ProfitBricks, Taking On Amazon, Offers Virtual Data Centers to Startups

12/13/12Follow @gthuang

It’s easy to say you compete with Amazon Web Services. It’s hard to actually do it.

But that’s exactly what ProfitBricks is trying to do. The two-year-old German cloud-computing company, which has a fast-growing presence in Cambridge, MA, has been making some noise in the tech community.

As part of its goal to appeal to more companies and customers, the firm has announced a “foundation program,” whereby ProfitBricks will offer select startups in New England—they must have less than $1 million in annual revenue—discounts on its virtual data centers for a year. The program will roll out nationally early next year.

This is an interesting story on several fronts. First is the increasing level of competition to provide cloud-based data storage and computing power to businesses; in addition to big boys like Amazon, Rackspace, Microsoft, and Google, lots of smaller companies are popping up with alternatives. Second is ProfitBricks’ choice to set up U.S. operations in the Boston area, presumably because of the large talent pool and community in tech infrastructure; the Cambridge office has gone from zero to 30 employees in the past 15 months. And third is the technology and leadership team behind the company’s effort, particularly in the U.S.

ProfitBricks’ tech advantage is InfiniBand, a networking and communications technology used in high-performance computing. The company says its infrastructure essentially lets customers get better cloud-computing performance— for a 30 to 40 percent lower price—than its competitors. (Maybe that’s too good to be true, but if I had a dollar for every startup that complained about AWS, I might be funding some of them.)

Meanwhile, the firm’s leadership advantage is Bob Rizika, the CEO of its U.S. operations. Rizika is a five-time startup guy who previously ran Blackwave (bought by Juniper Networks in 2010) and did worldwide sales for VerdiSoft (bought by Yahoo in 2005). He has lived on both coasts but is a Boston guy at heart. And he comes from a family of engineers. “My father said, ‘You can do anything you want, as long as you go to MIT, study mechanical engineering, and start a company,’” he says.

More to the point, Rizika has been looking at doing next-generation cloud computing for a couple of years now. “Amazon had a great first-generation product,” he says. “But now it has the standard [innovator’s] dilemma.”

Essentially, what ProfitBricks tries to do is slice the demand for storage, memory, and CPU time into separate pieces so customers only pay for the exact part they need. According to the firm, this also lets companies do “true vertical scaling” in a better way. (Part of the technology involves software-defined networking, which is yet another fancy term for a type of virtualization.) The proof, of course, is in the pudding. “We guarantee the performance you see, there’s no variability,” Rizika says.

The front-end piece of ProfitBricks is a user interface that helps customers build out their own virtual data centers by pushing buttons graphically.

If all goes well, the company has its sights set on disrupting a big chunk of the cloud-computing market. “We want to change the price dynamics of the industry,” Rizika says, so “we set our pricing at the lower end.”

ProfitBricks says it has almost 1,000 customers, most of them in the Americas, ranging from Internet service providers to mobile companies, social-networking firms, business analytics companies, and gaming startups. The firm has more than 100 employees in Germany.

As for reaching out to the local startup community, Rizika sees a big opportunity to put Boston on the map of cloud computing’s future—and to redefine how young companies get built as IT resources continue to get cheaper and more powerful.

“Startups are all about who you know, and how fast you can grow,” he says. “It’s a space that’s near and dear to my heart. This is the golden age.”

Gregory T. Huang is Xconomy's Deputy Editor, National IT Editor, and the Editor of Xconomy Boston. You can e-mail him at gthuang@xconomy.com or call him at 617-252-7323. Follow @gthuang

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