Last week I attended a presentation by Adrain Cockcroft (@adrianco), Cloud architect behind Netflix’s amazing move to Amazon EC2 infrastructure.  Check out the video of the 90 minutes long presentation.

It was an excellent presentation with a good mix of technical and business areas covered. (Besides that Netflix also sponsored large number of Pizzas for the 100+ audience. Thanks Netflix)

Starting with the whole decision making process of why Netflix chose to abandon the effort of building their own data center and scaling it on-demand, Adrian covered some of the key challenges they had that only Amazon could handle.

Netflix as a company has been growing really fast (Q0Q 30+%) and to make it even more challenging they are changing their business model on the go. From the company that mailed DVDs to its subscribers they are increasingly moving their business to streaming movies. “Streaming of movies is the future and rather than hang on to our leadership in existing model and see someone else topple the apple cart, Netflix had take the bold step to disrupt itself and gain leadership in the new model before others” says Cockcroft. In a way they seem to have attacked and conquered the The Innovator’s Dilemma as Clayton Christensen outlined in his seminal book.

Lessons for those treading this path

If your company is pursuing this route of moving to a cloud provider (you have probably heard all of this before but it’s worth repeating)

1. Create a vision and lead with it. Don’t do it bottom up as most companies tend to do with a pilot and then based on results decide how to proceed.
2. You’re core competency is running a business and not running IT. You are better off going with specialists who have made running IT their business. “Amazon has hundreds, if not thousands of people working on optimizing, automating the infrastructure. Netflix could not imagine scaling to that level” as Adrian mentioned.
3. Evaluating and comparing every possible vendor on earth to make sure you made the right decision is great. But that does not ensure you have mitigated all the risks. Identifying a key vendor and focusing your energy to work with them and mitigate risk is a better choice.
4. IT Budgets will no longer be firm as they were in pre-cloud days. CFOs need to get used to it. While they would love to have predictable expenses, on-going monthly expenses might be spiky. But then again, the overall spend might be lesser than if you were to build it yourself.
5. (repeat of point 2) Focus on providing differentiated business value and let someone else provide the undifferentiated services like IT.

Key Technology Shifts that companies should be prepared for

1. Possibly moving away from relational database to keystores/columnar databases like SimpleDB and resulting architectural changes.
2. De-normalizing data so you have what you need readily rather than the old way of joining multiple sources to get the derived dataset you are looking for.
3. Moving away from the traditional system management tools to those that get Cloud.
4. Automate the heck out of everything. Don’t leave anything for chance.  The resources in Cloud are allocated from a dynamic pool and mistakes can cause those resources to disappear. Manual processes are risky and prone to mistakes.

For me, the most intriguing aspect was how did the decision to move to infrastructure hosted by a direct competitor, come about. eBay apparently decided to go with Microsoft Azure instead of Amazon EC2 for the very “direct-competitor” concern. There are also rumors in some quarters that Netflix might be a acquisition candidate for Amazon. But then again, as someone mentioned, why would Amazon acquire Netflix and lose one of their marquee enterprise customers. They also present the best case study for Amazon EC2 capabilities.

About Subraya Mallya

Subraya Mallya is a technology executive, entrepreneur involved in conceiving, building software businesses. In this blog, he focusses on business and technology strategies around Business Model, Product Development and Marketing. Connect with me on Twitter - @subrayamallya