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Tuesday, March 08, 2005

The Moore Effect 1995-2005, 2005-2015?

Ryan McIntyre – one of the co-founders of Excite writes,"A decade is a very long time in Silicon Valley, particularly when viewed through the lens of Moore's Law". Excerpts with edits and my comments added:

Short term exponential progress is overestimated(where the curve is relatively flat),but we tend to underestimate progress in the long term (when the curve gets very steep, goes up and to the right, does a hockey stick, etc.).Though enterprise and consumer oriented companies like yahoo, google, eBay, Amazon etc..have different revenue models, their delivery model and back-end architectures for serving their customers are fundamentally similar. A quick overview of prices of key infrastructure elements in the data centers:
- Bandwidth: $1100/megabit/month in 1995 vs. $128/megabit/month in 2005
- Cage Space: $175/sqft/month in 1995 vs. $25/sqft/month in 2005
- Disk Storage: $1,300,000/TB in 1995 vs. $3,300/TB in 2005 (SCSI RAID)
- 1-CPU Server: $25,000 in 1995 vs. $1,000 in 2005 (web server class machine)
- 4-CPU Server: $360,000 in 1995 vs. $38,000 in 2005 (with 16GB RAM
The compute performance of a web server class machine in 1995 vs. today if assessed makes interesting reading. Given five or six performance doublings since 1995 courtesy of improvements in clock speed, bus speed, architecture changes from 32 to 64 bit,additional cache memory and faster RAM, a conservative estimate would be that today's single CPU 1-U "pizza box" web server is roughly fifty times faster than last decade's model. Couple that with the 25x price difference for this serverx, in 2005 - one can buymore than one-thousand times as much compute power as it did in 1995. Bandwidth is at least ten times cheaper than it was in 1995, floor space in the data center is seven times cheaper and enterprise-class storage is at least four hundred times cheaper than it was only a decade ago. With some smart software and network engineering, the cost per gigabyte of storage can be brought down an order of magnitude further still using a distributed filesystem based on low-end IDE drives. Finally, with the rise of Linux, Apache, MySQL and open source in general, software license costs can also vanish from the equation when running a large-scale web service.

The cost to deliver an application to an end-user has dropped dramatically for web service enteprisess and the cost to operate their data centers therefore has much less of an impact on their costs of operations and capex budget than it used to, which means their gross margins for delivering their product have improved significantly since 1995. For companies like Yahoo, Google and more recently, Technorati, this means the cost to deliver a page view or search results page has gone down dramatically, while the average size of a search-results page is perhaps only marginally larger since 1995. Even considering the size of a search index (Google's 8B pages today vs. Excite's 10M in 1995) has grown nearly one thousand-fold, the costs of computing power and storage have accommodated this expansion while bandwidth costs and rack space have fallen nearly tenfold.
A subscription-based recurring revenue stream can foster different business models with dependable revenue stream and profit margins that can approach those of a traditional software company. In 2015, the increases in CPU speed, memory density and bandwidth will make today's costs and capabilities look as quaint as 1995's do today. Thus the environment will continue to become more hospitable to the software-as-a-service model, more entrepreneurs will create meaningful businesses based on this model, VCs will continue to invest in these ideas, and we'll all be able to enjoy some mind-blowing applications a decade from now that are simply not possible today.

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Sadagopan's Weblog on Emerging Technologies, Trends,Thoughts, Ideas & Cyberworld
"All views expressed are my personal views are not related in any way to my employer"