Cloud to Ground Podcast Episode 5 – Mat Ellis
Andrea Bridges-Smith: Hello everyone, welcome to another episode of Cloud To Ground, presented by Spanning. If you’re a Google Apps user and you are worried about the safety of your data – and if you’ve not been reading the news lately, you should be – please come and visit us at spanningbyemc.wpengine.com, and we will be happy to help you out. My guest today on the podcast is Mat Ellis, Founder and CEO of Cloudability, which is a great company that makes a great product. Full disclosure, we use that product and we absolutely love it. So, welcome to the podcast Mat.
Mat Ellis: It’s great to be here.
ABS: Thanks very much. So we have to, first of all, prove your cloud street cred to our viewers and our listeners. That’s very important, we want to make sure that everybody knows we’re not just blowing smoke, that we actually know what we’re talking about. So, how long have you been in the cloud game?
ME: Well, I’ve always been interested in this kind of distributed computing and looking for an opportunity to deploy it, but I moved to a company in Kansas City in 2007 – late 2007 – and we had a few troubles getting our ops working. And we had a lot of data to crunch, we needed to get the data crunched every day…and as the most recent hire, although I was a general manager, I was most recently a CTO, I got the task of dealing with these problems, and it became clear that one way of tackling it was to move on to the cloud. And that, in 2007, early 2008, running the dupe on the cloud was challenging. I was the manager, I actually didn’t do the work, but being the guy responsible for the challenges, the problems, the timetables, in that part of the world, it was a really interesting problem. Very exciting to be able to– an idea that you could press a button then, ‘Oh, I’ve got another server,’ was just really novel. And that was– that’s my reach in the cloud.
ABS: Okay, great. So can you tell us a little bit about what Cloudability does?
ME: Cloudability is a service for companies that are making heavy use of the cloud, which today normally means things like infrastructure and Amazon Web Services, but can mean any variable computing cost. And we gather up all your cost, we have you herd all the cats in your org so that you know what you’re spending. And then we help you make sure that everyone is using everything that they’re buying so there’s no waste. And then, when you got some basic financial control, we send you a daily email, we give you some analytics that allow you to dig in and understand just what you’re spending money on. We have you get to a place where you start to label all of your spending. It can be a project code, it could be a cost code, and people often use different sets; geography, people, products. And now you know the true cash cost of your variable compute cost for these products, which means you can now start to divide that cost by the key business metrics. So, for example here at Cloudability, we measure the cost of our free service separate from our revenue service. We have a free service too– keeping an eye on your total bill, and that cost us $0.49 per user per month. And if my bill goes up to say, $50,000 a month for that service, it should be because I’ve got a 100,000 free users. And now, it’s much easier to make a decision about whether that’s making us money, losing us money, how much money it’s making or losing us. And really, we feel there’s a big change in the way in computing, it IT – we used to have to do all the planning upfront, and we’d buy the computers, and own them and operate them. But now you can rent it, and we have to learn a new skill, which is how to manage this stuff day to day. In a way that manufacturers had to undergo from owning the cows to make a car seat, to now you just buy car seats every day to go in your Toyota Camrys and let the specialists deal with all of that. So, we’re here to help companies through that journey. If you’re using the cloud, you really should be using some kind of service like ours. And even if you’re using it at a very low level, you should be thinking about using our free service that sends you an email everyday telling how much you spend, and that way you can just avoid some sticker shock when your bills come in at the end of the month.
ABS: Absolutely, and I can tell you that our founder and CEO Charlie Wood, he gets that email every morning and he’s pretty reliant on that to keep us up and running, so thanks for doing that.
ME: Well, there’s an interesting story to that email, actually. So, when I– my wife grew up in Oregon, and when we had our second baby, she was very keen to get home. So in the middle of the depression, I quit my job in Kansas City and came back to Oregon, and then, there were obviously no jobs, I knew that. I’m prepared for that. And so I decided to look at some startup ideas I had, and to pay the bills we moved people on to the cloud, I did consultancy work. And every single person, every company that was on the cloud, there was the same question – “What are we doing? What are we spending? Are we making money? Is this going to bankrupt us?” So I wrote Cloudability to answer those questions, but it wasn’t my startup idea, it was just to save me some time. When it broke, everybody complained, bitterly. And that’s when we realized that we’d stumbled upon something that was actually our startup; the idea which was Cloudability.
