ITU Cekirdek Mini MBA Seminar - Business & Technology Perspectives for the Scalable SaaS

Creating the SaaS Startups
that Scale to Millions of
Users
Creating the SaaS Startups
that Scale to Millions of
Users
Hasan Basri AKIRMAK
Mentor at ITU Seed, Cloud Evangelist at Ericsson
https://tr.linkedin.com/in/hasanbasriakirmak

This session was presented in ITU Cekirdek,
http://www.itucekirdek.com/en
The University Startup Ecosystem in Istanbul,
on June 22nd 2017.

Do you often tell your potential customer or investor things like “This
is a PoC”, “It only works on a single host”, “We need time to install on
another server”, “We need to redesign the code to handle ten
thousand users” ?
You need to have solid answers to how your platform scales on
growing demand if you aim for Silicon Valley.
In the first part of this seminar, we’ll focus on non-technical
stakeholders like CEO and CMO co-founders, and we’ll have an
overview of designing enterprise grade B2B, B2C or B2G Software as
a Service (SaaS) platforms using cloud technologies. What are the
best practices to scalable, highly available and reliable SaaS
platforms and the store front, customer support channels? Why is an
on-demand, elastic IT infrastructure setup necessary? What do
scalability and automation have to do with the OPEX and the
Business Case?
In the second part of this seminar, we’ll go into technical details for
CTO co-founders and give examples for realizing platforms that scale
from 1 to 1M User on cloud. You’ll also have an understanding of the
products and services needed to realize this. You’ll also have an
understanding of the products and services needed to realize this
from Amazon (AWS) Cloud: Shopify (e-shop), Zendesk (Customer
Support), AWS API Gateway, Lambda (Serverless Computing), EC2
(Virtual servers), ASG (Auto Scaling), SNS (Notification Service),
CloudWatch (Fault and Performance Monitoring & Centralized
Logging), CloudTrail (Compliance), CloudFormation (Infrastructure
Automation).
Motivation

İTÜ Çekirdek - Creating Startups that Rock | Creative Commons CC0 - Attribution License | https://www.linkedin.com/in/hasanbasriakirmak | 2017-06-22 | Page 4
The opinions expressed here represent
my own and not those of my employer,
AWS or any other
trademarks/companies mentioned
herein.
DISCLAIMER
Creative Commons License
Licensees may copy, distribute, display
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derivative works and remixes based on
it only if they give the author or licensor
the credits (attribution).
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“When a startup begins to take off,
the technical requirements for data,
computing, and networking
skyrocket. At GV, we’ve built a team
that lives for these challenges. They’re
a group of experts with a track record
of working at massive scale, and they
love to help.”
— Graham Spencer
General Partner at GV
Why is IT a Strategic Asset?
Google Ventures Engineering Support
Source: Google Ventures

“Startup is not an IBM, but a smaller
version. All the tools are divide by
zero. You have customer development
team. (Including engineers) and you
need to sell)”
— Steve Blank, Stanford University
[4 steps to epiphany]
Why is IT a Strategic Asset?
Life Cycle of a Startup & the IT Impact
Our view: IT is different. Transitioning the technology
infrastructure from something designed for learning &
discovery to a well-oiled engineered machine later is
expensive.
Effective IT can decrease the breadth and depth of
the Death Valley Curve.

Credits
The arguments I built in this presentation is based on several thought provoking authors’ work. Here are the major ones
from my library.
TechnicalBusiness
Versatile

Credits
The Best Practices explained here and used in the scalable SaaS platform implementation are based on
several advanced Cloud Seminars and whitepapers in Public Domain
AWS ReInvent 2015 Sessions available on YouTube
1. DVO315 Log Monitor Events with AWS CloudWatch, Lambda and Dashboards. Link
2. BDT317 Building a Data Lake on AWS. Link
3. WEB401 Optimizing your Web Server on AWS. Link
4. SEC313 Security by Design. Link
5. DEV203 AWS API Gateway and Lambda. Link
6. DVO303 Scaling Infrastructure Operations AWS Config and AWS CloudTrail. Link
7. ISM402 Cost Optimization at Scale. Link
8. ARC302 Running Lean Architectures: Optimizing for Cost Efficiency. Link
AWS ReInvent 2016 Sessions (Not available on YouTube yet)
1. ARC301 Architecting Next Generation SaaS
2. ENT308 Building a Solid Business Case for Cloud Migration
APN (AWS Partner Network) Webcasts (You need to be an AWS Partner to access this content)
1. SaaS Architecture
2. Amazon EC2 Masterclass Webcast
AWS Whitepapers
1. AWS Well Architected Framework. Link
2. Managing Infrastructure at Scale. Link

