we’re getting three or four times our normal volume of envelopes. It’s just a question of bringing in additional servers on EC2 to process that additional load, and winding them down once the demand winds down. So we don’t have to commit a lot of up-front capital for those five or six times a year when things spike.”
Rajaram admits that there are still questions about the reliability of cloud computing. The company learned that the hard way on July 20—one day after the official launch of Pixily’s service—when Amazon’s EC2 and S3 systems were out of commission for five long hours. But Rajaram says Amazon is getting better at communicating with users during outages and restoring service faster. “It’s not about whether it goes down, because almost every system is going to go down at some time,” he says. “The point is how you recover from it.” Pixily is also considering buying an on-site server that would take over the load when Amazon’s cloud infrastructure fails, he says.
But even if the company does have to buy some of its own computing hardware, its biggest expenses will be for old-fashioned things like postage—for the envelopes used to send customers’ papers back and forth—and labor (i.e., the workers in the company’s Waltham scanning center).
“With our cost structure, we make a profit on every envelope” of papers, Rajaram says. As a result, the company has been able to bootstrap itself to this point, and won’t need to raise new funds until it begins a big marketing push next year.
Up to now, Pixily has kept marketing costs low by pursuing targeted promotions such as an offer advertised on the Weather Channel’s website for two months of free document-conversion service for people who live in regions hit by this summer’s hurricanes. It’s also exploring strategic partnerships with retailers such as Staples, FedEx Kinko’s, Office Depot, and Costco. The customers at those chains “pretty much fit our ideal customer—people who have kids, are strapped for time, work in a service industry, understand online applications, and can pay for the convenience we offer,” Rajaram says.
But couldn’t the very online services that Rajaram mentions—such as banking sites where people can pay their bills online—mean that the flow of paper into people’s homes may eventually subside? I asked Rajaram how long consumers will really need a service like Pixily.
“People have a love-hate relationship with paper,” he replied. Boston-area electrical utility NSTAR recently reported that only 12 percent of its customers have opted for paperless bills, he says. “People attach a real value to the act of receiving a statement,” says Rajaram. “It’s a reminder to go pay the bill. So it will be a very long time before we go truly paperless.”
Which means that makers of file folders, label makers, and file boxes can probably breathe easy for now. After all, there are some crucial keepsakes—like your dog’s first report card—where a digital scan in the cloud just isn’t the same.
