Management & Finance

Cloud Computing Future of Web, Says Shopify Exec

Cloud computing is a term that’s frequently discussed, and also often misunderstood. Google Docs would be an example of cloud computing, whereas, Microsoft Office, locally installed on a computer, is not. Among the many cloud platforms on the web, Shopify is an ecommerce leader. Harley Finkelstein is Shopify’s chief platform officer. I recently spoke with him about cloud computing and hosted ecommerce platforms.

Practical Ecommerce: Explain cloud computing to us.

Harley Finkelstein: Well, there are a lot of different definitions, but as far as we’re concerned, and from my own experience, cloud computing is just on-demand resources via a network. It’s the ability to pull and update things in real-time, to access or re-access any hard software, access any applications you need in real-time, have updates done in real-time, and basically operate from a cloud rather than an actual a piece of hardware.

PEC: Does “cloud” mean a web server?

Finkelstein: Correct, yes. Any server. Most are third-party servers, like an Amazon server or Google server. We [Shopify] are considered cloud computing because users access our software through our network rather than simply buying the software off the shelf at a Staples or other retailers.

PEC: How does the notion of third party applications fit into a cloud computing platform such as Shopify?

Finkelstein: I think, traditionally, companies like Microsoft and even some of the more traditional businesses like IBM, try to be everything to everyone. They sort of load up their software with every possible feature imaginable. The reality is when you or I use Microsoft Word, for example, we’re only using a tiny fraction or a small portion of the full features. What’s happened in the last couple of years is companies have turned internally and figured out what exactly are their core competencies. For Shopify, it’s ecommerce software, and so we’re sticking to our core competencies and our competitive advantage.

The idea of having these third-party integrations through the cloud or some sort of network is really interesting because the trend that we’re seeing is, again, companies are sticking to their core competencies and then aligning with other companies that are industry leaders in a particular area. For example, Apple could have built every single feature into the iPhone — like satellite radio and games and all those other things — so when you pick up a new iPhone, everything is included. Instead, they only put in the tools that most people required most of the time.

Same thing with what we’ve done at Shopify. Our product natively does everything that most people need most of the time in the area of ecommerce. Everything else that some people need most of the time, or most people might need some of the time, we’ve aligned with partners that are thinking about those particular areas exclusively.

So, again, Apple could have built some radio right into their iPhone. Instead, they aligned with the likes of SiriusXM Radio and built an app. Apple could have built games themselves, but instead they partnered up with guys like Rovio to create Angry Birds. Shopify has done the same thing. We could do email marketing, but MailChimp and Constant Contact do it better. We can do accounting, but FreshBooks and QuickBooks do it better.

PEC: Amazon Web Services, a large hosting provider, was recently out of service for the better part of a day. Should the potential for a remote server to malfunction give users caution on relying on the cloud for key services?

Finkelstein: Yes. There should be some caution of course. But for a company like Shopify, which is a hosted ecommerce provider, we want our users and our customers to know and feel confident. We are very, very cautious of outages like what happened at Amazon.

Fortunately in our case, we were able to mobilize in real-time so that there was very minimal, if any, outage whatsoever on our platform. But there is caution because as we talk about the cloud and third-party apps, all of a sudden, we’re moving away from trusting and hoping that by hosting with Amazon, you’ll never have to worry about going down because they’re such a large entity. But the lessons from Amazon’s outage were that, even though you’re putting your confidence in a bit of a hegemonic company, there is still some caution, and you still need to be careful and fairly observant of what’s going on around you. There is a chance that Amazon could go down. There is a chance that Google could go down. Our mentality is to have contingency plans in place that will allow us to fix things and mobilize very, very quickly to avoid any outage.

PEC: You mentioned that many platforms and software packages are laden with unnecessary features that merchants or business people pay for. Which ecommerce platforms do you believe have those unnecessary, expensive features?

Finkelstein: Around the late 1990s, you had some new [ecommerce] market entrants — Yahoo! Stores being one of them — that came into the market. I think the mentality there was a sort of big business enterprise mentality, which is throw everything — as much as possible — into the software. Yahoo! Stores, at the time, was one of the first players. They did certainly have a first-mover advantage. They had a ton of features in there. Some of them were within their core competencies, but many of them were not. And I think that was problematic.