What to expect from this session
› Part 1
–“Ticket to Haydarpasa or Silicon Valley” – Google Ventures Engineering
Team
–“I’m gonna beat u Zuckerberg” – Industrialized Production
–“From Illusionist to Magician” – The B2B Perspective
–“From Black Friday to Godzilla” – Defining Business Performance
–“The Business Case for SaaS” – OPEX, CAC, Outsourcing
› Part 2
–“Building Infrastructure at Scale” – Well Architected Framework
–“Running it” – Tracking Performance with KPIs
–“Time vs. Space Tradeoff” – Compute, Storage, Data and Apps: The New
Normal
–“Putting Pieces Together” – Scalable SaaS Platform on AWS

CloudNativeLandscape
Source: CNCF, github, CC A 4.0

› “You can sell products to B2C using
emotional levers (games, fashion, etc.)
but, in B2B, getting customers excited
will not get you a check.”
› “B2C consumers are accustomed to
‘what you see is what you get.’ They can
choose to use it or not. Businesses have
higher expectations (security,
customization, integration,
performance, etc.)*
Source: Lean B2B: Build Products Businesses Want, Garbugli, Étienne.
Image: IMDB
B2B also has higher expectations

Cloud Terminology

“Cloud Economics”
TCO* Impact
*Total Cost of Ownership

SaaS Business Case – Costs
› Cost Drivers: Everything as OPEX
– IT infrastructure components
- Server, Storage, Networking
- SW Development Costs:
Reliability, Availability, Security
- Operation Costs
– Support Costs
› 1st line: Web, mail or Call Center
› 2nd line: Software Development Team
› 3rd line: 3PP (AWS, Shopify, …)
– Cost of Performance
› Risk Mitigation Costs
› RPO: How much Data can we afford to lose?
› RTO: How much downtime can we accept?
Diagram Source: AWSSource: http://www.forentrepreneurs.com/saas-sales-compensation-plan/

Cloud Economics : Efficiency at scale
Unable to
Serve
Customers
Infrastructure
Cost $
Time
Large
Capital
Expenditure
Opportunity
Cost
Predicted
Demand
Traditional
Hardware
Actual
Demand
Automated
Virtualization
Quantifying:
• Cost Efficiency
• TCO
• Optimisation
• Trade-offs
• Risk
• Reward

TCO of your IT Infrastructure
Hardware – Server, Rack
Chassis PDUs, ToR
Switches (+Maintenance)
Software - OS,
Virtualization Licenses
(+Maintenance)
Facilities Cost
Hardware – Storage Disks,
SAN/FC Switches
Software - Backup
Network Hardware – LAN
Switches, Load Balancer
Bandwidth costs
Software – Network
Monitoring
Server Admin, Virtualization Admin, Storage Admin, Network Admin, Support Team
Diagram doesn’t include every cost item. E.g. software costs can include database, management, middle tier software costs. Facilities cost can include
costs associated with upgrades, maintenance, building security, taxes etc. IT labor costs can include security admin and application admin costs.
Space Power Cooling
Project planning, Advisors, Legal, Contractors, Managed Services, Real-Estate,
Training, Cost of capital
Less-tangibles:
Cost of delays
Risk premium
Competitive abilities
Governance
Etc.
IT Labor Costs
Network Costs
Storage Costs
Server Costs
4
1
2
3
Extras5
Facilities Cost
Space Power Cooling
Facilities Cost
Space Power Cooling
Source: AWS Value Argumentation https://www.slideshare.net/AmazonWebServices/cloud-economics-and-calculating-cto-awsome-day-zurich-112016

The four pillars of infrastructure cost
optimisation
Monday Friday End of Vacation Season
35% saved
Source: AWS Value Argumentation https://www.slideshare.net/AmazonWebServices/cloud-economics-and-calculating-cto-awsome-day-zurich-112016
Right sizingCapacity CommitmentsElasticity Measure, improve

