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Summary:

While the rest of the IT world is reeling from the hard drive shortage, users of cloud computing services should have a relatively painless experience — even if their providers don’t. Joyent’s Steve Tuck talks about his experience and how the HDD shortage might affect the industry.

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While the rest of the IT world is reeling from the hard drive shortage, users of cloud computing services should have a relatively painless experience — even if their providers don’t. I recently spoke with Steve Tuck, general manager of Joyent Cloud, about how Joyent has been dealing with the hard drive crisis and how it might affect the industry.

  • Steve Tuck

    Hard drive prices are going up. Infrastructure vendors are now sending out notices telling customers that all their existing quotes are null and void, and that prices are rising. Granted, he said, these quotes are always subject to change and are technically “only good for the day you have it,” but this type of widespread and immediate price increase is very rare. Joyent didn’t feel quite the price pinch because it has always bought high-end drives from server OEMs, but now others are paying for low-end drives what Joyent has been paying for those high-end units.

  • It might get worse before it gets better. HP  and Intel have already noted how the hard drive shortage has affected their bottom lines, and that’s not going to improve until at least the deep into the first quarter as manufacturing facilities in Thailand get back up and running. Joyent isn’t taking any chances. Tuck said Joyent is accelerating buildouts at the SuperNAP in Las Vegas and in other data centers just in case prices rise even higher.
  • The manufacturing process needs to decentralize. One of the biggest changes that might come out of this shortage, Tuck thinks, is that such a small number of manufacturers can no longer supply the entire server industry. He didn’t go into details on how that might happen, but it seems logical the answer might be to move more manufacturing of computer components to more meteorologically stable geographies, even if that means paying slightly higher costs. When Japan was struck by a massive earthquake and subsequent tsunami last spring, DRAM prices jumped based on uncertainty about the state of those facilities.
  • Cloud users shouldn’t see price increases. Done correctly, cloud computing is a very efficient operation for cloud providers, meaning they should be able to absorb some additional infrastructure costs and still maintain a profitable business. Tuck said Joyent operates at around a 30 percent margin. Rackspace has a profit margin of 9.1 percent. Estimates of Amazon Web Services’ profit margin vary between 4 percent and more than 13 percent. Even if their margins are razor-thin, Tuck acknowledges that public, “commodity” cloud providers couldn’t realistically raise their prices if they wanted to, because the business model is all about price predictability and ever-lower prices.

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  1. Joshua Goldbard Tuesday, December 27, 2011

    Joyent operates with a 30% margin? That’s obscene…

  2. 30% margin? Are you sure they is not a typo?

  3. 30% sounds indeed like a lot, especially if compared to Rackspace´s and Amazon´s margin.

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