The price of a dedicated server in Europe with Xeon processor, 32 GB RAM and 360 GB SSD high performance storage is about 35 EUR per month. For this price, one gets 250 Mbps bandwidth with unlimited traffic and a quite nice range of free services.
The price of a virtual machine in China with the same performance and unlimited traffic at 250 Mbps is close to 20,000 RMB per month. This excessive price can be explained mainly by the cost of bandwidth and Internet transit in China that represent nearly 90% of this price.
The price of the same virtual machine in China with zero traffic is about 3,000 RMB per month. By paying network access based on the actual usage in terms of traffic, one can reduce costs drastically. A few cloud providers, including Qingcloud, support this payment option for networking. It is probably the best approach to consider for a small company to save costs. This approach can be combined with the use of public cloud services such a Youku to store large assets such as videos. HTTP compression is also a clever approach to reduce networking costs by dividing by 10 the size of transfered data. In the end, only of few dozens of GB of traffic will be charged every month.
Hosting applications in China is currently
100 times more expensive than in Europe if we consider networking costs. It is 10 times more expensive than in Europe if we only consider computing costs. This situation is due to the lack of competition on this market, with very few suppliers. What is even worse is that most cloud providers provide poor connectivity.
Hosting an application in one cloud does not provide any guarantee that this application witll be accessible from all over China. There are frequent routing problems in China that block access from certain Internet providers to certain cloud providers for a couple of hours (see
China Internet: why is it unreliable and how to fix it?).
Overall, development of the digital economyc in China is currently hindered by excessive price and poor Web connectivty. If we wanted to compare current situation with Europe, it is as if providers such as OVH or 1and1 did not exist yet. And we all know the major role of providers such as OVH in Europe to liberate innovation forces of the Digital economy.
There is a solution to change this situation: use coworking spaces to host small servers. Coworking spaces already pay for electriciy, space (m2) and networking (FTTH). Coworking host companies that are the typical ones looking for low cost cloud.
We have found that effective bandwidth in some coworking spaces is 100 Mbps. This is less than 250 Mbps but it is good enough. Electricity was also quite stable.
This approach is possible nowadays because small servers as the Intel NUC are designed for gamers and provide as much performance as a dedicated server costing 35 EUR per month.
They use M2 SSD technology which provides 2000 MB/s performance, more than any cloud provider. Nexedi tested these servers continuously in a coworking space in Shanghai during 3 weeks with the most stressful test: the ERP5 test. During 3 weeks, we have rebuilt, compiled and executed four complete ERPs in parallel on the Skull NUC. It did not crash. We even put the NUC in a drawer and made its temperature reach 100 degrees. It did not burn.
In each corworking space, we estimate that it is easy to hide as many as 100 servers. Between two and four servers can be installed for each meter of corridor.
The ceiling and air-conditioning pipes are a good location to hide small servers. The flow of air is good. Even if the air-conditioning is turned down, small servers will not get too hot.
The technical solution that enables the possibility to turn a coworking space into a cloud provider is called: distributed cloud. It is based on an open source sofwtare called SlapOS that was created in 2010 and that is used in mission critical projets for companies such as Aide et Action, SANEF, Mitsubishi Group, Airbus, Kyorin, Sankei Chemical, etc.
With SlapOS, all computing resources are unified as if they were a single one, no matter where they are: office, coworking space, home, data center, etc. SlapOS is able to provision any service: VM, database, PaaS, CDN, etc. It also handled accounting, billing, payement and even CRM in a fully automated way.
Cloud services provided by the coworking cloud are mainly virtual machines (VM) and Web acceleration. The combination of those two services covers about any Web application case in China. Web Acceleration is powered by Grandenet application delivery network (ADN). It ensures that a copy of assets is located on servers with high bandwidth outside the coworking space. It also ensures that any problems of connectivity in China are solved. Grandenet in essence combines a CDN technology with resilient networking.