› Compare your current on-premises environment to your FUTURE STATE, RE-
ARCHITECTED cloud environment. NOT a replica of what exists today.
Cloud is more than Lift & Shift of
Traditional IT
Business Agility
› Rapid experimentation.
› Faster app development
› Faster business
decisionsSource: ReInvent 2016
Workforce Productivity
› Self service culture
› Increased automation
› Attracting & retaining
talent
Operational Resilience
› Improved Service
Performance
› Less Downtime
› Less bugs
Other (In)tangible Benefits

The Business Case for Cloud
Save Money. Make Money. Reduce Risk.
Finance
• Capex ↓↓
• Opex ↓↓
• Opportunity cost ↓↓
• Risk premium ↓↓
Productivity Quality & Risk
• Cycle Times ↓↓
• POC Delivery ↓↓
• Innovation ↑↑
• Speed to Market ↑↑
• Complexity ↓↓
• Defects ↓↓
• Outages ↓↓
• Support overhead ↓↓
• Compliance ↑↑
• User satisfaction ↑↑
• BI quality ↑↑
25% - 40%?
15% - 25%?
20% - 30%?
Source: AWS Value Argumentation

› Revenue Drivers
– Consider upfront payments
– Contract Length & discounts
– Monthly Recurring Revenues
– Churn effect (Retention Rate >
100%)
› Best Practices
– CAC – Cost of Acquiring Customer
› Digital marketing to help you
– LTV – Customer’s Life Time Value
› Retaining the subscriber
› Add-on sales (new features, or
increase consumption) vs.
increase users
SaaS Business Case – Revenues
Source: http://www.forentrepreneurs.com/saas-sales-compensation-plan/

› Make sure customers are happy after
purchase so they will remain long term
customers.
› Book as much New Recurring Revenue as
possible.
› Collect as much Cash Upfront as possible.
(Particularly important in the startup phase)
› Sign Longer Term Contracts (e.g. annual
terms vs. monthly, multi-year vs. annual)
› Drive expansion revenue with existing
customers to have a revenue retention rate of
greater than 100%, even when you lose some
customers due to churn.
( “Negative churn”)
What are the Key business objectives
for a SaaS business?

Identify which
one is more
profitable: Adding
New Users vs.
Stimulating
Consumption?

Godzilla will visit you one day
Image: IMDB

Fallacies of Software Engineering
›Servers don’t fail
›Disks don’t fail
›Networks don’t fail
In the cloud, test how your system fails, and validate your recovery
procedures.

Acceptable Downtime and Loss of
Data for your Business
Identify where your
startup should be

Creating a software system is a lot like
constructing a building. If the
foundation is not solid there might be
structural problems that undermine the
integrity and function of the building.
When architecting technology solutions,
do not neglect the four pillars of
security, reliability, performance
efficiency, and cost optimization. Long Tail
• Automation
• On-demand
Elasticity/Scal
e
• Maintainability
• Self Service
• Hybrid
Security
Availability
Performance
Cost Opt.
Part 2

“Technology Primer”
Compute, Storage, Network & Monitoring

The Technology Perspective
Hardware – Server, Rack
Chassis PDUs, ToR
Switches (+Maintenance)
Software - OS,
Virtualization Licenses
(+Maintenance)
Hardware – Storage Disks,
SAN/FC Switches
Software - Backup
Network Hardware – LAN
Switches, Load Balancer
Bandwidth
Software – Network
Monitoring
Service Development, IT Ops (Server Admin,
Virtualization Admin, Storage Admin, Network Admin,
Security Admin, App Admin), Support Team
E.g. software costs can include database, management, middle tier software.
Project planning, Advisors, Legal, Contractors,
Managed Services, Real-Estate, Training, Cost of
capital
Dev, Sec, Ops
Labor
Network
Storage
Compute
4
1
2
3
Others5
Source: AWS Value Argumentation
“Software
Defined
Everything”
(a.k.a. “Infrastructure as Cod