ABS: Wow, well, that’s pretty brave to quit your job in the middle of a bad economy and go start a business, so props to you!
ME: That’s not the word my account manager uses.
ABS: [laughter] Well, I’m sure that your account managers are incorrect.
ME: They are now, but not then.
ABS: Yeah, yeah, exactly. Okay, so obviously you have some cloud credibility. You’ve been at this for a while. You have a company based around the cloud. So, we’ve officially certified you as an expert. There’s no medal or anything.
ME: Apparently so.
ABS: But, I did want to ask you, what kind of ROI do people typically see when they move to the cloud, do you have any idea?
ME: That’s a really interesting question. It’s something which we’ve studied internally since the inception of our business, because it’s a fundamental question to what we’re doing. It’s hard to measure ROI in numbers if what you’re going for is capability and opportunity. And it’s also hard to remember how you use to do things, so if you think about having to wait six or eight weeks for a server to be installed in your colo, or three to five months for your colo to expand and to allow you to grow your business, and now you can just do it in a press of a button. It’s really hard to compare and contrast even emotionally. We find that, almost all of our customers today are using the cloud, not for price reasons but for capability reasons, for the fact that it’s a– just cheaper– sorry, it’s just more flexible and nimble. And a good example of this is one of our customers, big company, still working on getting them to allow us talk about them in public, but had an idea for products. They weren’t sure how well it was going to be received, and they had too weak an investment case for them to proceed in the traditional way – to borrow that equipment, to kit out the colos and add stuff, they just couldn’t have done it. So they did it on the cloud instead, very much really as an experiment from a business perspective, and it went so well that within nine months they had a multi-hundred dollar– a multi-hundred million dollar run rate of revenue from these new products, and it really took them aback. And they know, they look back and they go, “If we’d done this in-house, we couldn’t have kept up. It would’ve been a much smaller business because we just wouldn’t have been able to offer the same level of features and service.” And so, we’re finding increasingly that more people are buying when they use the cloud. It’s externally-facing business people who really have always wanted to operate, make a decision in the morning, do something in the afternoon. And it doesn’t always mean it’s the right decision, by the way, just they want a better act on things right now, and the cloud gets them a lot closer to that. And unfortunately, new responsibilities, new problems come with that new power, and then people sometimes get pushed back because of spending overruns or ‘I didn’t really know it’s going to cost that much,’ and in particular CFOs are in a hot spot because they’re used to dealing with fixed price; you have to come to them for a check, and the benefits are uncertain, but the costs look very clear. You want to deploy the product, but I know it’s going to cost me a million dollars, and it’s exactly the opposite. I don’t know what the costs are, but it’s already out there and everyone’s relying on it. And when they say, “Let’s get these costs down, well, this is too high,” it’s easy for techs to go, “Well, don’t worry, I’ll make it go down next month, or we’ll do project X which will make it go down.” So it’s a really hard spot to be able to get used to this idea that they’re a little bit out of control of the spending, and that’s where their focus is. It’s not cost, it’s capability.
ABS: Yeah, I think that’s a really good point. I can tell you from our experience here that one of the ways that we’re saving, obviously, money is that we don’t have a server, so we never had to buy one. So as long as we have a router and a wireless connection, we’re good to go. And we don’t have to hire anyone to maintain that server.
ME: Or retain them.
ABS: I’m sorry?
ME: Or retain them.
ME: You know how hard it is to hire and retain engineers? Well, there’s one extra engineer at your company who’s now working on your products instead of maintaining your file server. And there’s equal levels of skill involved, it’s just one of them is helping you move your business forward and differentiate and one of them isn’t.
