However, if there’s a fundamental limitation in your infrastructure, then money won’t buy you the scale you need when you need it. Simply put, you need sufficient underlying storage, processing, and power. If there are rolling brownouts in your part of the country, you can have all the storage and processors in the world, but they won’t be serving up your application and content.

Similarly, if you can’t bring the storage and processing capabilities you need online fast enough to meet the growing needs of your application or spikes in usage, either your application will fall over or a significant subset of your users won’t be able to access your offering.

Price

So price really comes after architecture and performance. At small scale and large scale, price really matters. This is because if you’re just starting out, you don’t want to pay a whole lot to try out a new web site. When you’re early, you don’t know if people will find what you’re building interesting, so you naturally don’t want to over-invest in infrastructure.

Conversely, when you’re much, much bigger price is also a huge factor: infrastructure becomes a key cost driver for your business. Like scale itself, price comes down to just a few simple factors: bandwidth, storage, and people.

To develop the chart above, I used the following assumptions:

AWS

Amazon Web Services:

• Storage = $0.15 per GB per month
• Data in = $0.10 per GB; Data out = $0.18 per GB down to $0.13 per GB

To put this in perspective, a 100MB un-metered port delivers about 31,622 GB of data per month. On AWS, that would cost about $4,750 for storage and a little less than $5,700 for bandwidth, per month, for a total of about $10K per month.

The advantage is that as you need more capacity, you simply call the APIs to write more objects or create more machine instances. (But keep in mind what I said earlier about the underlying infrastructure: you can only perform as well as it does.)

Dedicated

Using dedicated servers, assuming 2×250GB drives with RAID for each server, I used an aggressive $150 per server per month plus $0.05 per GB per month for bandwidth. (This assumes a $1,500 per month for un-metered 100Mbps bandwidth.)

Of course, the advantage of dedicated hosting is that you don’t have to deal with the servers. In fact, you never have to configure, setup or physically maintain a single server. It’s all done for you. But that comes at a cost: you’re paying a premium for the service and older hardware.

Collocated

For collocation, I assumed:

• Storage/processing: 2×500GB drives with RAID for each server, and I estimated the total cost of each server at $1,500, amortized over 30 months for a price of $50 per month per server. This gives you well more than a Pentium-D 3.0 Ghz machine, which is more or less the current standard for dedicated servers.
• $0.05 per GB per month for bandwidth (assuming $1,000 per month for a 100MB un-metered port).

Collocated servers require the biggest commitment. You have to buy your own hardware, configure it, and physically place and maintain it at the data center, along with keeping it updated with the latest patches.

Yet collocation still delivers the lowest cost over the long term. If you architect to keep the cost of managing servers as low as possible and you’re scaling fast, collocation is still the way to go.

Conclusion

The real question is: what kind of application do you have? If you’re building an application that just serves up text with a very small number of images or videos, collocation is probably overkill ““ you don’t need the bandwidth or storage discount. If you’re in the business of serving tons of videos and/or high resolution photos, however, you still need your own infrastructure. If you’re in between, you have to ask yourself what price you’re willing to pay to control your scale.

There’s just one thing. Stand-alone tech businesses have to be cost-effective to survive. But they don’t save their way to success. They scale it.

It was reported earlier this year that Amazon S3 had reached 5 billion stored objects. AWS is cost-effective and easy. That’s why everyone’s using it.

Some startups use AWS as their primary storage/processing mechanism, while others use it as secondary. In the primary approach, just about everything runs on AWS. In secondary, AWS is used as a failover/backup mechanism. It provides additional storage or acts as a way to roll out extra features or services without adding to your own infrastructure.

What’s ironic is that this approach has been tried before but never gained wide-spread adoption. Sun, for example, has Network.com, which offers “flexible access to the pay-per-use computing resources of the Sun Grid Compute Utility.” But when you look at the site, it is targeted at “big” compute problems like computational mathematics, CAD, EDA, and financial services.

What AWS capitalizes on is an overall trend: the wave of low cost available infrastructure and resources, from open source to off shore development that are changing the ability to test new ideas and iterate products at incredible speed. AWS taps into this wave and helps expand it.

I frequently get asked by entrepreneurs if people are using AWS. The resounding answer is: yes.

Now I just hope Amazon is on a path to solve the resulting capacity challenges.

We’re excited to be sponsoring the MeshWalk Palo Alto on July 25. Check out the site for more details on this great moving un-conference.

“MeshWalk Palo Alto on the theme of Entrepreneurship will be July 25th. Over the course of the day about 100 selected entrepreneurs will walk through Palo Alto and Sand Hill Road, meeting with investors and fellow founders and discussing the process of starting and funding a company.”

We’re seeing announcements of a number of traditional media outlets facing challenges. One big reason for that is because BR is the new PR.

PR = Press Relations
BR = Blog Relations

A press release or story carried in the mainstream press is going to take you far. But to build business and drive traffic now, BR is a must. It’s not sufficient to post a few links here and there. You really have to invest and dedicate time and effort to blog relations. Not only is this important to drive traffic and users but it’s also important because it connects you in with your community.