› Instance Types
› VM Images & Marketplace
› By the hour pricing or Spot
Pricing
› Scale Up: Changing
instance type
› Scale Out: Horizontal
scaling
› Load Balancing & DNS:
distributing load, and
adaptive performance
› Containers
› Serverless Computing
Basic Compute Concepts
Compute
Compute
Engine
App Engine
Container
Engine
Container
Registry
Cloud
Functions

Basic Storage Concepts
› DAS: Ephemeral storage
› NAS: VM storage
› Snapshots, backups
› JBOD: Good for big data, DWH, log file
storage wo
› CDN: Cache Static Content
› Compute Instance Types optimized for
Storage:
– Sequential access good for log file, time based
storage
– Random Access good for DB, HPC…
› Flash storage: High IOPS
› Spinning disks: Low cost
› IOPS: Key performance factor. Starts
from 100 can go up to 20.000 and over
with sharding architectures

Storage Parameters, Storage Tiers
› Kind of access method Block, file, vs object Storage
› Patterns of access Random vs sequential Access
› Throughput required IOPS, SSD vs. HDD
› Frequency of access Online, offline vs archival Storage
› Frequency of update WORM, dynamic
› Availability and durability SLAs 99 vs. 99.999999999%
Basic Storage Concepts
The optimal storage solution for a particular system will vary based on parameters

› Share info
› Extract insight
› Recognize patterns
› Track performance
› Ultimately make better business,
technical and operational
decisions.
Big Data: What Can You Do with all
this Data?
Generation
Collection & Storage
Analytics & computation
Collaboration & Sharing

› Service Selection based on
– Pattern & Structure (Cache, SQL vs NoSQL, Search)
– Performance (R/W, Latency, hot vs. cold)
– Scalability (Parallel R/W, Max Capacity)
– Availability (HA, Service Access: 99% till 99.999%)
– Durability (InMem Cache vs 99.999999999%)
– Cost and API
› E.g.
Relational DB, Big Data & Analytics

› e.g., Google starts 2 billion
containers per week)
› That is 3300 container
launch/second, and that statistic
was from 2014 (Src: CNCF)
Development
Agility and Resiliency
› e.g., Twilio did 8000 live
deployments in 2016
› That is 21 deployments / day
“Software is a Mindset not a Skillset”

› Self Service culture
– Full visibility and transparency to tenants
› Automation:
– Implement “Infrastructure as Code” via Templates
– Manual Monitoring is not scalable
› Tracking KPIs, measuring SLAs
– Resource Level Monitoring: CPU load, disk IO,
network traffic
– Business level Monitoring: Response times, RTO
and RPO, Costs
› Implementing self healing
› Monitoring Example: Send an alarm when
cache is 80%
› Security Example: Sense list of IP’s
generating unsuccessful SSH attempts and
Block those IP’s by adding them to firewall
blacklist rules automatically
Management Tools
Managing your infrastructure at scale
How do you monitor your instances post launch to ensure they are performing as expected?

› Backup Requirements for each
workload
› HA (High Availability)
requirements for each workload
› Scalability requirements for each
workload
› DR (Disaster Recovery)
Requirements for each workload
Performance Requirements: A Nice to
Have?

Understanding End to End
Performance

Virtualization is NOT cloud

› Migration (especially with redesign is complex and costly)
Never say “We move to cloud later!”
Source: AWS Cloud Adoption Framework

SaaS Architecture – Apps vs Ops View
Data Partitioning
Tenant Isolation
Identity
Profiling&Analytics
Management&Monitoring
Metering,Billing&Tenant
Administration
Operational View
AppView
Technical and Business Agility

Understanding Multi-tenancy
Silo Pool
vs.
› Silo Model
› Pros
– Tenant specific tuning
– Tenant level availability
› Cons
– Cost
– Management Complexity
– Deployment Challenges
– Analytics aggregation
› Pool Model
› Pros
– Centralized managemen
– Cost optimization
› Cons
– Cross-tenant impacts
– Compliance challenges
– All or nothing available

TENANT ID ITEM ID
T1 230
T2 3434
SaaS, Multitenancy & Data Partitioning
Tenant 1 Tenant 2
Schema
Schema
Separate
storage/DB for each
tenant
Single storage/DB,
multiple URI/schemas
Common DB, single
schema