ABS: Right, exactly. So Cliff is actually the guy that you’re talking about here at our company. He’s kind of our de facto IT person, but really, it’s a matter of keeping the router up and running rather than keeping a server up and running, and so he gets to work on the product and actually work on building new features, and testing it out and making sure that it’s stable, so that’s really nice. So we’re saving money in those areas, so that’s kind of an obvious one. But, I can tell you from my personal experience, coming from a Microsoft environment at my last job and coming here, the downtime here has been night and day. With a Microsoft Outlook environment with a server in a server room – a bunch of servers – things would go down all the time, and we were constantly waiting for somebody to fix things. There’s one day where we had an email outage where we lost the past three days of email. It just was gone and it was not coming back, and they tried and it was just gone. And I haven’t seen any of those types of problems here, and fortunately we a have back up service, so it’s less likely, but nothing has gone wrong to facilitate that event. So you’re saving time and money by avoiding those type of instances.
ME: We had an interesting opposite problem. In the 90s, I was the Microsoft poster child, and I worked for people like–
ABS: Oh no!
ME: — Pepsi Cola and Frito-Lay, evangelizing and seeking out and slaying the Lotus SmartSuite users and replacing them with Microsoft Office users. We found that if we did a really good implementation, we couldn’t retain the good people. See, they have 200 people in an office and there just wasn’t enough interesting things for them to do. And then, we had the other problem which was interesting, the good people would go off and do bigger and bigger installations of Microsoft Office and Outlook and Exchange until they kind of reach their level of competency. And so it’s a really skillful job, managing an Exchange server, and all that data takes an incredible amount of talent and skill. And unfortunately, Google also has that, but they’ve commoditized it. So those people who can keep together a very large Exchange environment should really be working on your business and its core products and not the email systems anymore, and there’s no better example of this than in the US presidential election last November. The Obama for America campaign were customers of ours, and they used our product, and they were exclusively cloud-based. So when they set up the business, they used shared file services instead of an Exchange file server. And they spent all of their time starting algorithms and expanding data and Harper Reed the CTO, he’s often said in public, they get the Cloudability bill and they go, “Curse you, Cloudability!” They’re going to turn some stuff off. But their whole focus was on crunching data and improving their algorithms. And the Romney campaign, the ORCA project was just done how every other presidential campaign has been done. Massive investment in technology, some of the best people hired, but they spend a lot of time and effort on the infrastructure, on the coms, on sending out file servers, mail servers and handsets. And it didn’t have enough time to get it right, and they spent too much time on the infrastructure, not enough on the algorithms, and it’s widely thought that that made a really big difference in Obama’s campaign. They had access to the data, they could put people in the right places, and the Romney campaign didn’t have that. So to us, it’s a really good example of what will happen to companies if you don’t get your ducks lined up on this. But now you have new problems. So we find, for example, that when we use these shared file services, it’s much harder to recover files when someone accidentally deletes a folder, and a really good example of this is, we’re in the textiles program and we’re practicing with ten other companies our demo day pitch, and our creative guy was working on our deck. And when he finished his work he cleaned up, and he deleted all the other files because he didn’t want them in this folder anymore. And literally, he’d just deleted everyone’s pitches for the next day. Now fortunately, we were able to catch that in time, and have him just press command Z and it undid it all, and all the files went back, but if he’d walked off and not been available, I don’t know what we would’ve done. And so, you have to put into place processes and products – we use Spanning, for example, to make sure that if that happens to our Google Drive folders, that we can go back and get all of that data. And I’m always worried – we have a startup, we have a lot of people coming and going – that one day, we’ll delete the wrong email account. And now, my email is my most critical resource. If that account got deleted for any reason, I would be in the mud. So there are these new problems that come with these new capabilities, and you’re going to spend the same amount of time on stuff, it’s just on different problems and hopefully at the end of it, you will be a little more protected.
ABS: Yeah, it’s funny that you mention that because I was talking to someone just the other day who is a network administrator for a school district in Pennsylvania, and he was telling us this story about how he got an email earlier this week from his librarian saying that she’d accidentally deleted their entire social studies curriculum. The whole thing, not a single file. The whole curriculum. For the department.
ME: Was he able to recover it?
ME: Oh dear.
