Skip navigation

HostingCon Insights: Hosting Industry Growing & Evolving

HostingCon 2013 has wrapped up. The conference highlighted the changing world of hosting and cloud, and the rise of the hybrid, multi-service provider. Attendees and presenters expressed apprehensive optimism about the current state of the hosting and cloud industry.

Hosting providers, gathered this week in Austin for HostingCon 2013, expressed apprehensive optimism about the current state of the hosting and cloud industry. The conference covered a range of topics, such as Internet freedom, how hosting providers can differentiate, and how and where to expand in Europe and AsiaPac.

The conference drew more than just hosting providers. Data center providers like Cobalt Data Centers, Interxion, Cologix (which announced the completion of an expansion in Montreal) Phoenix NAP, Tierpoint, and Telecity Group were also on hand. The event also highlighted the growing role of multi-service providers, and the coming hybrid wave of colocation and cloud. Companies like Peer1 Hosting, Telx, VAZATA, OnRamp and Tierpoint all discussed finding the right mix of services for the right customers, which we’ll explore more in a future article.

The industry is still abuzz from IBM's acquisiton of SoftLayer, a pillar of the hosting industry. IBM essentially consumed a private provider that was holding its own against increasing threats coming from outside of the traditional hosting industry, like Amazon Web Services. I learned that DH Capital took part in the transaction, and that it received a very attractive multiple. Also, it appears that IBM will let SoftLayer operate autonomously under its own brand name, and that this was a major factor in SoftLayer’s choosing its suitor.

Other hosting providers like SingleHop saw the acquisition as potential opportunity to step up. SingleHop has a lot of the same DNA as SoftLayer -- it’s also a very automated, dedicated and cloud hosting provider that offers everything through a single panel. Further, SingleHop has seen triple digit revenue growth for several years. The company recently expanded to Amsterdam and has been looking heavily into AsiaPac and South America.

International Outlook

On a panel about international expansion to Europe and Asia that was moderated by 451 Research’s Kelly Morgan, the consensus seemed to be that Amsterdam was most attractive for hosting providers looking to establish a primary footprint in Europe, while Singapore was recognized as key to AsiaPac operations. Amsterdam’s rich connectivity and great tax structure means that hosting providers are most aggressively looking at it for its initial base of European operations. London, a perennial favorite locale or data centers and commerce, was described as somewhat insular and falling a bit out of favor. However, Europe is not one market rather it can be seen as multiple country-specific markets because IT managers from different companies often want to keep data within borders.

How do hosting providers choose their data center provider when expanding to Europe? Perhaps the most important consideration, as Martijn Kooiman from TeleCity Group put it, “You need to choose a partner with the ability to scale, but one that can also start with you.” The panel also included wisdom from other major data center providers in Europe, through Interxion’s Jelle Frank van der Zwet; SoftLayer’s Todd Mitchell; and Readyspace’s David Loke. Loke provided insights into expanding into AsiaPac in particular.

Industry Insights

Structure Research’s Phil Shih outlined the industry outlook from a high level, providing a temperature check for each Internet infrastructure sector. Colocation providers have been growing from 5-20 percent, with cloud growing the fastest at 40-50 percent. The mix is trending towards managed services, said Shih, with both cloud and colo providers looking to managed services as their way to raise Average Revenue Per User (ARPU).

“The big trends I’ve noticed is time to market has matured, and companies are having success growing customers,” said Shih. Another trend discussed was the uptick in folks leaving Amazon's public cloud (AWS) for operator clouds. When examining two industry successes, such as Rackspace and SoftLayer, one point that Shih made that bodes well for the data center industry is that neither company got into the data center building business. Hosting providers in general aren’t about to get into the physical infrastructure game, which means they’ll continue to be growing and lucrative customers for the data center industry.

An Evolving Industry

In a presentation titled, “Pradigm Shift: How to React in the Face of Industry Change,” Maxwell Wessel, from SAP North America, described what disruptive technologies mean for the industry. He drew several parallels from industries like pharmaceuticals and steel. His five key points were:

  • Everything changes. Embrace it
  • Never fight a disruptive entrant head on
  • Disruption isn’t defeat
  • Business Hinges on understanding the customer
  • Compete where you can win

These points make a lot of sense in an industry that seems to be converging into one, with colo providers offering cloud, IBM getting deeper into hosting, and the multi-service provider on the rise.

Wessell finds that small, nimble companies win when innovation is disruptive in nature. He talked about the theory of disruption, and the importance of the “extendable core”. His major example of extendable core was Airbnb, a disruptive player in the hotel/rented room space that can move upmarket to threaten the hotels industry, such as the Four Seasons, as well as competes and disrupts the brands such as Best Western.

Christian Dawson, co-founder and chairman of i2Coalition, presented the general session on the Tuesday, as well as held a last minute addition panel on the final day to discuss why Web Hosts should care about NSA Government surveillance and prism. Dawson’s day job is with hosting provider ServInt, but he tirelessly fights for our rights via the Internet Infrastructure Coalition.

The Tuesday session was titled “The Fight For Our Future,” and included Reddit’s Erik Martin and Fark’s Drew Curtis as well as Michael McGeary from Engine Advocacy, Michael Petricone from CEA and Julie Samuels from Electronic Frontier Foundation. The panel discussed why an unregulated Internet was so important as well as why patent trolls are so corrosive to the economy. Panelists said hosting providers have a responsibility to fight for our rights because of the position they hold. Government will listen to hosting providers because they are job creators. Should it have passed, SOPA (Stop Online Privacy Act) would have been disastrous to the new Internet-based economy.

The conference provided a great peek into the next generation of infrastructure and how the industry is evolving. Rackspace’s CTO John Engates was even on hand for a panel, providing a rare opportunity to hear one of the industry's greatest minds speak about driving open standards and how he sees cloud shaping up in general.

The mood was good throughout the event, with apprehensive optimism abounding -- the industry is growing nicely, and considering how inter-related all companies in the Internet infrastructure world are, that’s good news for all.

TAGS: Colocation
Hide comments

Comments

  • Allowed HTML tags: <em> <strong> <blockquote> <br> <p>

Plain text

  • No HTML tags allowed.
  • Web page addresses and e-mail addresses turn into links automatically.
  • Lines and paragraphs break automatically.
Publish