Antonio PirainoVice President, Tier1Research

Are you ready for Hosting 3.0?

Tech Bubble 2.0? • “Facebook reached 750m users; 7 billion pieces of content shared on the

site weekly• Facebook was linked to over 100,000 crimes in the UK• “Apple’s15bn app store downloads is growing 9 times faster than

Macdonald’s” (A.Love)

• Apple Embroiled in Patent violations with HTC and Samsung• “Google Android 550,000 a day, 160m Chrome users, $37bn cash, $200bn

market cap”• FTC/EU is investigating Google for possible antitrust violations• Google retiring Google Health online personal health records• “Twitter's July membership increased 50,000 per day with 95 million tweets

a day”• IOC warns athletes out of the London Olympics if they over-step Twitter and

Facebook• “LinkedIn added up to $102/share with $470m revenue and over 100m

users”• Competition with Zynga, and being sunk by Spam• Facebook, Groupon, Zynga, LivingSocial, Twitter, LinkedIn, Pandora

($3bMarket Cap = 16x Revenue), Zillow: $3.5 billion revenue; $200bn Market Cap. 

• Demand Media Enterprise Value/EBIDTA: 18-19x ($1bn Market Cap) • Copyright/Trademark infringement issues detracted from market cap <$1bn

Do Not Confuse with Cloud 2.0 or Hosting 3.0!

Hosting Evolution

Phase 1

Phase 2

Phase 3

Courtesy of onvirtualization.com

Cloud Computing: Market Separation

Public to Enterprise

What Changed?

Challenges Hosters will Face

What can you do?

Where to next?

Hosting 3.0

The Opportunity

6

ChangeWave U.S. IT Spending Indicator –Net Score

August 2006 – July 2011

7

ChangeWave U.S. IT Spending Indicatorvs. S&P 500

August 2006 – July 2011

Impact on SMB Budget

Economic Impact

What’s changed in the business Psyche?• Consumerization of IT Era

Enterprise Capital Budgets

What Changed?

Challenges Hosters will face

What Can you do?

Where to next?

Hosting 3.0

The Opportunity

Courtesy: Jack of all Clouds/Cloudkick

The Distribution ShiftN

um

ber

of

site

s in

sam

ple

s

The IaaS Opportunity Cost

Source: Tier1 Research/The 451 Group

Reve

nue

$USM

$0

$1,000

$2,000

$3,000

$4,000

2008E 2009E 2010E 2011E 2012E 2013E

Total Cloud Services Revenue EstimatesIaaS Revenue Estimates CAGR70%

Which format of Cloud?

Aggregate Cloud ‘As a Service’ Market

CAGR~25%

Growth in the Rest of the Market

2009 2010 2011* 2012* 2013* $5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

$45,000

$50,000

$55,000

$60,000

$65,000 Internet Infrastructure Market 2009-2013

Reve

nue

(US$

m)

Shared hosting revenue has been growing at 7-9% per year

Shared Hosting Revenue 2009-2013

Revenue growth – Shared hosting

Dedicated hosting revenue has been growing at around 5% per year

Revenue growth – Dedicated hosting

Dedicated Hosting Revenue 2009-2013

Internet Infrastructure Revenue Mix

Managed hosting revenue has been growing at around 20% per year

Revenue growth – Managed hosting

Managed Hosting Revenue 2009-2013

Top Apps driving cloud computing

Business Intelligence/_x000d_Reporting and Analytics

(BI)

Collaboration Tools

Document and Enterprise_x000d_Content

Management (ECM)

Customer Relationship _x000d_Management (CRM)

Email Systems

0% 10% 20% 30% 40% 50% 60%

21%

22%

22%

35%

39%

Cloud Computing: Top 5 Areas that Companies Currently Support Applications Running on Public Cloud Computing Services. Current Share - Jul 2011

What Changed?

Challenges Hosters will face

What Can you do?

Where to next?

