Hyperscale allows you to transform your datacenter from a cost center to a profit center. The original data giants turned an outward focus on platforms and free services into an inward focus on datacenter efficiency, in comparison with most datacenters today, which might as well have hay on the floor and chickens running around, according to cloud pioneer Jason Hoffman.

Datacenter efficiency: the cost/benefit analysis

When I was head of revenue operations at a media company, I had a lot of big ideas about how to make money for the organization. One of my ideas, I thought, was so good that I didn’t even need the sales department to execute it.

Existing clients were asking for services that would have required my team to work many extra hours. I figured I could create a “product,” the purpose of which was to charge the client for those services, and then use the money to pay bonuses to the people who did the extra work. Excited, I went to the head of finance to discuss my plan.

The head of finance rolled her eyes when I started talking. She was used to my questions.

“Your department can’t make money,” she said, as if explaining math to a child.

“Why not?”

“Because it’s a cost center.”

“Why can’t a cost center make money?”

“Because it doesn’t have a profit line on the ledger.”

“So if I ask another company to pay for a service that I create, and it sends a check, where will the money go?”

“I don’t know,” she said, smiling sweetly. “But it won’t go to you.”

Turn cost centers into profit centers

Indeed, cost centers cannot make money. Not because they are operationally incapable of being productive. But because, no matter how productive they are, they are considered to be an expense. Quality control, accounting, human resources: they don’t make money. They can’t.

Of course, the CEO has the power to turn a cost center into a profit center. But that isn’t a transformation to be undertaken lightly. Profit centers define a company’s purpose.

At some point in the past, Jeff Bezos made such a decision at Amazon. Amazon had datacenters designed to handle the peak workload for e-commerce: Black Friday. But the rest of the year, a great portion of those resources was unused. Why not start renting them out to customers? Thus were formed Amazon Web Services (AWS) and Elastic Compute Cloud (EC2), and the idea of an e-commerce company becoming a cloud services provider. Which is to say, the idea of any company using its data infrastructure to actually make money.

Increase datacenter efficiency and adopt the platform model

Outside of Amazon, the data giants with the big infrastructures (Facebook and Google) adopted the platform model: they gave their primary services away for free and made money by advertising. With this outward focus on free services, came an inward focus on datacenter efficiency. At the time, this interest in improving datacenters for the sake of service to users outside the company was called warehouse-scale computing

 

Watch Jason Hoffman, Ericsson’s Head of Product Area, Cloud Infrastructure, discuss the evolution of digital transformation with Rick Ramsey.

 

 

To explore these ideas in more depth, check out our e-book on transforming your datacenter into your competitive edge:

Download the eBook

Or you can read the following blog posts:

Assemble your datacenters like LEGO® bricks

5 ways that hyperscale datacenters reduce opex

Creating the datacenter you need with software-defined infrastructure

Cloud Infrastructure Digital Industrialization

Michael Bennett Cohn

Michael Bennett Cohn was head of digital product and revenue operations at Condé Nast, where he created the company's first dynamic system for digital audience cross-pollination. At a traditional boutique ad agency, he founded and ran the digital media buying team, during which time he planned and executed the digital ad campaign that launched the first Amazon Kindle. At Federated Media, where he was the first head of east coast operations, he developed and managed conversational marketing campaigns for top clients including Dell, American Express, and Kraft. He also has a master's degree in cinema-television from the University of Southern California. He lives in Brooklyn.

Michael Bennett Cohn

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