PEC: Aren’t cloud computing and third-party apps more expensive than a licensed software package?

Finkelstein: Well, if you look at it as an investment, you might be paying $50 a month versus maybe going to Staples or Best Buy and buying some software off the shelf. But, I think it’s much more affordable to use a software as a service model where you pay a monthly subscription fee as we have at Shopify.

The main difference to us is static versus dynamic. When you buy something off the shelf, it works exactly that way, and it will continue to work that way forever, for all of the time. If it’s not going to change, you can download updates perhaps through the web, and typically, you are charged for those updates like you would be for updates to Microsoft Office, for example. Whereas, when you’re talking about software as a service and you’re paying a monthly subscription fee, in many cases, it updates automatically. You take advantage of the software’s evolution just by continuing with the subscription. You don’t necessarily have to download anything new or different. You don’t have to update the software.

For example, as we get better at providing merchants with ecommerce software, any merchants that have previously signed up for our software will automatically be able to take advantage of that. That’s a very, very powerful tool. The fact that merchants that started with us even in 2006-2007 know that in 2011 — as we get better at creating ecommerce software, we have better integration, we have new partners, we have new initiatives — they can take advantage of that simply by continuing their relationship with us.

Whereas, if they were to buy something off the shelf, or even if they were to have a custom-made solution from an enterprise company like GSI, iCongo, or Cactus Commerce, they would have to go back to that particular enterprise developer and say ‘I need this updated’ or ‘I need you to provide me with new tools.’ Typically, there will be a cost associated with that. But by merely being a Shopify customer, for example, as we get better, your software automatically gets better as well. I think that is a very, very powerful philosophy that wasn’t around before the whole concept of software as a service.

PEC: As an entrepreneur and an observer of technology, what do you think will be the natural evolution of cloud computing in the future?

Finkelstein: I think eventually we’ll be at a point where the entire computing experience will occur through a dummy terminal. Effectively, the actual hardware will have very little software on it, and you’ll access everything through your online connection. Even if you don’t have to have the fastest computer or one that’s loaded up with the most amount of software, you’re going to be able to access everything from the cloud or the web, whether you’re running your ecommerce store, using Google Docs or communicating through some sort of web-based voiceover IP.

We’re going to get to a point where we’re simply going to log on through these dummy terminals, which are going to be pieces of hardware — laptops, desktops, iPads — and effectively, you’re going to start your entire computing experience not when you press the ‘On’ button on the computer, but rather when you log onto the Internet, and you’re able to access the web.

That’s why I think Google Chrome as an operating system is a very compelling application because that is exactly what this whole concept of dummy terminals is. You don’t necessarily need these bulky pieces of native software on your computer anymore. As long as you have a web browser, you can access anything you need, and in many cases, it updates in real-time. It’s a lot more advanced; it’s a lot more fluid. The idea of pressing CTRL + ALT + DEL because a couple of applications are crashing are long gone. Cloud computing is going to help a great deal with that.

PEC: Anything else on your mind?

Finkelstein: From an ecommerce perspective, I think the barriers to entry have never been lower. Before joining Shopify, I ran an online store while I was in law school. I needed to make some extra money to pay my tuition, and I set up a little t-shirt company using Shopify because it was the easiest for me at the time, and it worked fantastically. But, at that point, I still had to run to the post office every single afternoon to deliver my packages. I had to answer emails for customer service. Returns were fairly difficult, not to mention I had to design the site myself.

Today, whether you look at frontend design through a theme store, like Shopify, or you look at third-party fulfillment companies like Fulfillment by Amazon, Webgistix, or Shipwire, the barrier to entry into the ecommerce space has never been lower. It’s so easy and simple to run an online store. And you could scale it extremely well to make it a million-dollar business selling worldwide, even if you have another job or you’re in school full time, by integrating through APIs with really great partners like third party fulfillments and customer service companies and coupon companies. You’re able to run an amazing business and you can be as hands-on or as hands-off as you would like. That didn’t exist even three or four years ago. I call it the democratization of ecommerce. It’s becoming easy and accessible for everyone regardless of technical understanding or capital.

Kerry Murdock

Kerry Murdock

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