Intelligent Machines

The Penny Pinchers of the Cloud

Cloud computing has made Web startups cheaper than ever to run. Some organizations are now learning anew how to be budget-conscious.

Today, information technology costs are important to the bottom line of many companies.

As chief technology officer for Barack Obama’s last campaign, Harper Reed had to build a giant technology organization to reëlect the president in a little more than a year.

Cloud computing (see “Who Coined Cloud Computing?”) provides a way to scale such big, complex projects quickly, but figuring out how much to spend can be a balancing act. Reed, for example, couldn’t afford to let any websites, e-mail programs, or Facebook apps crash, nor did he did want product engineers worrying about computing costs. But neither did he have cash to burn renting excess server capacity.

He turned to Cloudability, a startup based in Portland, Oregon. The company’s analytics software, he says, was suggested by Amazon Web Services, where the campaign was renting more and more server capacity by the month. At that time, Amazon’s cloud computing business did not have particularly good tools for helping customers track their spending, let alone figure out how to rein it in.

Cloudability is one of a crop of startups aimed at helping businesses understand the costs of cloud computing as the technology matures and much larger businesses get more comfortable with the idea of renting or leasing remote computing capacity to run their software and IT infrastructure.

At many companies, the “cloud” can involve an unwieldy, decentralized mess of hundreds of individual accounts and credit cards that can be hard to track. “Getting a developer to turn off a cloud server is like getting a kid to turn off the light switch,” says J.R. Storment, Cloudability’s cofounder and chief customer officer. Often they may just forget.

His startup, founded in early 2011, says it has signed up 4,500 customers that account for a total of $260 million in cloud spending, or, as Cloudability estimates, 10 percent of Amazon Web Services’ usage. Startups like Newvem and Cedexis, and Amazon itself, now aim to provide a way to monitor cloud usage more effectively as well.

The company’s basic software is free, but there’s also a paid version with more features. It tracks a business’s cloud billing according to up to 30 different metrics, such as time period or region. It can also be used to break down spending by project or by application—a key tool for developers who are working to, say, write more efficient code.

Storment believes such tools will help Fortune 100 businesses feel more comfortable with the cloud’s on-demand rental model, which could save them money in the longer term. The software can also protect against accidental account overages when developers forget to switch off cloud accounts or services. It can also warn of hacking—Storment says one customer found out when it got alerts that its bills were abnormally high.

Reed and a few other top-level technology managers at the Obama campaign had Cloudability’s reports e-mailed to them, and they were able to use them to optimize the amount they were spending on Amazon’s Dynamo database, a high-performance service that is good for storing Facebook messages to send back and forth quickly but generally too expensive for other uses.

The Obama campaign is an extreme case, but for many startups, there comes a time when the days of freewheeling, scrambling growth need a reality check. Maybe someone was hired to pay attention to costs, as happened when Pinterest, a social network that was one of the fastest-growing sites of all time for a few months, hired Ryan Park to lead its technical operations in 2011.

“Our number one priority was keeping up with the growth,” he says. But “one of the first things I did was to figure out what we were spending money on, and on what vendors and why.”

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