Multi-Service and Multi-Cloud Providers on the Rise

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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.

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About the Author

Jason Verge is an Editor/Industry Analyst on the Data Center Knowledge team with a strong background in the data center and Web hosting industries. In the past he’s covered all things Internet Infrastructure, including cloud (IaaS, PaaS and SaaS), mass market hosting, managed hosting, enterprise IT spending trends and M&A. He writes about a range of topics at DCK, with an emphasis on cloud hosting.

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2 Comments

  1. Great article Jason. Enjoyable read.

  2. Agreed. I expect that the algal bloom of niche service provider offerings will continue as barriers to simplification (unchecked variance) lower and as IaaS proliferates.