Fail to do BR and not only are you not current on how to do marketing today, but you’re simply not connecting with your community.

As Doc Searls pointed out long ago, “Markets are conversations… that consist of human beings, not demographic sectors.”

PR was a one-way broadcast. BR is a conversation.

The CommunityNext event last Saturday was great. I had a blast and met a ton of interesting people. It’s easy to moderate a panel when you have entrepreneurs who have such immense knowledge about what they are doing. Plus I got to meet Eric Nakagawa from icanhascheezburger. You should check out his wonderful site if you haven’t already.

Some takeaways from the conference and follow up meetings this week:

• User acquisition is engineered. Just the way great products are engineered, user acquisition is engineered. It is not left to change, it does not “just happen.” It takes a lot of work to create viral, organic growth.
• What is one key difference between true viral acquisition and seemingly viral acquisition? Not that it necessarily matters in terms of eventual business outcome, but true viral costs next to nothing for user acquisition . Seemingly viral costs something. You are paying to pick up users. One can argue it makes sense to get to some critical mass - say 1M users, if you have the capital to go do that. But true viral means your user/customer acquisition costs are about zero. The rest, after the operating costs of your people and servers, is all upside.
• It’s a tough hiring environment right now. One of the best strategies for finding developers is to contact the engineers behind your favorite widget/app/etc. and see if they want to come work with you full time.

Everyone is eagerly awaiting the launch of the iPhone at 6pm on June 29. This isn’t just marketing. It’s a revolution. Here’s why.

Other large phone manufacturers have been at this for years. What could Apple possibly know about delivering a better cell phone experience?

Everything.

The iPhone changes the playing field because Apple has three distinct advantages:

• Internet software. Pure-play hardware companies don’t fully understand how to deliver great Internet software. Software today doesn’t just mean MP3 players and snapshot capabilities, nor is it just about calendar and email. It means making the Internet accessible and easy to use: built-in PDF support; Safari browser; and Youtube. Of course that leads to…
• Integrated design. Because Apple controls the end to end experience, it is delivering a device and software that consumers actually want to use. An ultra-open platform that relies on OEM specifications works well when processor, memory, and power are unlimited. But when these items are at a premium, integrated delivery is the only way to go. There’s another reason Apple is so good at optimizing for a constrained environment and that’s because it uses…
• Startup approach. Apple appears to think and act as if it is a startup, even though it’s a big company. The other companies may have hundreds or thousands of people hard at work on their next generation mobile offerings. But unlike social media, which thrives on the consensus of the many, great design is the result of the wisdom of the few. There are probably a lot of people working on the iPhone project, but only a few who really control and influence the core design.

Today’s consumers are demanding. They have ultra-high expectations about the content they consume and the experience they receive. They live in a market where they can quickly test out an experience, be it a web site or a device, and pass judgment even more quickly.

It’s hard to live up to the incredible hype surrounding the launch of a new mass-market consumer product. But it’s all too easy to underestimate nimble entrepreneurs who understand today’s demanding consumer. Don’t ” they change everything.

Super Happy Dev House, PBWiki, David Weekly, Matt Rubens, and Sven Strohband received a nice mention in the San Jose Mercury News. The “Bay Area’s premier monthly hack-a-thon event” is not only fun but also a great place to meet really smart developers and engineers.

It’s been fun getting questions on why I’m building widgets (especially after Widget Companies: Fool’s Gold). It’s been even more fun building them. I’ve learned a lot: most critically, that Flash has become what Java wanted to be.

Java was meant to be the language that made platform irrelevant. It was so high profile, some would argue, that the Common Language Runtime (CLR) evolved in response to it. What happened?

When Java was created, implementation led and design followed. Today, design leads and implementation follows. Acquiring users is the name of the game. That puts sites, widgets, and applications that are easy to use and look great at a premium.

That doesn’t mean design complexity — in fact, just the opposite. Less is more. Clean lines, plain backgrounds, and easy uploads win. Flash won because it carried the day on design. It grew from a simple drawing tool into an animation product and from there into a complete authoring environment.

Coupling moving visuals with actions has always been powerful. But with more than 500,000 developers and 325 million Web users of the Flash player, Flash is more than an environment. It’s a platform that’s everywhere.

To be clear, Java has become a platform in the enterprise. Talk to today’s CIO and Java is everywhere in the server room and in some places on the desktop: legacy application integration for example.

What happened? Java got the C programmers, but Flash won the hearts and minds of the designers. Flash made it easy to create good looking animations and ultimately videos viewable by anyone. It wasn’t about delivering the highest quality — it was about fast and easy.

Talk to today’s entrepreneurs and you’ll hear that one of the most in-demand skillsets, if not the most in-demand skillset around, is the ability to do great design work. People who have a natural talent for design are at a premium. Those who can couple great design with fast implementation even more so. Flash is the catalyst that makes that possible.

Java took fair share in the enterprise. But Flash won the consumer. Java can read 10 million user records from a database and expose them on a web page. But Flash can make you look good doing it.

Java may be a thousand words, but Flash is the picture. And as we all know…