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Something to think about... / blog
Failure is Not a Problem

Written by on July 22, 2013

Note to big brands: There is a reason why consumer products are called 'low-margin products', and enterprise products are called 'high-margin products'. You are paying too much.

In fact, let me tell you a story from my days as the digital media manager of a big fashion enterprise:

Fashion companies are very graphic intensive companies. Everything they do involves some kind of graphic file. From the designs made by the designers to the fashion shoots done by marketing, to the presentation kits used by sale. As such, it quickly became apparent that we needed a much more effective way to handle it.

We needed to create a media asset management system, and we hired a developer to make that happen (note, the cost savings alone was in the millions).

But one day we ran out of hard disk space. So I called our enterprise IT department and told them to figure out how to get more. We only needed a couple of terabytes, so it wasn't that big a of a deal. A few days later they came back with a quote for an 'enterprise level' SAN storage solution with an enterprise level backup solution (because they had found that the extra space would max out our existing backup solution as well).

Total price? $98,000

In the enterprise world, this doesn't sound that bad. Enterprise SAN's has built in redundancies, a high level of reliability, and includes all kind of management features.

To our enterprise IT department, this was not only a good solution but also a cheap solution, and, as they pointed out, several other brands had already bought just this type of storage server.

But paying $98,000 for a couple of terabytes of storage is just insane. I had 1TB of space at home, for which I had only paid $299.

So after a lengthy pissing match with IT, I decided to ignore them and instead buy our own storage solution. Something that was heavily frowned upon (you were not supposed to go against the mighty IT department). And I needed the backing of our CFO.

Here is what I did:

First, we looked at how many of the files people used on a regular basis. The answer was about 5%. So why go out and buy a hideously expensive storage system that can keep all the files active, when only 5% of them ever needed that level of access? Why not divide the files into 'files we use often' and 'files that we only use occasionally'.

This way we could use our old storage server (which was fast and reliable) for the day-to-day stuff. And use a second storage server as an archive (which didn't need all the enterprise features).

What did we buy? Well, I bought the same thing that I had at home. a consumer level NAS device, like this one from Synology (http://goo.gl/8ulW0). It costs only $310 + 4 2TB hard disks priced at $98 each.

Note: We actually started out buying NAS from Lacie, but they weren't as reliable as the ones from Synology.

In other words, for a total of $700, I could get not just 2TB of storage (as needed) but a total of 8TB of storage.

Of course, our enterprise IT department was pissed. This was just a toy. It wasn't secure (which it was), it wasn't reliable, it couldn't be managed by their enterprise level software, and so forth... so they outright refused to allow it to be included in their enterprise level backup system.

Hmm... yeah... okay... So, I just bought two of them.

One would serve as the main storage server, the other serving as a backup. And then I asked our developer to write a script that would make sure they were always in sync.

In fact, I decided to buy four of them. One would be the main storage server, the other the backup, and two more just standing by in case something went wrong with either of the first two.

Total price? $2,800 ... or 35 times less than the enterprise IT solution (which only had 2TB of storage).

With this in hand, it was very easy to get the backing of our CFO and shut up our IT department.

Over time one of the hard disks might fail, but we would just swap in another. Sometimes the entire NAS would fail, but remember I bought four, so we would just unplug it and plug in the new one and everything would be fine again.

Over a six year period we actually ended up buying a total of 8 of these at the total cost of about $5,600, but that's still a lot less money than $98,000.

Yes, they failed more often, but that's the whole point. With enterprise level devices, you have one device that has to have 100% reliability of all time. As a result, you pay a hideously amount of money for a lesser solution in exchange for what you believe is a slightly better build quality (in reality the difference is minuscule).

My approach was different. I said, "I don't care if something fails. I want to create an environment in which failure is not a problem." So instead of buying one enterprise level server, I bought four consumer level servers. If one failed we would have three more ready to go.

And this is where we come back to the question of high and low margins. The only reason why this works financially is because enterprise level products have such a high-margin.

Think about it for a moment:

  • A 8TB consumer level NAS = $700
  • A 2TB enterprise level SAN = $98,000

Yes, the enterprise level SAN is more fancy, but that's just insane. $90,000 is roughly the same as two full-time employees

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Thomas Baekdal

Thomas Baekdal

Founder of Baekdal, author, writer, strategic consultant, and new media advocate.

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