A few years ago, there was a surge of application service providers - ASPs -- looking to outsource management of the software and computing resources for companies. We thought it might be interesting to see how one of the many current companies in the market, Thousand Oaks-based Cloudworks (www.cloudworks.com), is using existing technology to try to tackle this market, and how it has used the online delivery model to shift away from what had previously been a geographically limited, talent constrained business. We spoke with Mike Eaton, the firm's CEO.
What does Cloudworks do?
Mike Eaton: Cloudworks is a hosted computing company, where we run all of the applications a business customer would need in our data centers. They just need a browser, and then they can log in and be productive from work, home, the road, or anywhere. It's basically a hosted computing model.
Who's the typical customer for that?
Mike Eaton: Our customers are actually quite a wide range of industries and sizes. Because we are a hosted model and charge by-user, we can be cost effective for just one person. We have people who have left big law firms and had Exchange, Blackberry synchronization, and document management and all that kind of stuff, and building that for a one person law firm isn't cost effective. But, we can do that. We also have companies that are quite a bit larger than that, and are a good fit for up to several hundred people. Industry wise, we have manufacturing clients, service, business services, finance, pretty much everywhere.
How much is technology you've created yourself versus from third parties?
Mike Eaton: The intellectual property is really on the design. It's how you take these off the shelf components and put them together. We're running primarily Dell on the server side, use Cisco networking gear, Ironport security devices. But it's mostly stuff other people can get. We've been in the small/mid sized IT services business for 11 years, so having that level of experience we know how to build a network right, and one that is reliable. A lot of our expertise is really being a good IT department and delivering that expertise to people rather than it being any particular software. There's a lot of stuff you have to iron out to make the tools work well.
What's the geographic spread of your customers, and can anyone from anywhere in the world use your services?
Mike Eaton: We've had a traditional IT services business called Atticus for the past 11 years. That market area we consider to be LA and Ventura County. Mostly, because you can't provide good service beyond that geography if your technicians live in this area. We have clients in Santa Barbara and approaching Orange County, but that limit really keeps traditional IT services in that geography. Cloudworks doesn't have that geographic limitation. We have clients in New York, we have clients in Chicago, Florida -- the exciting thing for us is we can really serve people pretty much anywhere in the United States. We don't have any international ones, but the opportunity hasn't come up.
So this really is a way to go beyond the driving distance limitation for traditional IT?
Mike Eaton: The other thing we're excited about is finding technical resources that have good interpersonal skills, folks who aren't just sitting in a cubicle and actually have to interface with customers, aren't that easy to find. The limitation that Atticus had was not only geography but to find enough staff that were self motivated to get up and get to their morning client, but also deal with all the personalities involved in a service business, and who were still very technically capable. There's a limitation to how many of those people you can really find. So, if you can build a model where instead of having them run around every day trying to deal with 20 different networks, they're just working on one network, and lock it down in such a way that the human resources go further too. That's really one of the big advantages of this.
So do you think this is scalable?
Mike Eaton: Yes, this is much more scalable than any other IT services model we're aware of.
Industry wide, wouldn't you think more people would move more towards this kind of model? Especially with all the driving around?
Mike Eaton: It is really inefficient now. I think it will be much more common. I'm surprised that we haven't seen more people doing this. On the other hand, knowing how hard it was for us to do this, and the amount of investment it took, I realize why a lot of service providers don't jump into this. It's actually very common for people to manage Exchange, or a CRM environment, but for someone to host desktop applications is still somewhat unusual, but I do think it's going to change.
So where are you now?
Mike Eaton: The one challenge of this, which also might be holding people from launching this business, is it's a paradigm shift for customers. One thing we've learned from doing this is that even if your servers are falling apart or not doing exactly what you want to do, there's some comfort in knowing they're just down the hall. They may be crappy, but they're still your stuff. The idea of taking that data and those applications and giving it to someone else in some place where you've never seen is somewhat unsettling to customers. We've been able to get over that with the right amount of time, but that issue is one of the things that slows the migration from going over to the new technology. So this particularly model needs to get more acceptance and comfort with people before it starts to take off. I think we're at the place now where our efforts to educate people, improve their comfort level with it, have them talk to other customers who are on our servers for a couple of years and hear that it's for real.