BESSEMER CLOUD COMPUTING LAW #1:

Less is more!



Leverage the cloud everywhere you practically can, both for your internal systems as well as for your own product offering(s) and "just say no" to on-premises deployments! This will not only give you a direct understanding of the customer experience and best-of-breed strategies of Cloud Businesses, but it will free up your technical resources and balance sheet to focus on your core product and customers.

Although your technical team may be great at setting up Exchange servers and PBX systems, they are far too valuable to your organization to waste their time on such rote tasks. Your cost of capital is also likely very high, making upfront hardware and license costs extremely painful (dilutive) for a young company. By pushing as much as possible into the cloud, you avoid management headaches and make these expenses variable. You should be able to pick many initial products quickly, including hosted email (Gmail, hosted MSFT Exchange, USA.net), CRM (Salesforce.com, Oracle CRM On Demand, Microsoft Dynamics CRM), Marketing Automation or email management (Eloqua, ConstantContact, Vertical Response), Financials (Intacct, NetSuite), Talent Management (SuccessFactors, Cornerstone OnDemand, Taleo, LinkedIn), web analytics (Omniture/Adobe, Google Analytics, Coremetrics), telecom (Verizon, AT&T, Paetec, Smoothstone, Nuvox)Skype, Google Voice, Fonality, etc..), security (Google/Postini, McAfee, Symantec, Perimeter eSecurity), webcasting/remote access (Webex, GoToMyPC, LogMeIn, TeamViewer), and the like.

Similarly, try to leverage PaaS and IaaS whenever possible for your own core product development. There has been a massive change in the consumer internet world over the last two years, with the vast majority of new internet websites and applications using Cloud environments such as Amazon Web Services as the foundation of their development from the first day. We believe that quality of service and portability issues are rapidly resolving themselves at a level that will be suitable for enterprise deployments, and a similar migration will occur within the software and Software-as-a-Service worlds over the coming years. Although trends in Cloud businesses tend to be more predictable than those in consumer internet traffic, many of the same drivers exist: you no longer have to worry about the details of capacity planning, data center operations, infrastructure optimization, and hardware purchasing, and can instead focus on building a great product for your end customers.

One of the clear benefits of the Cloud Computing hype is that many very large companies are collectively investing billions of dollars in Cloud infrastructure and are now tripping over themselves to offer your business Cloud infrastructure at ridiculously low prices. Among Salesforce.com’s Force.com, Microsoft’s Azure, Amazon’s Web Services, IBM Computing on Demand, Google App Engine, Sun Cloud Computing, Rackspace Cloud Servers, and the dozens of private vendors entering this market, you should be able to find at least one provider that fits your needs. Stability and portability are particularly critical items to evaluate, and you should be cautious to leverage any proprietary tools and services that encourage lock-in, as portability is your best protection against future performance or pricing issues.

inally, although this is becoming more widely accepted as a best practice, we must still emphasize the importance of building a single instance, multi-tenant product, with a single version of code in production. "Just say no!" to on-premises deployments! Multi-instance, single tenant offerings should only apply to legacy software companies moving to a dedicated hosting model because they don’t have the luxury of an architectural re-design. Of course it is possible to use virtualization to provide multiple instances, but this hybrid strategy will make your engineering team much more expensive and much less nimble. A few outlier hybrid models have been successful, but in general please leave the hybrids to the "clean tech" entrepreneurs. You also want to leverage your core infrastructure as much as possible, even when expanding internationally This generally means to invest early in backup and disaster recovery, but if you’re managing your own datacenter, avoid a second production facility as long as possible (at least past $2M CMRR).