In many ways, CloudFlare is your typical San Francisco startup. Working out of an old coffee factory in the city's South of Market District, it has geeks hunched over monitors in a sparse loft-like environment, incomprehensible charts on the walls, and ping-pong tables that look like they get some serious use.
But there's something a bit unusual about CloudFlare too. Taking a page from the giants of the internet, the company is making an end run around big-name server sellers such Dell and HP, and soon, it may cut out such middlemen out when it buys network switches too.
In buying servers, this 38-person company is sometimes going direct to the sort of obscure companies -- called original design manufacturers, or ODMs, in business parlance -- that assemble servers for the Dells and HPs of the world. CloudFlare doesn't do it with every purchase, but the fact that it's even doing business with the ODMs could be a sign of things to come in the server industry.
During a recent visit, CloudFlare CEO Matthew Prince displays some of the ODM systems his company is loading up to run in one of its data centers. Laid out on a conference room table, right next to a secret next-generation Dell system, there are servers from an ODM called Quanta and a company called Hyve Solutions.
Although about 70 percent of CloudFlare's servers are still built by regular server companies, the company has been going to the ODM's since day one. In fact, when it launched two years ago, some of its very first racks of servers were built by an custom server maker called ZT Systems.
Facebook buys its servers from Quanta and another Asian ODM called Wistron, but it uses Hyve here in the U.S. to put the machines into racks, connect network cables, and generally test them out.
Prince is happy to show off his ODM machines, because he knows it adds to his hot internet services startup's geek cred. But this is also a trend that's starting to rattle the server industry. Intel says that four years ago, 75 percent of its server chips were sold to just three companies: HP, Dell, and IBM. Nowadays, that pie is split between eight.
Internet giants such as Google and Facebook have been buying from ODMs for years. But when you buy direct, you often need to be an internet giant. That's because you simply don't get the same level of service and support on ODM machines. Call up Oracle with a problem on your Dell server, and they'll take your call. Call them up with a problem on your Hyve Solutions box, and you won't get the same response. That's a major reason why CloudFlare still uses mainstream server vendors. When it needs a system fixed in one of its 23 far-flung data centers, it's usually easier to call on a support tech than to fly out and fix the system themselves.
As cloud computing spreads, more and more computing work gets done by big data centers that write their own customized software and can do their very own support and even server design. Right now, nobody really knows how much of the server market is being gobbled up by these do-it-yourselfers. But the biggest question is who is going to be next to cut out the middleman.
Last month, Goldman Sachs told us that they've been buying from the ODMs for about five years.
But CloudFlare is the tiniest company we've heard of that's gone direct. And the model works for them because, while small, they face some serious computing challenges. CloudFlare serves as a kind of proxy service for hundreds of thousands of websites, helping to serve about 70 billion pageviews per month. For just $20 a month, they can speed up traffic and even shut down a distributed denial-of-service attack.
Because they do all of this with home-grown software and because they have some serious geeks on staff, it makes sense for CloudFlare to go to the ODMs sometimes.
It may even make sense for CloudFlare to skip the big networking companies and start adding its own software to white-box switches so that they can become smarter about, for example, thwarting online attacks.
"We're starting to look at getting switches that are white-box switches," Prince says. "We won't design the motherboards, but we'll design some of the software that sits on some of those switches."
But that doesn't mean that it's a good idea for everyone to set up a do-it-yourself operation. "I can't think of another start-up that's doing it, but I can't think of another start-up that works at our scale," says Prince. "If you told me that Klout was doing this, I'd say that is a total waste of their time," he adds. "Nobody sees the scale that we do."
That's not necessarily good news for Dell or HP, though.
In the Silicon Valley start-up scene, "everyone is using public cloud, mostly [Amazon's] EC2," says Diego Doval, the former CTO of social networking company Ning in an email interview. "Buying hardware is rapidly becoming a thing of the past for the vast majority of start-ups."
