SmoothSpan Blog

For Executives, Entrepreneurs, and other Digerati who need to know about SaaS and Web 2.0.

Catching Up With 3Tera in the Clouds

Posted by Bob Warfield on March 1, 2009

Recently I had a chance to catch up with 3Tera CEO Barry Lynn and SVP of Sales and Marketing Bert Armijo.  It’s been a little while since I chatted with these guys and they’ve been busy!

It’s now been roughly 3 years since their first beta test.  Incidentally, they claim that beta makes them the first Cloud vendor, since Amazon S3’s beta was 1 month later!  Not sure selling Cloud infrastructure is the same as selling the Cloud like Amazon (that’d be like making the gold pans before the gold is found), but I do applaud their pioneer spirit.  If not the first, they’re certainly among a very small group of original Cloud Thinkers.

Good Catching Up With You Guys.  What’s New Since We Talked?

Our latest version is 2.48, which was recently released.  The big change there is we’ve added support for Solaris and Windows, and there is integrated monitoring.  We now have service on 4 continents, soon to be 5.  And we have customers taking advantage of that.  A customer can get presence on 4 continents in a day with 3Tera.

How Many Customers Do You Have Now?

Several hundred live customers, mostly through partners.

We have a number of hosting partners, and we’re always looking for more.

Tell Us About Your Partnering Strategy

People are starting to realize the need for private clouds.  People are starting to get it.  Federal Government and Large Enterprise want it.  There are legal restrictions on where data can be put.

For a long time partnering was unique to us.  People in the space all wanted to build their own cloud.  Our customers can work with multiple operators from Day 1.  Our customers do this on a daily basis.  It’s routine.  We have a button for it in the GUI to automate it.  Backing up to multiple points of presence, for example.

The product is maturing and we’re starting to see a change in types of customers coming on board.  Don’t know if it’s the economy or the Cloud industry.  A year ago, most customers were web or SaaS.  Now the vast majority are Enterprises.  It is a profitable and stable business though it puts a different kind of requirements on the product.

Why Enterprise?  I’ve Talked to a Lot of SaaS Companies Having Difficulty With Large Deals.

First I haven’t heard SaaS companies are having any particular problem with Enterprise sales.  There’s stress everywhere, but we don’t see the Enterprise as particularly stressed.  When business is good companies want control over price like SaaS offers.  But when business is bad they want economies of scale.

We love this economy.  Everything requires a bit of luck.  Here’s what’s going to happen.  This is the hardest hitting recession we’ve yet seen in the shortest period of time.  Some companies want quick ROI investment, particularly around saving money.  Others get completely frozen and don’t do anything.  There’ll be companies in both of those camps.

<The frozen camp is where I’m hearing the Enterprise problems.  Larger orgs seem more prone to freezing.>

If you look at things like Siebel or other SaaS having a problem, where customers cut back is in discretionary vertical functionality.  Do I have to do it at all?  We greatly lower the cost of almost everything.  We don’t build apps, we build platforms.  So we replace something non-discretionary with something also non-discretionary but cheaper.  Others are making discretionary spending cheaper.

A datacenter upgrade or tech refresh cycle was poised (last one was dotcom).  Now they lost budget for that, so its, “How do I run my business?”

You can’t run a business without IT infrastructure.  I may get rid of my cable TV, but I still have to buy food.  I just want cheaper food.  That’s what we’re out to do.  We can show them the catalyst for cheaper IT infrastructure.  We can even enhance quality while saving. 

People get the same level or more control as when the hardware was in their datacenter.  In fact, it’s more, because they have better tools to abstract large distributed systems.

How do you get the word out?

We look more like a web company there.  We don’t have a big field sales force.  We don’t have big Enterprise software contracts.  What we’ve done is to simplify and create a small incremental purchasing decision.  Even multinationals can start for a few hundred dollars a month, increasing spend as they see value.  That eliminates long eval cycles and the committee sale.  We’re more efficient and we pass that along to the customer.  We’re more focused on value instead of artificial billings like services and support. 

<This incremental pay-as-you-go cost is what I love about the Clouds.  We’ve seen it at my own company Helpstream when using Amazon.>

So we use telemarketing, or what a lot of people call Sales 2.0.  A lot of sales are Webex.  We only go visit customers who have an established footprint with us.

We minimize the onboarding cost and eliminate the lock in.  We avoid API’s that people have to write code to—that creates lock in which worries customers.  This minimizes the perception of risk.

