The Microsoft Partnership That Changed Everything
In February 2009, Microsoft approached Applied Innovations to beta test their new managed hosting platform—what would later become the Dynamic Datacenter Toolkit (DDC). They had been working with MaximumASP and wanted additional industry validation for this emerging cloud infrastructure solution.
We were uniquely positioned for this opportunity. Having successfully launched our VPS hosting business unit in 2007, we possessed the operational expertise to evaluate and implement this next-generation platform. The challenge: build a production-ready client offering within 60 days. We delivered in 30.
Building Our First Cloud Cluster
Our initial deployment leveraged Dell PowerEdge 2950 servers with a Dell MD3000i iSCSI SAN—a solution that cost $80,000 less than alternatives while providing full redundancy and scalability through additional MD1000 storage arrays.
The DDC combined Windows Server clustering, Hyper-V virtualization, and the complete System Center suite to create a managed, highly available cloud infrastructure. We virtualized all system components:
- System Center Virtual Machine Manager - Centralized management and rapid provisioning
- System Center Data Protection Manager 2007 - Integrated backup solutions
- System Center Operations Manager - Comprehensive monitoring and alerting
- System Center Configuration Manager - Automated updates and configuration management
Strategic Advantages We Discovered
This platform delivered immediate competitive differentiation:
- Premium positioning - We could compete on value rather than price against commodity VPS providers
- Unique capabilities - Failover clustering, redundant multipath iSCSI storage, and enterprise-grade management
- Self-service potential - Complete APIs and frameworks for customer portal development
- Cloud marketing advantage - "Cloud" commanded premium pricing versus commodity "VPS" offerings
Early Implementation Challenges
Like any pioneering technology deployment, we encountered obstacles:
- Active Directory dependency - Limited support for customer-managed AD environments (later resolved)
- Backup complexity - DPM 2007 had a 350-server limit and required ongoing management
- Storage constraints - Windows Server 2008 required one customer per LUN, limiting resource optimization
- Clustering limits - Initial 65 VM per cluster node restriction
- First-generation product - Hyper-V 1.0 bleeding-edge challenges
Windows Server 2008 R2 and Cluster Shared Volumes (CSV) resolved most of these limitations.
The 500-Server Challenge
Nine months later, we received an RFQ for 500 servers—either dedicated or virtual—with a 12-month contract. Specifications were modest: 2.8GHz processor, 1GB memory, 80GB storage, Windows Server 2008 R2. Timeline: immediate deployment.
Our analysis revealed that 500 commodity dedicated servers would be unprofitable within 12 months. Instead, we proposed our DDC-powered cloud solution, partnering with Dell for servers and storage, Juniper for networking, and Terremark for datacenter space.
Despite peak ecommerce season timing and extended vendor lead times, we won the contract and deployed the complete solution within three weeks.
The Economics of Cloud vs. Physical
We deployed 500 virtual servers on 24 Dell PowerEdge R610s with two Dell EqualLogic PS6500E arrays and Juniper switching infrastructure. The cost comparison was compelling:
- Hardware costs - 2.25x more expensive for physical servers
- Software costs - 21x more expensive for equivalent management and monitoring (excluding OS licensing)
- Collocation space - 8x more expensive for physical deployment
- Power circuits - 19x more expensive for physical servers
- Total 36-month costs - 5x more expensive for physical infrastructure
Microsoft later featured this deployment as a case study, highlighting the dramatic cost advantages of cloud infrastructure.
Scaling Success
Three months later, the same customer requested 700 additional servers. Leveraging our operational experience, we deployed this expansion within two weeks at even lower unit costs through improved efficiency.
Why We Won: Value, Not Price
Contrary to expectations, we didn't win with the lowest bid. Virtual isn't always cheaper than physical. We won by offering capabilities our competitors couldn't match: a highly reliable, scalable, managed solution tailored to customer needs.
We delivered a customer-focused, managed cloud hosting solution rather than commodity dedicated servers—demonstrating that differentiation trumps price competition.
Strategic Implications for the Industry
This experience illuminated a fundamental shift in datacenter economics. Traditional collocation providers are evolving into managed service providers to increase profitability per square foot. Cloud services represent the next evolution—dramatically multiplying revenue potential through virtualization ratios of 40:1 or higher.
The Dynamic Datacenter Toolkit enabled this transformation, providing the framework and guidance needed to build differentiated, profitable cloud offerings. For technology leaders considering cloud strategies, the lesson remains relevant: focus on value creation and customer outcomes rather than competing solely on cost.