What Cloud Computing Offers Startups

At the Intuit's mini-conference on "Startups and the Cloud," the discussions, which varied from investment to technology, repeatedly raised the question of what advantages, if any, cloud computing offered startups.

To answer that question, we need to know what cloud computing is. I'm going to borrow the definition developed by NIST, which Longworth Venture Partners analyst Vishy Venugopalan cited in his overview of cloud computing, which kicked off the day's events:

Cloud computing is a model for enabling convenient, on-demand network access to a shared pool of configurable computing resources (e.g., networks, storage, servers, applications, and services) that can be rapidly provisioned and released with minimal management effort or service provider interaction.

Five or ten years ago, it was not uncommon for a newly-funded start-up to spend tens or hundreds of thousands of dollars on infrastructure. Servers, disk arrays, back-up power supplies, management and monitoring software, an air-conditioned room with a raised floor—the list of capital expenditures could be impressive, and this investment needed to be made before engineers could begin any significant work developing products.

Cloud computing changes all that: it minimizes infrastructure investments, so that companies only need to invest in IT services when they're needed.

Cloud computing eliminates the need for that air-conditioned room filled with expensive server racks. It eliminates the need for the local IT manager to watch over them. And it shortens the management team's list of headaches, by sparing them the details of back-up tapes and server upgrades. IT can be provisioned cheaply and immediately—today, this afternoon, now, and development can begin right away.

Todd Hixon from New Atlantic Ventures put it this way:

Cloud computing gives you a sandbox for delivering solutions while assessing demand. It enables you to avoid needless investment in infrastructure.

Jeffrey Beir from North Bridge Venture Partners agreed:

Cloud computing allows developers to focus on the IP (intellectual property) that's unique to them.

After all, it's that unique IP that's ultimately going to make or break the company. It's the unique IP—not a rack of Dell servers in a computer room—that's going to be the quintessence of the start-up's brand, differentiating the company from the hundreds of other start-ups and thousands of larger companies already crowding the market.

By minimizing infrastructure costs and infrastructure management costs, cloud computing enables young companies to spend its precious capital on what's most essential. For young companies in this time of tight budgets and hard decisions, cloud computing is a financial and operational boon.