Even though web services and SOA architectures are more scalable, higher performing and support application development better than traditional platform applications, the real story is money. Selling software and hardware as a service massively reduces initial capital and ongoing maintenance costs. Applications based on web services architectures are less expensive to develop, not only because they leverage components from other applications more effectively, but because they take a more common and less expensive type of developer.

As I was running down the cause of Friday’s S3 service interruption, I came across this excellent financial analysis of the cost savings of a web services deployment versus that of a traditional platform approach. Mind you, this analysis is historical - this cost savings was actual, not projected. The author is the Don MacAskill, the CEO and Chief Geek of SmugMug, a photo sharing site. As you can imagine, photosharing is storage intensive, and Don’s company moved off of an Apple XRaid platform onto S3 not only to gain the financial benefits (both in cash flow and P/L) but because it was more reliable than an internal solution. I encourage you to read the post yourself, but here’s the bottom line straight from his post:

• Total amount NOT spent over the last 7 months: $423,686
• Total amount spent on S3: $84,255.25
• Total savings: $339,430.75
• That works out to $48,490 / month, which is $581,881 per year. Remember, though, our rate of growth is high, so over the remaining 5 months, the monthly savings will be even greater.
• These are real, hard numbers after using S3 for 7 months, not our projections. They closely match (but are actually slightly better) than our projections.

It’s a small jump to see how other “commodity” based services have the same financial benefit - from processing, to billing and even to telephony services. It’s a challenging time to be a telephony vendor… and it just got a little worse.

Posted by Thomas Howe @ 9:02 am | Filed Under Lead Stories |

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