AirBnB is to Home Owners as VMware was to the Datacenter

Posted on May 2, 2016

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I read a great article last week on CNBC concerning the premise that Americans could make 6.2 billion dollars renting their bedrooms out for short term stays on sites such as AirBnB.  As an advocate, customer and benefactor of AirBnB’s much esteemed service myself, a sudden realization occurred to me over the weekend after reading the article.  AirBnB is doing for homeowners what VMware did for datacenters a decade ago.

VMware introduced the idea of server Virtualization at a time when data centers were victimized by server sprawl on a grand scale as users clamored for new network applications, each one requiring its own server.  Each of these servers worked in independent isolation from one another which meant that when the application wasn’t being utilized, the server and its resources just sat there in a totally unproductive state.   Even when the application server was operating at peak usage it usually only functioned at 15% utilization.  That meant that organizations were paying for server resources that they never utilized, a purchasing model that is unsustainable at some point.

And so came software defined computing from VMware, otherwise known as virtualization, in which multiple virtual computers reside on a single physical host server.  A virtual machine was an actual server simply transformed into a computer file.  Now, a physical machine hosting 5 virtual servers could boast 80% utilization which resulted in a much higher ROI for server infrastructure investment.  With this and many other recognized advantages of server virtualization, it took less than ten years for IT Managers to now ask themselves, “Why would I ever NOT want to go virtual?”

The same can be said of homes in America today.  The average guest bedroom today is 140 square feet and based on a purchase price of $100 a square foot, results in an initial fixed cost of $14,000.  Now add the cost of furnishings and variable costs such as heating/cooling and insurance.  Now stop to think about how often that expensive guest room is truly utilized.  Five to ten nights a year maybe?  Now think about the time or money spent to vacuum it, dust it, clean it, etc., all for a room that is rarely employed. The fact is that most guest rooms in the U.S. simply stand idle as a museum like relic that no one enters, or as a junk room to store things we own that are hardly utilized as well (another subject in itself).  The vast underutilization of today’s guest bedroom points to a very poor ROI.  In fact, most of us would be better off simply putting our guests up for the night at a nearby hotel and paying for it ourselves.

And so came AirBnb, which just like VMware did for servers, is enabling home owners to obtain far greater utilization out of unproductive bedrooms.  Suddenly, a designated junk room becomes a money producing asset.  Assuming a profit margin of $75 a night, it would only take 186 rental nights to cover our initial investment.  In addition to the invited revenue there are some enticing tax benefits as well as the room is now a business.

In this globally competitive disruptive world in which economic growth is challenging to find, businesses and individuals are searching for ways to maximize the resources they have.  VMware not only created a new paradigm that has transformed datacenters across the globe, but may have also created a model that is adaptable to most type of resource today, including that guest bedroom at the end of your hallway with the door forever closed.

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