› Actively track KPIs
– Resource Level: CPU load, memory usage, network traffic
– Business level: Response times, RTO and RPO, Costs …
› Use Automation: Logging in and checking the CPU manually is not scalable!
› Implement self healing
– Example Monitoring: Send an alarm when cache is 80%
– Example Action: Purge cache automatically when 90%
– Example Monitoring: Sense list of IP’s generating unsuccessful SSH attempts.
– Example Action: Block those IP’s by adding them to firewall blacklist rules automatically
› Learn to implement your “Infrastructure as Code”
Managing your infrastructure at scale
How do you monitor your instances post launch to ensure they are performing as
expected?
Amazon
CloudWatch
AWS
CloudFormation
Amazon
Elasticsearch
Service

COMPUTE
Manage Storage & Compute
Resources Separately in Cloud
STORAGE

Don’t do a Monolithic DB + Search Tier
RDBMS
DB & Search Tier
Apps

Use the Right Tool for the Job
DB & Search Tier
Apps
Cache
MemCached, Redis
NoSQL
Cassandra, DynamoDB
Hbase, MongoDB
SQL
MySQL, Oracle,
SQL Server, Postgres
Search
ElasticSearch,
CloudSearch

“Data Lake” Architecture & AWS
Services
API & UI
Amazon API
Gateway
AWS Elastic
Beanstalk
Amazon
S3
Amazon
Glacier
Amazon
Kinesis
AWS
Lambda
Amazon
CloudSearch
Amazon
DynamoDB
AWS Elastic
Beanstalk
AWS IAM AWS STS
(alternate)
AWS KMS encrypted
data
Users
Storage &
Streams
Catalogue &
Search
Entitlements

Putting Pieces Together
A Scalable SaaS Platform Implementation
AWS API
(order fulfilment triggered by e-commerce platfor
AWS CloudFormation
Infrastructure as Code
AWS Lambda
Send login and web address
information to customer
per email using SES
AWS CloudWatch
Infra & Application layer
Fault & Performance Monitoring
AWS CloudTrail
Compliance reporting (Log of all reque
to AWS account and API)
AWS Config
Resource Configuration Management
keeping track of versions of every resource
AWS DynamoDB
Metadata repository (file name, size…)
AWS S3
Storage with 99.999999999% durability
Tenant isolation by buckets
AWS SNS
Email notifications to
Operations Team
about alarms
AWS EC2
Compute service for Open Source Sync Sw
Single tenant for tenant isolation
AWS EBS
NAS Storage service, for EC2 cache
AWS ASG
Replaces EC2 in case
of sys or health check errors
AWS Route 53
DNS Service
Shopify.com
aS E-Commerce Platform as sales channel
Zendesk.com
SaaS Customer Support Channel
:
A Marketplace for
Partner Products,
Solutions or SaaS
running on AWS
AWS IAM
MFA & Cross Account
Access to Confounders
Bitnami.com
3PP Baseline AMIAWS CloudFront
CDN for Joomla Microsite

Implementing Scalable Web Application on Google Cloud

Data Processing on Google Cloud

Implementing Scalable Web Application on Microsoft Azure
Cloud

N-Tier Application on Microsoft Azure Cloud

“What’s Next?”
Containerized Packaging, Microservices,
Massive Orchestration

>Next Big Thing?
CNCF - 2015
Source: CNCF

Source: CNCF

Cloud Democratizes Advanced
Technologies.
Technologies that are difficult to
implement can become easier to
consume by pushing that knowledge and
complexity into the cloud vendor's
domain.
For example, NoSQL databases, media
transcoding, and machine learning are
all technologies that require expertise that
is not evenly dispersed across the
technical community.
Every service –which once accessible to
only the Fortune 1000 CIO’s can be
consumed by anyone.
Epilogue
Link to article: https://www.linkedin.com/pulse/how-experiment-impact-democratizing-access-cloud-big-hasan-basri

If you found this session useful, please “endorse” me in LinkedIn for
areas like:
Business Development, Business Planning, Go-To-Market Strategy,
Consulting, Product Management, Product Strategy, Cloud Computing,
Entrepreneurship.
THANK YOU
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ITU Cekirdek Mini MBA Seminar - Business & Technology Perspectives for the Scalable SaaS

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