Raise a glass and do the math: why wine making pairs well with cloud computing

Earlier this month, my wife and I had a chance to vacation in Sonoma County. During our stay in charming Healdsburg, California, we enjoyed a wonderful hour-long tasting with Mark Blanchard, owner and creator of Blanchard Family Wines. In between sampling BFW’s Dry Creek Malbec, Jackson James Zinfandel, and Russian River Valley Syrah, Mark proudly described how he and his brother James had bootstrapped their company from the ground up.

I remembered how Jim Koch at Boston Beer Company launched his legendary Samuel Adams craft beer brand—opting to brew at outside breweries that had excess capacity, rather than invest all the capital required to build a brewery of his own. When I shared this story, Mark’s eyes lit up. In a similar story, Mark recalled that, during BFW’s first year, he happily rented winemaking equipment from a custom crush facility so that he could instead commit BFW’s startup funds towards purchasing the very best grapes available.

I was eager to learn more about how BFW built its business. Next, we discussed why BFW refuses to own its own vineyards. Mark led me through some back-of-the-napkin math. Assume the following:

• BFW requires 50 tons of grapes per year to produce its wines.
• 50 tons of grapes should produce around 3,150 cases of wine.
• Excellent Sonoma County grapes average around $3,000 per ton.
• The market rate to purchase 10-acres of Sonoma County land is $3M.
• An acre yields 5 tons of grapes.

So, let’s play around with the numbers: either a) BFW can purchase a year’s worth of grapes for $150,000 or b) BFW can invest $3M to own the land required to produce those grapes. At first blush (that’s a wine pun—get it?!) the latter option implies a 20-year breakeven. But, that’s before we also consider the time value of money, the annual cost to operate the vineyard (about $5,000 per acre), and the costs to harvest the vineyard (about $150 per acre).

On top of the financial implications, BFW gains a competitive advantage in establishing unique quality control over its products. Think Jim Koch put up with shoddy operators when outsourcing his brewing? Because so many breweries had excess capacity, Jim could hire and fire at will, leading to an exceedingly high standard of production at Boston Beer. The same is true for Mark and James Blanchard who are free to demand exceptional grapes from the vineyards from which they source. If their Dry Creek Viognier isn’t perfect this year (don’t worry though, it is!) they’re free to source elsewhere the following growing season. Same is true should consumer preferences move away from Petite Syrah over the next 20 years. That’s flexibility you can’t get when you own the land outright.

BFW’s approach parallels a trend that I increasingly witness in my own IT industry. As aging hardware comes due for refresh or as new strategic priorities present themselves, companies who need to establish new data center capacity face an important, often multi-million-dollar choice: keep building more vineyards themselves, or start buying just the grapes.

For BFW, the winemakers know exactly what they want to do—make beautiful wine. And to do so, BFW doesn’t have to participate in the entire process. Some like the fully-verticalized approach—own the vineyard, tend the crop, make the wine—hell, even own a forest in France to produce your own corks and oak barrels! But Mark and James Blanchard have opted to reduce complexity and limit their number of core competencies, so they can instead focus on maximizing the quality of their end products.

It’s nothing against the grape growers themselves—hey, I work for Microsoft! And we have plenty of beautiful vineyards (data centers) and varietals (IaaS, PaaS, SaaS) from which to choose! But for the companies who, at the end of the day, really just want to make wine, it’s a strategic decision as to whether your leadership wants to invest in owing its own land or would prefer investing somewhere else. And if it's the latter, might I suggest a nicely outfitted tasting room to better enhance your customer experience?

Jeff Smidt is an Enterprise Retail Specialist with Microsoft, helping retailers to digitally transform. With its cloud computing infrastructure, platform, and software services, Microsoft specifically helps retailers better engage with their customers, empower their employees, optimize their operations, and transform their products and solutions.