How the Cloud Keeps Fuel and Cash Flowing When the Power Goes Out
When Hurricane Irene hit Eastern Massachusetts last August, the roads were filled with broken trees and downed power lines, leaving many without power for more than a week. When Diesel Direct, a trucking and construction businesses, was affected by this power outage, its founder sought an alternate plan for keeping the business active under such circumstances. He found his answer in the cloud.
Daniel Abrams has been in the trucking and construction businesses for more than 30 years. Abrams was running a regional leasing company before founding Diesel Direct in 1998, after realizing the logistical problem of keeping trucks fueled was a business opportunity, not just a headache. Today Diesel Direct fuels and services trucks nationwide for clients as big as one of the big-2 soft-drink distributors and as small as a local trucking company.
Its workers--who ghost in and out of truck-fleet parking yards so early even the crack-of-dawn loaders and drivers sometimes don't see them feeding the trucks--use handheld scanners to record how much fuel and service they give each truck, then upload that data to Diesel Direct, which can then send out invoices for the work that same day.
Low Tech, High Speed, No Room For Error
"This is a very cash-flow-intensive business," according to Tim Callow, a consultant acting as CIO for the $300 million company. "We're buying thousands of gallons of diesel every day at every single site, so we can't afford to wait for payment or reimbursement.
A lot of the invoices have to go out every day by certain times, so third-party accounting companies can do their thing for the fleet owners." The setup sounds like a classic for any overhyped business-process-automation system, but Daniel Abrams and other Diesel Direct managers weren't interested in managing their business using sophisticated business systems that require more motivation, money and technical staff than Abrams was willing to use or pay for.
The company ran just fine on the expertise of a staff of experienced billing agents, account managers and administrative specialists--whose primary tools were one giant customer database built on Microsoft Access, Exchange email and the anachronistic but effective use of paper invoices delivered via fax or snail mail.
It ran just fine until Irene made Abrams realize that if power went out in the main office--on the second floor of a strip-mall office in blue-collar Stoughton, Mass.-- Diesel Direct wouldn't be able to send out that fast flurry of invoices every day.
Without that, the cash-flow situation would get ugly very quickly.
"This is a very blue-collar business," according to Callow, who runs the consultancy Prescient Thinking with one partner and took over as de facto CIO/CTO at Diesel Direct last fall.
"Fleet managers understand quickly how we can save them money by letting them trade a few extra cents per gallon of fuel for the FTE cost of having their own people handle the fuelling and maintenance and reporting, plus the cost of having the truck off the road while they're doing it. Diesel Direct lets them skip most of that."
That doesn't require a lot of technology to accomplish, but Diesel Direct can't accomplish anything if its minimal IT infrastructure is offline for any length of time.
Abrams, worried about storms taking out his business as well as the power, didn't know what technical solution he wanted until Callow "described for him what an enterprise infrastructure looked like," Callow says.
"They didn't need one, didn't want one, but they did want the security, the reliability of a redundant IT infrastructure," he says. "The most effective way to get that at the lowest possible cost is the cloud.
Diesel Direct hired VirtuStream, a hosting provider that not only offers cloud services, it offers a range of alternatives in each of three categories--private, virtual private and public cloud. (Virtual private clouds run in shared-resource facilities like regular clouds, but encrypt the data in place and in motion and keep each customer's data separated in storage, servers and networks so they overlap as little as possible.)
Choosing Reliability Over Features
It's not unusual for mid-sized companies to come to depend on cloud services, according to James Staten, vice president and principal analyst for Forrester's Infrastructure and Operations practice.
It is unusual for them to be more concerned with infrastructure than with applications, he says.
Small- and mid-sized businesses have kept pace with enterprises in their adoption of various cloud technologies, but tend to favor portfolios of software-as-a-Service (SaaS) accounts that give office workers access to new functions, rather than reliability functions dear to the hearts of data-center managers but invisible to most users, according to Bernard Golden, co-founder and former CEO of consulting company HyperStratus and a virtualization/cloud-computing columnist for CIO.com.
The interesting thing about mid-sized companies using the cloud for infrastructure is that most hosting providers haven't figured out how to handle that demand at a reasonable price for customers or profit for themselves.
"It's an issue about capacity management and utilization of resources," Staten says. "In a traditional outsourcing model all the costs are assigned to one client and amortized over time. For hosters offering cloud services, one company like Diesel Direct bursting capacity on Monday and dropping back Tuesday leaves some capacity unused. Hosters that can figure out when that's going to happen can resell that capacity to someone else, so they end up selling the same resource over and over, which is much more profitable. Most haven't figured out how to do that on a regular basis."
Diesel Direct hired VirtuStream to host its data and slightly upgraded versions of its software so employees could work from the same office using the same interfaces and workflow they always had.
The only difference was that the data and apps were all housed in a data center outside Washington, D.C. and replicated to another "This is not a company that's eager to pay for the latest and greatest IT if they didn't really need it, but they were willing to pay so that [redundancy]," Callow says. "If something happened at the headquarters, or to the VirtuStream's data center outside Washington, another in San Francisco could pick up the load and the company could keep invoicing."
Benefitting From Cloud
From an operational IT perspective, the biggest benefit of signing up with VirtuStream is the rapid, repeatable changes in capacity VirtuStream allows its customers, Callow says.
Diesel Direct's business is bursty--doubling or tripling from one day to the next, changing with the flow of invoices.
VirtuStream's service contract allows Diesel Direct to set a relatively high average baseline, then change its top capacity demand limit as often as it wants--every day if that's what works for the customer, which in the case of Diesel Direct it very much does, Callow says.
On high-volume days, Callow says, adding capacity is as easy as changing a configuration screen; so is reducing capacity when the spike disappears.
Those changes save Diesel Direct both money and time. Rather than running reports and invoices all night Tuesdays, for example, the additional capacity lets the company run those resource-intensive processes during the day rather than overnight. That gets critical work done faster and more accurately than a process left to complete itself unattended.
There are limits on the capacity even of the weekly bursts Callow scheduled, but there is no comparison in speed and power to what came before.
The benefits from dynamic capacity management and professional management are "a perfect example of why people are going to embrace cloud computing even in $300 million non-tech-focused companies," Golden says. "They don't want to spend a lot of money on IT, don't have the budget to do best-practice on-premise kinds of things, so being able to leverage another company's resources on their behalf (VirtuStream) is a big win right there."
Diesel Direct also shows why, except for frequent announcements of new customers for SaaS companies, news is thin about when or why mid-sized companies adopt the cloud.
"Enterprises might have the luxury of making strategic decisions about cloud or other technology," Golden says. "In mid-sized companies things are very tactical. No cloud evangelist is going around the refueling industry saying 'there are ways to solve this problem.' "Companies make tactical decisions to solve their own problems and, five or 10 years later, we'll all wake up and realize we've changed the way we do everything," Golden says.
Kevin Fogarty is a freelance writer covering virtualization, cloud computing, security and IT innovation. Follow him on Twitter at @kevinfogarty.