ABS: No, they’re still trying to figure out if there’s any way that they might be able to get that data back. So that’s definitely a new concern– it’s not really a new concern, it’s an old concern that’s happening in a new platform now. And one of the things that I think that IT professionals and their bosses should know, is that just because you moved to the cloud doesn’t necessarily mean that you should go and fire all your IT staff. There’s a lot for them to still think about. There’s things like backup, things like monitoring their usage and keeping up with those costs and making sure that there’s no unprepared-for spikes in usage that they can’t manage… There’s BYOD policies. There’s disaster recovery. There’s finally getting around to documenting all of those processes that everyone says is a best practice but no one really has time to do because the server crashed again. So I think that that’s important for people to know, that IT’s role with the cloud, it should shift. It should shift in a new direction towards something more proactive and less reactive.
ME: Well we have a very strong opinion about this. We think that the CIO’s group is going to become smaller in numbers and in budget, but a lot more powerful. In a fashion similar to the COO’s office in manufacturing businesses in the 80s and 90s, if you make things, your COO is one of your most important critical functions because otherwise you’re going to be dead in the water. And what the COOs are basically doing, particularly in large distributed manufacturing companies, is joining everything up and insisting that people comply with standards that allow you to integrate the whole manufacturing process. And we think that the CIO is going to become effectively the chief integration officer, with a team of people who are helping regulate the flow of data to protect that data so it doesn’t float out of the business, that people aren’t pursuing the cheapest vendor who happens to be a shell vendor, who’s there just to get your data or your passwords, that your stuff complies with the law, and doesn’t play fast and and loose just to hit their goals. So, I think there’s a smaller role for a company that’s all cloud-based. Obviously, there’s going to be– there’s $3.5 trillion of spending on on-premise. That’s somewhere between $3 billion and $30 billion spending on the cloud depending on whose estimates, so it’s still a tiny fraction. I think Morgan Stanley estimated that it’s going to– they think in the next 10 years it’s going to affect 17% of global IT spending. So what’s that – $600 billion of spending? So that means it’s $2.4 billion of spending– $3 billion spending is not on the cloud. But still, there’s going to be a lot of traditional IT, but for companies that are mostly cloud-based, I think there’s a chance for IT gurus to become more influential, more impactful. And that goes down to the fact that your IT guy today is doing the backups and dealing with them because it’s a necessary function, but you wouldn’t pay someone $100,000 a year to do that. You’re paying him $100,000 a year to run your Exchange server. But when you don’t need the Exchange server, what do you do about the backups? You still got to do them. And that’s the important point here is, as you said, the same problems exist in different forms. I’m very grateful I can take a box, and pay a company like Spanning a few dollars, and it’s dealt with. And that it’s your IT guys that are making sure the backups are working, are recoverable, are safe, are secure, and not one of my IT guys, and instead of paying $100,000 a year, I’m paying $1,000 a year for a company our size. What’s that? It’s like a 90% discount, and I’ve effectively got the same service. So it’s time to think of the cloud as the solution, not the problem. And if you do that, but you still got the same things to deal– to solve for, then I think you can get a positive experience out of it. If you think this is a cheap way to not do stuff, you’re going to have a rude awakening. You’re going to lose your whole curriculum.
ABS: Yes, absolutely. We’ve seen it before, so… Well, Mat I want to thank you so much for taking the time to talk to us today. For anybody watching or listening, if you are running a business in the cloud, you absolutely need Cloudability in your world, so please go to Cloudability.com and check them out. Again, it’s a service that we use everyday and we absolutely love it.
ME: And if you have a free– if you have low cloud spending, we have a free forever product that will just stop you from having overages. So, if you’re using anything on the cloud, you really should be using a product like ours, even the free version.
ABS: How much easier can they make it for you? That’s very good news. Thank you Mat for being here today. Thanks to all of our viewers and listeners for viewing and listening. And once again, if you need backup for your Google Apps, and the guy in Pennsylvania would definitely tell you that you do, please visit us at spanningbyemc.wpengine.com, we have a 14-day free trial. No risk, no obligation, check it out and see if it’s right for you. Thanks to everybody for watching Cloud To Ground, and my name is Andrea Bridges-Smith, and we’ll see you next time.