Thursday, 13 November 2014

Part 1 - Delivering Cloud services in challenging markets : Managing costs

At Lifetrenz, we started out to build a true multi-tenant cloud service specifically for the Healthcare vertical. As we planned our development and initial roll-out, we were faced with some challenges in making our business viable both for us and our customers.

Our primary target markets were very price sensitive and so we had to maintain a very low TCO for our application to remain competitive. This meant keeping a tight control of the total end to end costs involved in the service delivery to the users. I will focus on two of these - processing load on the cloud servers and the Internet bandwidth costs at the client side - which could be managed using technology.

In theory the bandwidth costs at the client side is borne by the client and so does not impact our profitability. However, these costs can be substantial considering the fact that there will be 30-40 application users at a medium sized hospital and can be a major factor in deciding to choose Lifetrenz.

In our initial tests on prototype environment, we clocked the per station requirement at 100kbps, which can be considered quite reasonable in many markets. At that level a medium hospital would need to maintain 3-4 Mbps line as primary and 2 Mbps line as standby. We realized that the monthly costs that are incurred additionally on this by the client, can increase the application TCO substantially and increase the threat of decisions going against Lifetrenz.

The second aspect that influenced overall costs was the per client hosting server processing requirements. As opposed to bandwidth costs, which has an independent bearing on our business, the server costs constituted a very important part of our overall service cost. Hence keeping it low was critical to the profitability of our business.

Here again we had some initial surprises on initial tests, as we could run only a couple of hospitals on a pair of Quad core instances. At that cost, the hosting cost alone would have rendered our service not competitive.

We had some serious problem in our hand and had to think out of the box to bring the cost down at both ends make our solution attractive in the market. How did we do this?? It involved a lot of hard decisions and a multitude of small measures involving architectural changes and redevelopment of the core application. In the end, we are happy at what has been achieved and are eager to keep challenging ourselves to keep doing better. I will include more specific details on how we achieved this in the following parts.
  • Part 2 - Delivering Cloud services in challenging markets - Managing bandwidth costs
  • Part 3 - Delivering Cloud services in challenging markets - Managing hosting costs

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