We have a full blown disruptive product.  It is subscription based.  It’s incremental.  You can try it out slowly and then move quickly when you’re convinced.  That helps a lot in this economy. 

Customers save the capex because they don’t have to own the software.  They save personnel costs because people don’t manage servers, they just manage applications using our platform.  Saving thoses costs together with faster time to market really is a cheaper and better proposition. 

We use a combination of methods to attack the marketing problem.  We are voracious practitioners of PR.  PR offers so much more value than any ad we can place ever would, whether that’s a Google ad or a print ad.  Having some writing and putting their intelligence into it creates value. 

We also do some Google ads, though we have cut back on that a little bit.  It is valuable because it brings new people into the space.  It causes them to go find the PR.  We also do a few conferences.  We don’t go to big trade shows, but there are some decent focused small conferences.  We like conferences with a few hundred people because we can spend time educating someone there.

Often these conferences are vertical or geographic.  For example, there are Cloud Conferences for Government people.

Most of our leads are inbound.  Soon, we want to look at more outbound techniques, but without spending a huge fortune.  For example, we’ll be at the Web 2.0 show in SF.  We’re also doing the Sitcom Cloud Event in NY.  We’re doing Forrester’s Cloud Event.  We actively participate in Cloud Camp.

Tell Us More About Your Partner Strategy

When we started, it wasn’t clear this was the right path.  We got a lot of pushback, but we stayed committed to it.  Cloud is not going to be a one size fits all market.  There’s a lot of different purchasers and a lot of different requirements.  Banks want their systems of record in their data center.  Healthcare likewise.  Europe has a lot of laws about this.  There are many geographical issues, even involving physical limitations of the speed of light.

The level of service customers need and can afford is also all over the map.  One company can’t build a data center that meets all of those requirements.  We see a Federation of Clouds where users can take their workload to where their requirements are met.

It’s very popular to have developer systems in a different area than production.  The latter has geography, redundancy, and other requirements.  We transfer the workload seamlessly from one to the other, which is powerful.

We have a tiny little startup that has facilities and points of presence in three continents.  Startups couldn’t begin to do that in the past.  We have customers on military contracts that have very special security requirements. 

Only by partnering could we meet all of these requirements.  Our job is to build the best possible enabling platform.

We’re very conscious of our partners and want to make sure they make money.  We don’t charge them up front or make them sign up for huge commitments.  Its win-win, customers save money, but partners make even more money with us than on their own.

The real strategic value is there will be an evolution over the next couple of years.  Many companies are just not in the infrastructure business.  Yes, they spend billions, but at some point they’re going to stop building that infrastructure and start using the Cloud.  It’ll start slow, they’ll move bits and pieces, but at some point, they won’t need to own datacenters.  There is a whole industry growing up to service this.

What About Amazon, Google, Microsoft, et al?

Cloud computing will be a federation of many many clouds.  There are thousands of telcos in the world.  We see cloud computing playing out the same way.  Of course we see Amazon, Google, and the others playing in that game.

There should be standards to increase the interoperability and make it better for all.  Networking is a very successful example of this today.  Telephones with rotary dials still work today.  Other industries struggle to get to that point.

Why Not Amazon Today?

What does that mean? 

<Bob laughing, “I want your graphical management tool working for me in the Amazon Cloud!”>

We set out to do a particular thing.  Amazon didn’t exist back then.  We set out to make it easy to deal with large systems.  We built an underlying infrastructure to support the user interface that you see.  AppLogic’s Cloudware infrastructure identifies pieces that can be broken out as services.  We are starting to see how to do that.

There’s the UI, there’s a grid OS, we look at heartbeats, failures, etc.  We have a catalog system, we have a metering system, and we generate billing information.  Each could’ve been a company.  But we built it all together as a seamless whole.

Now that we understand how this all fits together, we can look and see how to do it on systems that have fewer services.  EC2 is one of those targets.  We’ve been open about that.  It won’t happen in a month or two, but it’s something we’d like to do.  Amazon is one of several.

We don’t want to be seen as a front end for a cloud. 

Thanks Guys, Great Discussion!

<3Tera remains one of the Cloud Leaders that I like to keep an eye on.  They’re enabling the hosting world to build their own Clouds using 3Tera’s platform.  That ensures a lot more Clouds will be available with lots of interesting features and distinctions.  It’s all good for the end users!>


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