More cloud services could be provided in the future, including database, PaaS, file conversinon, file storage, etc. However, VM will remain the main service in the foreseeable future.
The monthly cost of operation of a decentralised cloud is about 150 RMB per server, in addition to the hardware cost. The NUC server is a bit expensive. It costs 6000 RMB for a configuration similar to the dedicated server costing 35 EUR per month. This is equivalent to 250 RMB per month over a period of 24 months. The total cost is thus 400 RMB per montj. This is a bit more than 35 EUR (250 RMB) but it is much less than 3000 RMB.
This cost could be reduced a bit by using bigger servers: less management, better price per GB of RAM, etc. However, such bigger servers could not be easily hidden in the corridors of coworking space. They would require permanent air conditionning, which is not always possible to ensure. Therefore, unless a specific room for hosting servers is available, it is not a recommendable approach.
Marketing is the highest cost of cloud services. Microsoft spent for example billions of dollars during a few years in order to convince a small share of users of Amazon to try Azure for free.
Cloud providers who did not differentiate strongly (ie. by 100% or more) by cost, performance or marketing, failed to attract customers.
Marketing is thus essential for the success of cloud services
WIth coworking space, we can implement a zero cost marketing strategy by focusing on members of the coworking spaces and by letting them spread the word. Cloud is actually yet another service of a coworking space that is added to an existing list of services: networking, photocopy machine, meeting room, presentation room, etc. Cloud services can thus be embedded in existing marketing efforts for these services and thus do not add costs.
Also, there is a natural match between coworking spaces and startup companies looking for a low cost cloud solution. Startup companies usually go to coworking spaces to save time and cost. Startup companies are usually using cloud to save time (compated to setting up their own infrastructure). Providing them low cost cloud is another way to help them save costs.
The business model of coworking cloud is based on two ideas. Members of coworking cloud gets cloud at costing price (400 RMB per month for a 32 GB server). This creates traction for the coworking space and helps retaining customers.
Non members can use the coworking cloud at a price that includes a significant profit (800 RMB per month for a 32 GB server).
An invitation system may be used to access cloud at lower cost and reward members who spread the word.
Also, small size servers may be provided. A 1 GB RAM virtual machine could be provided at 12.5 RMB per month to members and at 25 RMB per month to the public. If one consider the cost of collecting 12.5 RMB, this means that every coworking space member could actually get a free 1 GB VM without significant impact on the coworking space profit and with a huge marketing impact for the coworking space.
If we consider that most services are sold to the public after some months, once word has spread out of initial members, a coworking space with 100 servers could increase its yearly sales by about a million RMB and its yearly profit by half a million RMB.
You can try the performance of coworking cloud with this URL: http://softinst1802.node.grandenet.cn/owncloud/. This URL points to a personal cloud server called Owncloud and hosted in a coworking space in Sanghai. Performance is sufficient to provide access to users in Europe at a speed that is better than - for example - wechat.
The current speed is limited for now by Grandenet service: the bandwidth allocated to Grandenet servers in China is less than the bandwidth available at the coworking space. This will change in the future with the planned upgrade of Grandenet to 250 Mbps bandwidth.
If you like this idea, here are the next steps. First, purchase 10 Skull NUC servers with 32 GB RAM and 512 GB Samsung or Intel SSD (no other brand for the SSD else it is unreliable). We will teach you how to install them.
We will then provide you a first batch of 100 accounts for your coworking space members. They can use those accounts to create virtual machines of any size and open their web sites as long as they have an ICP license.
Then let us see how your coworking space members react and plan the next step from then: pricing, new web site, new services, tutorials, etc.
A bigger version of this plan, suitable for a large network of coworking spaces willing to take the market in short time consists of purchasing 1,000 servers and investing in any aspect of the system that can accelerate its adoption: web portal, tutorials, etc. This plan is suitable for an ambitious group of coworking spaces willing to become a significant competitor to existing cloud providers with a low cost alternative.