Go Daddy & The Power of Uncloudy Infrastructure

Amid growing enthusiasm for cloud computing, reports of a $2 billion buyout offer for Go Daddy provides a reminder of the enduring value of uncloudy infrastructure and hosting services.

Rich Miller

June 27, 2011

4 Min Read
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In the halls and sessions at the Structure 2011 conference, you could be forgiven for believing that cloud computing has already rendered other forms of hosting obsolete. After several days of full immersion in the cloud at the Structure 2011, the end of the week brought a reminder that cloud computing remains a modest part of a much larger Internet infrastructure story.

To be sure, cloud computing has provided exciting new opportunities for developers and start-ups, and is gaining meaningful traction with enterprise customers. But for the moment, cloud computing's mindshare is bigger than its market share. As of June of 2010, Tier 1 Research estimated that cloud computing represented 2 percent of the IT infrastructure market. Even if it has doubled in size over the past year - as suggested by data shared by Amazon- that still suggests market share of about 5 percent.

IDC has somewhat higher estimates, saying cloud represented 5 percent of IT spending in 2009 and will increase its share to 10 percent by 2o13. That would still leave 90 percent of IT spending focused on other delivery methods.

"Infrastructure" Does Not Equal Cloud
And yet, at Structure on Thursday, session moderator Paul Miller equated "infrastructure" with the pay-as-you-go cloud model. After much discussion of the advantages of cloud over dedicated hosting, it was left to panelist Duke Skarda, the chief technology officer at SoftLayer, to offer some context and history.

"I think dedicated hosting will continue to grow," said Skarda. "A lot of people tell us that it won't. If you go back 5 or 6 years in the hosting industry, people thought shared hosting was going to disappear as well. It's done nothing but continue to grow, even as the other options have grown along with it. I don't think dedicated is going anywhere."

As if on cue, Friday brought headlines that reminded us of the enduring value of shared hosting. The largest mass-market hosting and domain provider, Go Daddy, is reportedly in talks to be acquired by private equity firms KKR and SilverLake Partners for between $2 billion and $2.5 billion.

A Shared Hosting Colossus
As a domain registrar founded in 1997, Go Daddy may seem old school to the cloud crowd (even though it has announced plans for a cloud offering). The company has 9.3 million customers and manages more than 48 million domains. In recent years the company has extended its dominance into web hosting and e-commerce. It is the largest web hosting company, and is the second-largest issuer of SSL certificates, trailing only Symantec (which now owns the VeriSign SSL business).

The history of the infrastructure market is one in which new products have emerged on a regular basis. The hosting industry has been building better mousetraps for years. Each new offering triggers excitement and predictions that in-house IT is dead and third-party providers that cling to the old ways will soon be irrelevant. Dedicated hosting, discount dedicated servers and managed hosting have all gained market share, but have yet to drive the original shared hosting model out of business - as Go Daddy illustrates.

New products that provide improved features and usability are adopted by organizations equipped to deploy and manage them. Small businesses love consumer cloud apps, but most don't have the ability to load virtual machines onto Amazon Web Services. And many enterprises continue to run their IT operations in-house,citing concerns about control, compliance and security.

Cloud Part of a Complex Picture
Will cloud computing be a better option than dedicated or managed hosting? For many applications and workloads, the answer is yes. But history suggests that the existing hosting models will continue to find plenty of customers. Emerging white-label offerings make it easier for providers of shared hosting and dedicated servers to add cloud services. The hosting market has endured waves of regular disruption, and adapted to each.

The one common thread among all these services and business models, from shared hosting all the way up cloud computing, is the requirement for data centers to house their equipment.

Some cloud enthusiasts would have you believe that cloud services are reducing the need for data centers. In fact, the opposite is true - the growth of the cloud boosts business for providers of colocation and wholesale data center services. To cite a known example, the growth of Salesforce.com won't put the colocation industry out of business so long as Salesforce.com servers are sitting in Equinix data centers.

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