Customer Solution Case Study

Hoster Creates Competitive Virtual Server Offering, Reduces Pricing by 40 Percent

OverviewCountry or Region: United StatesIndustry: Hosting

Customer ProfileThe Small Business Authority provides a range of services for small businesses in the United States, including web hosting, lending, and insurance. It is based in New York City.

Business SituationThe Small Business Authority sought a more affordable virtual private server (VPS) offering to meet customer needs and wanted to decrease its operating costs and be more competitive.

SolutionThe firm used Microsoft software to create a public cloud infrastructure on which it can create low-cost VPSs.

Benefits More reliable VPS for 40 percent less Database hardware reduction of 88

percent Lower staffing costs Potential tripling of VPS revenues

“With our database consolidation alone, we went from 60 to 7 physical servers, an 88 percent reduction. The cloud infrastructure paid for itself within the first 18 months.”

Justin Russell, Vice President of Product Development, The Small Business Authority

The Small Business Authority provides a range of small business services, including web hosting. It used Windows Server 2008 R2 Datacenter with Hyper-V and Microsoft System Center Virtual Machine Manager 2008 R2 to create a more competitive virtual private server (VPS) offering that is hosted in a public cloud. The company has created 40 VPSs per host server and can dynamically reconfigure VPS resources as customers need them. The Small Business Authority has been able to reduce the cost of its VPS offering by 40 percent and include high availability at no extra charge. The company has reduced database hardware by 88 percent by moving databases into the cloud and can expand its hosting business without adding staff. The Small Business Authority is on track to triple its VPS revenue and can use its public cloud for new services.

SituationThe Small Business Authority, which is a brand of Newtek Business Services, has been a technology producer and web hosting provider since 1997. Newtek created The Small Business Authority brand to provide enterprise-caliber business services to small businesses across the United States. Its services include web hosting, merchant processing services, payroll services, lending, insurance, and business consulting. The Small Business Authority is based in New York City and has 300 employees.

To give customers lower-cost web hosting options, The Small Business Authority began virtualizing its Arizona data center in 2007 by using the Windows Server 2008 operating system with Hyper-V technology. Instead of leasing dedicated physical servers, customers could lease virtual machines—multiple servers implemented in software running in a single physical host server.

In 2008, the company introduced its first virtual private server (VPS), which offered customers a higher degree of isolation for their virtual machines. Instead of sharing processors, memory, and operating systems with other customers, a VPS customer could assign additional operating system, memory, and processors to virtual machines. Although the cost of a VPS was lower than the cost of a dedicated physical server, provisioning the virtual machine with multiple custom options was a time-consuming, manual process for The Small Business Authority, which added to the cost and slowed the company’s response to customers.

“We didn’t have the resources to create an automated VPS provisioning solution, so our initial VPS offering didn’t do very well because it was expensive compared to comparable offerings,” says Justin Russell, Vice President of Product Development, Technology Services, at The Small Business Authority. “It also wasn’t as flexible as customers wanted because everything was manual. If a customer wanted additional CPUs or more memory, they had to call our support team, and it took several hours to make the change. Sometimes, we simply could not deliver what they wanted.”

The lack of a nimble, dynamically changeable virtualization infrastructure was hurting the company’s ability to compete in the VPS market and to enter the developing “software-as-a-service” market. In early 2010, The Small Business Authority realized that it needed to invest in developing an automated VPS solution and a true cloud computing infrastructure with which it could respond faster and more economically to customer needs.

“We wanted to create a cloud infrastructure whereby our virtual resources could be pooled and allocated on a flexible, as-needed basis,” Russell says. “We also wanted to make it super easy for nontechnical small business owners to understand what they were getting and what it would cost. And we wanted to automate all the manual work that consumed so many of our resources.”

SolutionTo create a cloud infrastructure, The Small Business Authority upgraded to the

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“We also wanted to make it super easy for nontechnical small business owners to understand what they were getting and what it would cost.”Justin Russell, Vice President of Product Development, Technology Services, The

Small Business Authority

Windows Server 2008 R2 Datacenter with Service Pack 1 operating system and Microsoft System Center Virtual Machine Manager 2008 R2. The company acquired 10 high-capacity Dell blade servers and clustered them to create a highly available public cloud that could collectively run hundreds of virtual machines.

Dynamically Changeable CloudIn a public cloud, virtual machines are created as needed, with their memory and processing power scaled up and down, moved from host to host, and decommissioned according to customer needs. All the virtual machines in the cloud can use all the resources in the underlying host infrastructure; virtual machines are not limited to the resources of any one host server and do not even reside permanently on any one host.

Using the Live Migration feature in Windows Server 2008 R2, The Small Business Authority can dynamically move virtual machines to different host servers without interrupting or bringing down customer workloads running on those virtual machines.

To date, The Small Business Authority has created 400 virtual private servers (or VPSs) in its 10-host server public cloud, achieving a 40-to-1 virtual machine-to-host density. The Small Business Authority offers Windows Server 2008 R2 Datacenter and the Ubuntu distribution of the Linux operating system on its VPS.

Customers primarily run websites on their VPSs, but they also run databases, email applications, and other business

applications. One of the heaviest workloads in The Small Business Authority cloud is a set of databases running Microsoft SQL Server 2008 data management software. The company took 16,000 databases—shared by multiple customers—off of 60 physical servers and converted them to virtual machines. They now run on 7 of the 10 clustered host servers. The host servers are Dell PowerEdge M610 blade servers connected to a Compellent storage area network (SAN). The Small Business Authority uses a fully redundant fiber channel protected by Juniper SRX Series Gateways. “We chose Dell because Dell offered the best price-performance of any server manufacturer,” says Walt Conrad, Executive Coordinator, Technology Services, at The Small Business Authority.