Hosting 3.0

The Opportunity

Threats to your Hosting Business

• New Entrants & Rivals • Legacy Processes: slow, laborious, manual

• Spending more to be more efficient• SEO suboptimization

• Commoditization• Trusting your vendor

• Lack of Cross/Upsell• Lack of Stickiness

• Cultural Change• Time and Timing

• Where to start in the Cloud game• Price Wars in Cloud Era

• Perceptions around cloud• Getting it wrong

Growing Competition

• “Facebook began testing an API that lets corporate admins make changes to settings or install applications (July 2011)

• “Google launches new Page Speed Service (on top of SPDY): for Google Sites, Picassa, AppEngine, Apps” (July 2011)

• “Businesses with Microsoft Volume License can run existing Windows Server application licenses on Amazon EC2” (July 2011)

• “Apple has added volume purchasing to its App Store in a bid to entice the enterprise segment: B2B apps for $9.99.” (July ‘11)

• “Intuit and salesforce.com recently announced a deal to integrate QuickBooks with salesforce.com's CRM platform.” (April ‘11)

Perception wrt Reliability

Perception wrt Security

Compute model increasingly complex

• Means More work and complexity• Means more challenges in meeting SLAs

Cloud

Performance &

Availability

Ticketing

Asset Eventing

29

Storage Networks

Operating Systems Servers

Databases

Video

Management, Control & Transpaency

What Changed?

Challenges Hosters will face

What Can you do?

Where to next?

Hosting 3.0

The Opportunity

Options

• Virtualize & Automate• Parallels, Citrix, VMware, HyperV, ISP System, etc

• IaaS stack in a box (plumbing)• Cloud.com, Onapp, Flexient, Eucalyptus, Canonical

• PaaS in a box• Hexagrid, Joyent, Opsource, Morphlabs, Elasticstack

• Don’t forget to focus on Management and Control• Sciencelogic, Nimsoft (CA), BMC

• .. and on Security, reliability and assurances to Customers Means SLAs and more high touch involvement

• Don’t get into the habit of price wars – you can’t afford it!

Ultimately a decision needs to be made

• Partner, build, be acquired, change shape, compete ?

Venture Capital Expectations

• % of VCs who expect investments to increase in 2011 in companies related to:

Source: National Venture Capital Association Survey, results Dec 2010

What Changed?

Challenges Hosters will face

What Can you do?

Where to next?

Hosting 3.0

The Opportunity

The next phase of cloud computing

http://www.cloudgirlfriend.com/

Other (MSPs, VARs, Social media)

TelecomProviders

Hosting ProvidersISVsSystems

integrators

Global

Regional

Framing the Consolidation

National

SaaS/Apps Marketplace Opportunity

Cloud Value

Complex

LooselyCoupled

CRM/SFAHCM

CRM – Call Center SMB

CRM/Marketing Automation

EAM

FMS

Manufacturing And Operations Software

SCP

SCE-TMS

Procurement*

Web Conferencing

E-LearningTeam Collaboration

Email

SMB - ERP

Time

2010 -20062011 -2012+

Test and Development

Practical Reflections for Service Providers

Commit to a strategy Leveraging

communities, IP software, opensource stacks

Decide between IaaS, PaaS or SaaS Apps Exchange

marketplaces & Mobile apps growing

The biggest Competitor Other Provider,

the internal IT guy or Cloud readiness?

OfferingAssurances Ease of

migratability, integration, usability and tools

Addressing the Security Poverty Line• Means more

than just a pricing change

There is no magic Solution – partnerships are key!• Or Exit

Cloud 2.0 & Hosting 3.0

1. SLAs driven by business needs2. Automation & Orchestration efficiencies3. High Security (assurance, DR, compliance)4. Granular Monitoring, Mngt & Reporting5. Flexibility of Cost/Pricing and no lock-in6. Consistency in Technology7. Agility, scalability and elasticity8. New management features and Tools9. More Niche plays10. More Consolidation11. Apps/SaaS

Not a fad… This is Next-Gen Business

Questions?

Antonio Piraino

Vice President, Tier1 Research

www.tier1research.com