The economics of Google

What is Google’s key asset and comparative advantage? I am no insider but here is one interesting account:

Last Thanksgiving, the New York Times reported that Google had crossed the 100,000-server mark. If true, that means Google is operating perhaps the largest grid of computers on the planet. “The simple fact that they can build and operate data centers of that size is astounding,” says Peter Christy, co-founder of the NetsEdge Research Group, a market research and strategy firm in Silicon Valley. Christy, who has worked in the industry for more than 30 years, is astounded by the scale of Google’s systems and the company’s competence in operating them. “I don’t think that there is anyone close.”

It’s this ability to build and operate incredibly dense clusters that is as much as anything else the secret of Google’s success. And the reason, explains Marissa Mayer, the company’s director of consumer Web products, has to do with the way that Google started at Stanford.

Instead of getting a few fast computers and running them to the max, Mayer explained at a recruiting event at MIT, founders Sergey Brin and Larry Page had to make do with hand-me-downs from Stanford’s computer science department. They would go to the loading dock to see who was getting new computers, then ask if they could have the old, obsolete machines that the new ones were replacing. Thus, from the very beginning, Brin and Page were forced to develop distributed algorithms that ran on a network of not-very-reliable machines.

Today this philosophy is built into the company’s DNA. Google buys the cheapest computers that it can find and crams them in racks and racks in its six (or more) data centers. “PCs are reasonably reliable, but if you have a thousand of them, one is going to fail every day,” said Hoelzle. “So if you can just buy 10 percent extra, it’s still cheaper than buying a more reliable machine.”

Working at Google, an engineer told me recently, is the nearest you can get to having an unlimited amount of computing power at your disposal.

In other words, they are experts at building a reliable, robust system on the cheap. Here is the full story.