t’s taken a little longer than we’d expected (isn’t that always the case), but the new AppLogic support forum is now up and running.

Normal support functions, documentation and GridU recorded sessions are all available.

Grid University has proved pretty popular. Keep in mind, we’re small so that doesn’t mean hundreds of people, but we’ve averaged 10 or more people per class.

However, after listening to the recorded sessions, I’ve decided some upgrades are in order. The sound is terrible and you can’t hear questions from the other attendees. The result is a recording that you really must WANT to listen to in order to sit through it.

Therefore, Jessie Smart and I went shopping the other day and picked up some new gear. GridU now looks like a radion station. It’ll take us a couple days to get everything running, but we’re hoping next week to be able to provide better sessions and recordings for users.

I’ve commented before that the biggest advantage for SaaS isn’t cost, but that it brings users and developers
closer together. Jeff Nolan was thinking along a similar line when he
wrote in a recent post that “Most enterprise software is not built to sell to users but rather to IT . . .” resulting in “low expectations from the people who are actually buying . . .”

Jeff asserts this model is being challenged because users are being exposed to new Web 2.0 capabilities through consumer services. I agree. As happened with PCs in the 80’s, and again with the Internet in the 90’s, users’ expectations of IT are being set by consumer hardware and services. Enterprise vendors are clearly aware of this, and as Dion Hinchcliffe noted a few weeks back are actively announcing new offerings.

There’s something special about having a boss that proves he can still teach you a thing or two every day.

I spent a beautiful day this week in Monterey for the Tier 1 SaaS evolution summit. During a pannel on infrastructure solutions for SaaS, 3tera’s own Vlad Miloushev reduced the question to simple economics, and based on the number of people that picked up a pen to jot down notes, I wasn’t the only one who hadn’t done the following math.

Vlad noted that based on current estimates, Google operates between 500,000 and 1,000,000 servers.
If we divide the average of those esimates (750,000 for the math impaired) into their Q4 ‘06 revenue, we find that Google generated $4274 per server last quarter. Annualized, that’s $17,095 per server each year.

Google is notoriously efficient in their operations. Plus, their application is stateless, while most SaaS applications are not. So, if you’re running a SaaS company you need to consider whether you can realistically generate more revenue per server than Google. For our example, though, let’s assume you do quite a bit better and generate $24,000 in revenue per server each year.

What does this mean for the operations budget? Google spends about 40% on COGs, but the majority of that is traffic acquisition. 10% is related to operations, but that’s unrealistic for most companies. To support R&D, sales and generate a reaonable return, Vlad estimated COGs, including support, needs to be kept below 30%. Allowing 5% for support, that means 25% of revenue can be spent on operations, or $6,000/server each year. That’s $500/server each month.

I couldn’t find a managed service provider that’ll quote $500/server. Because of the labor involved, most start at more than twice that amount. However, doubling the operations budget for a typical SaaS company means raising more captial or starving R&D or sales and marketing, both of which will have long term consequences.

SaaS companies need a more efficient way of hosting their applications and that, of course, is what utility computing is all about.

A google alert today led me to Laurianne McLaughlin’s blog posting recalling a conversation in which Bill Coleman, BEA co-founder and now CEO of Cassatt, predicted CIOs will begin using utility computing and leaving data center operation to third parties like phone companies. Bill’s an exceptional sales person, but evidently he didn’t manage to convince Laurianne. She holds back her own opinion, but quotes a colleague:

“CIOs will not be comfortable shipping out this much data center responsibility.”

Ironically, in their March 1st issue, CIO magazine explains just one reason why Bill is correct.
In an article titled, Zapped, Kenneth Brill reports that
The Uptime Institute calculates the current cost to purchase a rack of servers, $138,000, pales in comparison to the $206,000 cost of electricity and HVAC to operate those servers over three years. Worse, while hardware costs are steadily falling, energy costs are rising and that’s compounded by the ever increasing power density of modern servers. The Institute projects energy costs to increase as much as 10X over the next five years for that same rack of servers.

I’ve come to the conclusion that in the approaching era when data center upgrades are measured in mega-watts and nearly half the footprint of a data center is consumed with power distribution and HVAC, CIOs are going to have an increasingly difficult time justifying owning their own data center.

Things are moving pretty fast here at 3tera these days, but I had another of those moments that we geeks live for today and thought I’d share.

I just got the first glimpse of an AppLogic interface on my Blackberry. Imagine having complete control over your applications without even the need for a PC. Combined with the new alert system that emails any warning message and you’ve got more control over your apps than if you slept in the datacenter.

Let me give you an example of what this can mean. While sitting in a movie theater with your wife one Saturday night you get that awful vibrating reminder of life in the real world. You check and it’s an email alert from AppLogic that a server on your grid has failed. You quickly login and see that AppLogic has already restarted failed components on other resources and repaired volumes. You reboot the server and watch the movie for a couple minutes until you see that it’s rejoined the grid. Total elapsed time - less than 10 minutes.

This is still in the prototype stage, but it’s a glimpse of where utility computing is heading.

Lincoln Murphy has posted a multi-part writeup on starting a pure-play SaaS company targeting Fortune 1000 customers. In it, he covers some of the objections he’s encountered, so if you’re considering starting (or joining) a SaaS provider it’s well worth a read.

Hopefully, he’ll also write a post covering the reasons customers eventually swallow these objections and sign on the dotted line.