Cheap Hosting Summit Beyond The Box
On the first morning of the Tier 1 Research’s Hosting Transformation Summit, Savvis (savvis.net) president Jonathan Crane began his presentation by noting the event’s venue: the Mirage in Las Vegas. Many dot-com era hosting providers gambled and lost, their sky-high valuations vanishing into thin air. But Crane expressed confidence that the Web hosting market has evolved into something real, citing as evidence Savvis’ $750 million annual revenue.
Savvis’ success comes also from operating what Crane calls a “purpose driven network” for producing “guaranteed business outcomes.” The company doesn’t see bandwidth capacity and computing resources as stand-alone products. Rather, these are building blocks for supporting customer- and application-specific requirements. Just as Salesforce.com offers software as a service, Savvis provides infrastructure as a service.
During a later panel discussion of virtualization, Savvis’ SVP of product engineering and development Mike Tardif advised the audience to “join the team or miss out.” Tony Klockenbrink of Egenera (egenera.com), whose software powers Savvis’ utility computing solution, agreed that “server hugging” is passe. At a time when power and data center space are difficult and expensive to come by, the traditional model of allocating entire servers to specific applications is no longer the best use of resources. Instead, processor area network solutions optimize resource use, improve availability and reduce both complexity and costs.
Layered Technologies (layeredtech.com) COO Todd Abrams called 3tera’s (3tera.com) AppLogic grid computing software the next big thing. The utility hosting model, he said, offers seamless scalability and is particularly compelling for customers with seasonal requirements. Abrams says 3tera’s upcoming cPanel grid will change the Web hosting landscape.
When asked whether the market has room for each of today’s hosting providers to become grid operators, 3tera CEO Vlad Miloushev estimated that as many of 90 percent of corporate servers are hosted by in-house IT departments, representing tremendous potential business for outsourced providers. The real competition for Web hosts, he says, is not each other but the status quo.
In addition to beyond-the-box infrastructure solutions, Summit speakers presented business models that reach beyond traditional Web hosting boundaries. Tier 1 (tier1research.com) founder and president Andy Schroepfer reiterated that a company’s Web presence encompasses far more than its Web site. Hosting providers also have the opportunity to help customers participate in the “Hosting 2.0″ ecosystem, which includes location markers on mapping services, listings on eBay, Amazon and other e-commerce aggregators and search engine keyword ads.
Executives from Zoho, SocialText, YouTube and SixApart discussed their nouveau-hosting services. Each of them offers bandwidth and storage space, but not as an end product. Instead, these infrastructure elements are hidden platforms for user-facing applications. According to Anil Dash, VP evangelist of Six Apart (sixapart.com), which offers subscription-based as well as ad-supported blogs, consumers’ perception of online advertising is changing. Some now feel that sponsorships and ad placements legitimize free Web 2.0 and SaaS services by making them sustainable.
Brad Rinklin, VP of global marketing at Akamai (akamai.com), called advertising a key driver of content distribution networks’ popularity. Tier 1 Research’s Dan Golding predicted that the line between hosting providers and CDNs would become increasingly blurred. Customers, he said, should be given on-demand access to distribution channels beyond their Web hosts’ networks.
Golding points out that CDN services are typically sold on a volume - per TB - versus rate - per Mbps - basis. Pricing models seemed to be an area for exploration in several venues. 3tera’s software is available on a per GB memory, per hour basis. Amazon.com’s EC2 virtual servers are sold by the compute-hour. Most interestingly, OpSource (opsource.net) CEO Treb Ryan says his SaaS-enablement service is offered under “success-based pricing;” SaaS providers are billed according to the revenues they generate.
Rules are changing in the M&A arena also. Peter Hopper, president and co-founder of DH Capital (dhcapitalllc.com), says that while valuations are rising, he doesn’t expect the floodgates to open on dot-com style consolidation activity. Instead, he sees equity placements becoming a popular transaction type, whereby owners can obtain some amount of liquidity without exiting the business.
True to its name, the Hosting Transformation Summit highlighted changes - as well as associated opportunities and challenges - in every aspect of Web hosting. Plans are already underway for a third annual event in 2007; Tier 1 is aiming for an attendance of 500.
To view photographs of the Hosting Transformation summit, click here.