AUSTIN - The rise of the multi-service, multi-cloud provider is upon us. While there will always be companies that focus on a single core competency such as colo or managed services, the world is demanding a mix of services. Providers need to enable everything from physical space to virtual machines, be it through partnerships, ecosystems, or providing it directly.
That's why service providers up and down the stack have been expanding their data center offerings. Companies like Onramp have moved beyond colo and managed services and begun offering cloud. VAZATA, which started off as a managed hosting provider, bought its way into the colocation business. The larger data center services players like Telx are remaining cloud-neutral, focusing on building ecosystems of cloud providers that customers can leverage.
What’s happening with services is now happening with cloud. Companies like Peer 1 Hosting are recognizing that there’s a distinct, middle ground between public and private; an offering that incorporates the security of a private cloud and the flexibility of a public cloud. The company dubs this “Mission Critical Cloud.” Peer 1’s Mission Critical Cloud shows the company has hit a vein: it took Mission Critical cloud less than three months to hit the revenue its public cloud did in nine months.
The industry is evolving, and a number of companies commented on how this is changing their businesses at the HostingCon conference last week in Austin, both through panels and individual interviews.
Is Colo Evolving?
VAZATA’s Lance Black hits the nail on the head. “Customers want to take advantage of economies of scale," said Black. "There will always be big colo, while smaller and mid-sized companies will offer a higher level of high touch, managed services and virtualization.”
At a time where many are converging into the cloud world, VAZATA has moved into colo, realizing that customers are demanding a mix of services. The statement that there will always be big colo is applicable to Telx, which has chosen to forego offering its own cloud. There are several reasons for this. Offering its own cloud would put Telx in competition with its customers. It’s about offering a range of services, and Telx enables this through pointing customers to other customers and connecting them. “Half of CIOs said they would not rearchitect their apps for cloud," said Telx’s John Freimuth. "Enterprise IT is adopting colo. We need to build a virtual exchange where customers can get these services from a number of providers."
For providers like OnRamp, "the key message is options," said Chad Kissinger, the company's founder. “Certain segments are choosing to forego colo and go a different route.” Several companies throughout the HostingCon event mentioned that customer deployments are becoming more complex, and providers must adapt to meet this challenge.
Evolving Isn’t Easy
“Colo and cloud involves two completely different sets of people,” said Black from VAZATA. “A colo salesperson is a real estate sales person. In the world of cloud, it’s more of an IT guru – an architect.” In addition to having the technology, there are personnel considerations. While there are an increasing number of multi-service providers, there’s no denying that accomplishing this involves a slew of different personnel resources that a company might not have. Cloud specialists are in short supply and demanding a lot more money. Tierpoint’s first colo deal was in 2010, and in less than three years it has a growing cloud business. "Now we have a couple million in cloud revenue,” said Tierpoint's Andy Stewart. “The biggest change is the people needed to sell and deploy cloud."
John Freimuth of Telx also discussed the very different business models, including the advantages of a pure real estate play through REIT status. “REITs have access to higher rates of capital at lower interest rates,” said Freimuth. “We’ll always need data centers.” For some of the big builders like Digital Realty Trust, going cloud doesn’t make any sense because of their scale and business model. The big players will make sure to remain neutral when it comes to cloud, focusing our building up rich customer ecosystems to attract more customers, rather than competing and potentially angering existing customers.
For the small to mid-sized player, however, it makes a lot of sense to cover all of the potential bases. Companies like Internap and Peer 1 Hosting are evolving at a rapid pace. What was once seen as detrimental in this industry – offering multiple services was seen as distracting and unfocused – now is seen as an advantage, as customers look for tailored, hybrid solutions. Internap has been trying to make all of its services seamless and available through the same portal, providing the ability to purchase colo and cloud from the same interface. Peer 1 Hosting is recognizing that cloud is about more than offering public and private clouds.
The result is that "Peer 1 Hosting has been attracting more complex, bigger customers," according to Robert Miggins. He speaks of the challenges of being a multi-service provider, and tailoring the business to suit these growingly complex needs.
"We’ve chosen to inject some discretionary complexity into our process by design,” said Miggins. “We have a statement of work process. This has really started to benefit us. Two weeks ago, we closed a very very big upgrade for a customer. The previous deployment was a few thousand a month. The next project is over 80k. We got some feedback form them, they said ‘you weren’t winning the deal, but you guys came back to us with really good questions."
Miggins said that Peer 1 had architects, network engineers, DBAs, scrutinizing this request. “We came back with a series of intelligent questions,” said Miggins. “Why are you doing it this way? That specific exercise won us the deal; having the courage to say ‘have you thought about this?’ ”
Miggins says the complexity of the stuff Peer 1 is seeing is going way up. Its roots in offering multiple services – colocation, managed services and cloud – give it a leg up in a world of hybrid service demands.
Cloud is Emerging into 3 Distinct Markets
There are two types of customers emerging. “There’s two personas of tech innovator and business IT pro,” said Miggins. The company has tailored its cloud solutions to address both markets' needs.
The tech innovator’s sensitivity to technology is low. These are newer and/or smaller businesses that can often take a cloud first strategy, are more likely to use open source. The company targets this customer with DIY public cloud, which is the company's public cloud based on OnApp.
The second type of customer is the IT manager or CIO in a larger business. “These customers have a budget, a team, and failure is not an option,” said Miggins. They more than likely use Windows, are more sensitive to technology. The company targets this type of customer with its Mission Critical Cloud.
The company has partnered very closely with Tier3 for its mission critical cloud. “Tier3 is super deep partnership,” said Miggins. “They’re also selling into the same stack, co-marketing, and they’re a customer.”
That partnership is an extremely symbiotic relationship, with each company extending the breadth of its services through leveraging one another’s strengths. The tight partnership has been excellent, according to Miggins. The Mission Critical Cloud is a type of private public cloud offering. Based on VMWare through Tier3's platform, it also has built-in disaster recovery, enterprise class security and blueprinting. Blueprinting allows customers to orchestrate, to repeat a complex task in a few steps. Thanks to Tier3’s capabilities, customers can clone an entire environment, not just a machine. The Mission Critical cloud has been selling great since launching this April.
Peer 1 hosting has recognized and tailored itself to the three cloud ecosystem: it’s no longer just private and public, there’s private, public and mission Critical public. Most offerings tend to address either end of the spectrum: the high touch, high demand Fortune 500 private cloud world, and the developer free-for-all public cloud world. There is a middle ground – what Peer 1 has identified for its Mission Critical Cloud. The middle ground leverages the security of private with the flexibility of public. It’s a balance many are still trying to perfect.
There's no magic formula to determine the right path. The small to mid-sized players are expanding their services, while the larger players are remaining cloud agnostic, offering a platform to reach a multitude of existing customers. Adding services aren't easy, as it can lead to hurt feelings and toes stepped-on when it comes to existing customers. Acting in as complementary a way possible to the types of customers you're targeting is key.
Identifying where your value proposition lays is key. Whether you buy, build, partner, or aggregate, it depends on how you're positioned, but one thing is for sure: customers are demanding hybrid services, not just hybrid cloud, and they're looking to providers that can enable smart infrastructure easily.