Following my previous day one report ,here are my thoughts on the second day of the two-day Tier 1 Research Hosting Transformation Summit.
Hosting Success Strategies - How the Evolution of CDNs, IDCs and the Internet effect hosting and content today and tomorrow
Phew! I think that might the longest title of the conference.
Tier 1's Dan Golding presented this session. He noted that we are seeing an unprecedented explosion in traffic - it's growing 5-6% per month. That means traffic is doubling annually. This is happening because of the rise of P2P, broadband and (in particular) online video.
His feeling is that this is what is driving network neutrality challenges. People now really want to use their DSL to the max and they still want more. Or as Dan said, “they're slammin' DSL” and access providers priced based on less use. That means increased costs while at the same time the market is getting more competitive so retail prices are going down.
A few random comments from the session - “Hopefully “Internet Engineers” will find ways to handle traffic on the backbone”, “content providers are now changing their transit buy strategy as pricing stabilize” and “The gigabit is the new megabit”.
How does this all impact IDCs (Internet Data Centers) and CDNs (Content Distribution Networks)?
For IDCs it's good times - colos are full, product is in demand, demand drivers not slackening, capital available for growth. But challenges are power/cooling, cheap IDC space is gone, if a recession comes what happens? Scaling is hard - customer service is harder. Scaling is the trickiest part of the business. Operating procedures and customer service sound easy but aren't. Demand is way up and supply is not keeping up. And high power density users are not welcome.
Some customers are not profitable (”demon customers” a la Best Buy) and some hosts are “de-selling” by using price increases and premiums for activities that aren't profitable.
How does it all come together? OpEx (Operating Expenses) have bottomed out - transit not getting cheaper, IDC same, CDN is still dropping but has logical limit.
Dan's Predictions? Growth continues. The CDN/hosting line is blurring. We need a “CDN Me” button for hosting customers so they can go to CDN without leaving host. IDC space crunch will ease up - new entrants in hot market.
Importance of Partnerships in the Hosting Ecosystem
Jon Zanni, MD, Hosting Business for Microsoft gave this presentation subtitled - “The software plus services continuum: Partner Opportunity in the “Live Era”
I spoke to a few people after Jon's session where he improvised over standard Microsoft slides outlining some of the roadmap and strategy around Live. Generally the things that jumped out for hosts in the audience were quotes like “Office Live is Sharepoint”, “When we started Office Live we didn't think about hosters, and to be honest we didn't think about developers either”.
One frustration for me (even as a non-host) was that Zanni often presented the Microsoft-oriented view of “Partner”, which means VARs, ISVs, Developers, Web Consultants, etc. Much of what I saw in the presentation in terms of the “ecosystem” made little sense for hosters.
I found it interesting that the latest iteration of their CRM has a single code base used for all deployments - On Premise, Partner Hosted, or CRM Live. There is only one thing a customer cannot do on all platforms (server-side .NET assemblies on CRM Live is a no go).
Jon finished with a “tip” for those in the audience - Check the SPLA - Service Provider Licensing Agreement - around November 1. Look for a new SKU that will help with virtualization and expect “unlimited instances” to be part of it.
During the A&A someone asked “Won't Microsoft want to own the whole pie eventually?” and Zanni replied (roughly), “partners are in our DNA. 85% of revenue is through partners. Models that don't follow that will be very foreign to us. We modelled doing all of Exchange ourselves. Multi-tiered won out as a model. We don't want to do another Hailstorm. There will be a big part for partners. I'm pushing for a MS-wide hoster strategy. The model we're looking at is that it depends on relationship model - if you get a bounty - we own, if you host them - you own, and if it is adCenter supported - we share.”
Is Shared Hosting Destined To Look Like An Ad Agency?
Morgan Lynch, CEO LogoWorks and Jeffrey Stibel, CEO of Web.com announced a partnership allowing Web.com customers to buy logos from LogoWorks. 60% of web.com's customers are new businesses so they see the fit as natural.
Lynch stated that, “Hosting” is a technology and that's not what small businesses need. They need a web presence. That's why the LogoWorks thing makes sense to web.com customers. “Hosting” is only as good as the content found there. Email, syndicated content, search, etc. web.com wants to partner with the best to offer these things to their customers.
Continuing on the theme of talking to your customers in their own language he pointed out that we should be saying web address, not domain - a domain is a technology and web site not hosting, which is once again a technology.
One of my favourite asides was that “there is no small business market”. Just because they are the same size doesn't mean a pizza place, a florist and a doctor's office are all the same and have the same needs.
Damn, only one functional outlet for almost laptop wielding geeks!
Is Virtualized/Utility Hosting Just A Pricing “Thing” After All?
OK, I'll be honest, this session pretty much went over my head. Apparently I need to do some research on this space and how it fits into the overall hosting mix.
On the panel were Vladimir Miloushev , CEO at 3TERA, Todd Abrams, COO at Layered Technologies, and Mike Tardiff, SVP Product Engineering and Development at Savvis.
Vlad was the most forthright of the bunch and had some really great observations, including - “Utility is when a service stabilizes. All utilities end up at self-serve. Therefore Utility Computing needs to be self-serve.”
Discussion around pricing models pointed out that while maybe utility computing should be about “pay as you go”, what is the “as you go”? Memory? Transactions? Speed? Vlad says “per transaction is a way to go” but that we're not ready yet.
This was probably the best session in terms of conversation between panellists and the audience.
Hosting Isn't Just Web Pages Anymore
The final session of the conference was lightly attended but probably an important one for hosts to get their heads around.
Colin Corbett of YouTube, Jim Corelis from STATS LLC, Anil Dash of SixApart, Dena Levin from SocialText and Michael Sawtell from The Family Post all took the stage to talk about their businesses.
YouTube - 100 million downloads a day, 40,000 uploads a day - got praise from everyone on stage for their transcoding of videos (upload anything, they'll convert to Flash which is easily served and seen by all).
Anil talked about personality and connection vs. “two business people in suits shaking hands in front of a server” stock photos.
These guys don't really think of themselves as hosts (Dena said “Hosting is not our core competency”)or see themselves as competing with web hosts. But consider how many of the millions of TypePad and LiveJournal users might have built hosted sites. Despite that I didn't get the impression the hosters in attendance thought of these companies as hosts either. I guess no one wants to be a host these days.
Oddly, the panel were also potential CUSTOMERS for a lot of people in the audience. Funny that. In fact, you could even think of someone like SixApart as a “reseller” of hosting provided by their colocation company. YouTube started with Managed Hosting but now co-locate. You could see dollar signs in some folks eyes as they thought about hosting YouTube or TypePad.
At this point the session kind of turned in to a focus group for big hosting clients. The general consensus was that “server in a closet, to managed service, to colo” was a natural path for web 2.0 businesses.
Someone asked, “how did you make a decision about your provider?” STATS made the jump in 24 hours once they realized they had to. Successful disaster recovery test and good relations was the strategy for Six Apart. When asked about certifications and their importance to the buying decision, Six Apart's Anil Dash said that ISO was nice to have and price was slightly important but by far the most important consideration was references. In fact he said they were the only thing that mattered. He wrapped up by admonishing that, “If someone came in to sell me now not knowing what a blog was, I'd be terrified.” YouTube looked for someone with a lot of capacity, transit, multiple networks, and “peering fabric”. Certification wasn't an issue.
I'd be interested on feedback on whether folks found me sharing these notes helpful. Originally I was doing them for internal consumption but then thought others might benefit. If you did let me know. I'd also be happy for feedback on how we can do even better coverage of upcoming events like ISPCON next month.
I realized exactly why today as I bought my morning coffee.
The Good:
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