Automated Control PanelTo handle the complex job of creating VPSs and dynamically allocating resources to them, The Small Business Authority created an automated control panel using System Center Virtual Machine Manager and the Microsoft Dynamic Data Center Toolkit for Hosters. The latter provides guidance, sample code, and best practices to help hosting providers build an instantly scalable virtualized infrastructure.

“Our WebControlCenter handles VPS ordering, management, scaling, and cancellation,” Russell says. “Without System Center and the Dynamic Data Center Toolkit, it would not have been possible to build this automated control panel. It only took us six months, and most of that time was spent linking the control panel to our billing system.”

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“Without System Center and the Dynamic Data Center Toolkit, it would not have been possible to build this automated control panel. It only took us six months, and most of that time was spent linking the control panel to our billing system.”Justin Russell, Vice President of Product Development, Technology Services, The

Small Business Authority

Customers log on to The Small Business Authority website and place their VPS order, specifying the number of processors and amount of random access memory (RAM). About an hour later, they receive an email message from The Small Business Authority that includes their new server’s IP address, support information, and logon instructions. “Part of this hour is fraud checking to ensure that the customer and order are legitimate, but then it’s just a matter of clicking a few buttons to approve the order,” Russell says. “If the customer needs to change their CPU or RAM allocations, they can do so easily. On the back end, our billing system interacts with System Center Virtual Machine Manager to gather order information so we can bill the customer for the resources they’ve ordered.”

BenefitsBy creating a public cloud infrastructure, The Small Business Authority was able to create a more affordable virtual private server offering and reduce hardware and staffing costs, and it anticipates tripling its VPS revenues.

More Reliable VPS Offering for 40 Percent LessToday, The Small Business Authority is able to offer a less expensive yet more capable VPS. “Our new VPS offering costs nearly 40 percent less than our previous offering, and high availability is included at no extra charge,” Russell says. “Previously, if a customer wanted high availability, they had to pay for their own dedicated cluster, which was several hundred dollars a month. Our new VPS starts at [U.S.]$40 a month and has high availability built in.

“One customer had long wanted us to cluster their email program, but it was just too expensive. When we introduced our new VPS, they were able to go forward. They did not have to invest $100,000 or more in clustered servers, a SAN, and fiber connectivity because we had already made that investment for them.”

No single hardware failure can take a VPS offline. By using the Live Migration feature, The Small Business Authority can take individual physical servers offline to update them without causing downtime for any customer.

Database Hardware Reduction of 88 PercentThe Small Business Authority has been able to reduce hardware costs by moving to a public cloud infrastructure. “We spent four times more on the high-capacity blade servers used in our cloud, but we’re putting 10 times more customers on them,” Russell says. “With our database consolidation alone, we went from 60 to 7 physical servers, an 88 percent reduction. The cloud infrastructure paid for itself within the first 18 months.”

Avoidance of Staffing CostsThe company has also reduced staff work and costs. “Provisioning a virtual machine in our previous environment took three hours; now it takes 10 minutes,” Russell says. “With the old model, we would certainly have had to hire more people—two more this year alone—to handle the increase in business. With our cloud model, we can keep growing with our existing resources. Because VPS provisioning is

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“With the old model, we would certainly have had to hire more people—two more this year alone—to handle the increase in business. With our cloud model, we can keep growing with our existing resources.”Justin Russell, Vice President of Product Development, Technology Services, The

Small Business Authority

completely automated, we’ve created more time that our administrators can use for higher-value activities such as customer service.”

Potential Tripling of VPS Revenues Since launching its new VPS offering in March 2011, The Small Business Authority has had tremendous response. “We have significantly increased the number of VPSs we sell every week," says William Rose, Marketing Manager, Technology Services, at The Small Business Authority. "We're on track to triple our VPS revenues, or more, in the next year.”

With its cloud infrastructure, The Small Business Authority can also consider offering additional services. “We now have a foundation on which we can roll out new services that our customers need,” Rose says. “Over the long term, this will enable us to grow as a company. We are looking into software-as-a-service offerings that require a reliable infrastructure. Our current affordable, high-performance infrastructure will allow us to do more with far less investment. It enables us to consider other opportunities that we couldn’t even consider before. It opens doors for us.”

Microsoft Cloud Power Microsoft offers a complete set of cloud-based solutions to meet business needs,

including solutions for advertising; communications (email, meetings); collaboration (document storage, sharing, workflow); business applications (customer resource management, business productivity); data storage and management; and infrastructure services. In addition, customers can take advantage of an entire ecosystem of solution providers and Microsoft partners.

For more information about Microsoft Cloud Power, go to: www.microsoft.com/cloud

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For More InformationFor more information about Microsoft products and services, call the Microsoft Sales Information Center at (800) 426-9400. In Canada, call the Microsoft Canada Information Centre at (877) 568-2495. Customers in the United States and Canada who are deaf or hard-of-hearing can reach Microsoft text telephone (TTY/TDD) services at (800) 892-5234. Outside the 50 United States and Canada, please contact your local Microsoft subsidiary. To access information using the World Wide Web, go to:www.microsoft.com

For more information about The Small Business Authority products and services, call (855) 284-3722 or visit the website at: www.thesba.com

This case study is for informational purposes only. MICROSOFT MAKES NO WARRANTIES, EXPRESS OR IMPLIED, IN THIS SUMMARY.

Document published May 2011

Software and Services Microsoft Server Product Portfolio− Windows Server 2008 R2 Datacenter

with Service Pack 1− Microsoft System Center Virtual

Machine Manager 2008 R2

Technologies− Hyper-V

Hardware Dell PowerEdge M610 blade servers