Flipkart follows Google, Amazon into the world of secret servers

Online retailer Flipkart is now following global pioneers like Amazon and Google to build its own servers and networks. The move is aimed at creating a platform that responds to specific requirements.

The decision to build its own servers follows painful experiences of the past. Flipkart’s first Big Billion Day sale, in 2014, was a big turning point for the company, which was able to cross $1 billion for the first time since inception. But it was also a major embarrassment for the e-commerce giant.

Flipkart’s website kept crashing due to the unprecedented volume of traffic; customers complained of money getting deducted and yet orders not getting confirmed. At a time when the largest Indian online retailer was starting to face competition from the world’s largest e-retailer Amazon, this failure of its tech infrastructure to respond to high sales volume was its worst nightmare.

But what came out from that disaster is now about to put Flipkart into an elite club of internet companies.

The firm decided it needed to match its tech infrastructure with that of Amazon and Google. It decided to set up its own data centre in India, instead of running operations from third-party data centres. Flipkart also hired a senior Google executive from California, Peeyush Ranjan, as Head of Engineering, to handle this project.

Ranjan decided to replicate the internet giant’s model of building own servers and networks. Which basically means, buying cheap hardware and connecting them with your own software to ensure you get the highest performance at dirt cheap cost.

“We built our own data centre because we know our needs are very specific,” Ranjan told BusinessLine . “We are a low-margin business. We can optimise the hell out of it, tighten every screw. That’s what Google did. When Google started building a data centre, it didn’t go about buying high-end storage and servers. They thought: ‘If the hardware fails, the software will provide resilience and we will swap out the hardware’.”

The efforts have paid off for Flipkart as it was able to run two subsequent Big Billion Day sales without major glitches.

That gives the company the confidence of being seen in the league of Facebook, Google and Amzon.

“We are building the same kind of data centres Facebook and Google have. We are working with the exact same vendors.”

Ranjan said that with highly optimised servers, the company is able to get compute power at the cheapest possible price, something that Amazon was led into after trying to constantly build capacity.

The US-based e-commerce player started offering compute as a service to others when it realised it had a lot more servers than it needed, especially during non-festival season.

Extreme competition in the e-commerce space has made several companies bleed worldwide. Amazon and Alibaba are already looking at different revenue models to squeeze in profitability by offering Cloud services, and so far it has worked pretty well for them.

“It is not surprising to see Flipkart build its own hardware,” said Sanchit Gogia, CEO, Greyhound Research.

“E-commerce manages the scale like nobody else. This means they’ll have to invest heavily in servers and switches in the next decade. It is much cheaper to invest in your own architecture and build it yourself. But it is not as easy as it sounds. Flipkart will face immense challenge trying to get into the big league of Google and Amazon.”

Today, Amazon Web Services, the result of the excess capacity within Amazon, is the fastest-growing and most profitable division for Amazon.

Would Flipkart do the same in the future? If it does, it has the ability to become a profitable e-commerce company and one of the largest data-centre providers in the world.

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