How Cloudy is the Future?

HostingCon KeyNote

19 July 2010

Lydia Leong

Research Director Internet Infrastructure and Emerging Enterprise Services

What is the Future of Hosting?

• • What is cloud computing, really?

• What will the cloud mean, not just for the future of infrastructure but for the future of IT and the way that businesses and consumers use IT?

How will different segments of the hosting market evolve over the next five years?

Cloud Computing: Multiple Perspectives, Multiple Origins

Focus on "the Cloud" Focus on "Computing" Web 2.0 and Mashups Subsidized Applications Googleplex Web Platforms Global-Class Consumer Applications SaaS From the Web Cloud Web Services and Web API/Arch.

Internet 1980 Information and Browser UI Connectivity 1990 2000 2010 2020 Data Center Pressures Virtualization Grid Real-Time Infrastructure Management Discipline Utility Models From the Enterprise

The Changing Seller / Buyer Relationship

"All that matters is results. I don't care how it's done." "I don't want to own assets; I want to pay for elastic use, like a utility."

The Seller Vendors Providers

Acquisition Model

Service

Business Model

Pay for use

"I want accessibility from anywhere, from any device." "It's about economies of scale with effective and dynamic sharing." Access Model

Internet

Technical Model

Scalable, elastic, sharable The Buyer Sell tech to: Implement tech bought from: Sell service to: Consume service from: Users Consumers Cloud computing promotes a provider consumer relationship over a vendor user relationship.

What is Cloud Computing?

Gartner defines cloud computing as "

a style of computing where scalable and elastic IT-related capabilities are provided 'as a service' to customers using Internet Technologies “.

1 2 3 4 5 Service Based Scalable & Elastic

Consumer concerns are abstracted from provider concerns through service interfaces Services scale on-demand to add or remove resources as needed.

Shared Metered By Use

Services share a pool of resources to build economies of scale. Services are tracked with usage metrics to enable multiple payment models.

Internet Technologies

Services are delivered through use of Internet Identifiers, Formats, and Protocols.

The Spectrum of Private to Public Cloud Services

Private Cloud Services

Anyone

ACCESS

Exclusive Shared data/grid service Dedicated SaaS instances

Cloud Provider Public Cloud

Web search Business partner cloud services Consortia owned service Targeted industry service

Private Cloud

Internal dev/test service

Outsourced Private Cloud

Exclusive provider (IT spinoff) Virtual private cloud Users

OWNERSHIP/ CONTROL

Third Party

Public Cloud Services

Slicing the Cloud

PaaS IaaS V-Cloud

Business Services Information Services Application Services App. Infrastructure Services System Infrastructure Services Cloud Enablers

SaaS

Same Old IT… New Abstractions, Delivered as a Service

Process Information / Data Application Middleware Operating System Hardware Data Center Facilities Process Information / Data Application Application Infrastructure System Infrastructure

Business Wants the Promise of Cloud

• • • • Hype leads to unrealistic expectations Internal IT is often slow to respond The real cost of IT is often poorly understood The problem is often process, not technology!

The Cloud Challenges IT Organizations

Adoption of the cloud computing model, and associated services, whether public or private, requires a culture shift within IT organizations.

1 2 3 4 5 Ownership / Control

Typical outsourcing concerns apply to external cloud services.

Security / Compliance

Cloud services introduce new security issues. Perception (and reality) of risk.

Suitability for Needs Interoperability Vendor Management

What workloads and applications are suitable to cloud environments?

Standards, portability, interoperability, vendor lock-in, public/private hybrids.

Contracts (or lack thereof), service-level agreements, vendor relationships.

What Does the Cloud Do To Hosting?

• • • • Alters the way that IT is consumed, and therefore buyer needs, desires, and expectations Transforms all segments of the market Creates new use cases and new opportunities Destroys legacy models

Hosters Change or Die

10

Hosting Market Segmentation

• • • • • • Shared (Mass-Market) Hosting -

Virtual hosting, traditional VPS

Colocation -

Small and large-footprint

Self-Managed Hosting -

“Server rental”

Application Middleware Operating System Hardware Data Center Facilities Simple Managed Hosting -

Managed through the OS layer; typically 1 or 2 servers

Complex Managed Hosting -

Managed up to the application; typically 4+ servers

Segmentation is delivery platform agnostic (don’t care whether it’s dedicated or virtualized)

Mass-Market Hosting: Buying Trends

• • Focus on the business value of the technology - SOHOs will increasingly adopt SaaS - Local integrators developing for the SOHO market will increasingly move to PaaS - Specific platform hosting (such as Wordpress) will remain popular, but this borders on being SaaS / PaaS, not IaaS • Social media will continue to be increasingly influential in tech-savvy buyer decisions Market share will continue towards shift to hosters who have brands and “pull through”

What Happens to Mass-Market Hosting?

• • • • • Users desire ease of use, control panels, and other things – no need for technical knowledge Relatively minimal impact in shared hosting, from the “typical” cloud IaaS products Cloud IaaS destroys the traditional VPS market Moderate impact from PaaS, increasing rapidly over time, and affected by market alliances Users buy SaaS and implicitly buy into SaaS ecosystems

Colocation: Buying Trends

• Capital-constrained businesses are favoring colocation and leasing over data center builds -

Large-footprint colocation and data center leasing are the drivers of the most growth – not retail colocation

• • Increasingly a local / regional business No supply/demand imbalance in the largest metropolitan markets • The broader trend is towards lower-quality, less expensive space (more Tier II than Tier III) • Power densities are continuing to increase

What Happens to Colocation?

• • The colocation business is not destroyed by… - More powerful servers - Virtualization - The cloud But… - Footprints will become denser - Servers will be more efficiently utilized - A greater percentage of the IT infrastructure will be owned by service providers, not end-user customers

Self-Managed Hosting: Buying Trends

• • • SMBs: Developers / the DevOps movement Enterprises: Virtual data centers New use cases “High-performance” computing - Batch computing - General IT infrastructure • Fastest-growing segment of the market

What Happens to Self-Managed Hosting?

• • • • Dedicated servers don’t go away But virtualized servers predominate Significant broadening of the market Commoditization - Strong price-sensitivity from buyers - Margin compression • Automation of management features

Simple Managed Hosting: Buying Trends

• Significant negative impact from the economy - SMB segment is harder hit by the downturn - Save money through self-management - Pricing pressure • • • Shift to cloud IaaS Management services are still important Larger deals are becoming more commonplace

What Happens to Simple Managed Hosting?

• Automation becomes king - Many basic management tasks can be automated - Drives down costs, improves service quality - Blurs the line between self- and simple managed - Potential collision with PaaS • Market consolidation?

- Leverage scale for cost-efficiency - Build more powerful brands • People still matter

Complex Managed Hosting: Buying Trends

• • • Has held up well despite the economy Virtualization is part of most deals Less price-sensitive Most deal wins based on “comfort level” • Buyer is increasingly savvy - Does research online - Business decision-maker - Technical evaluator • People-centric business

What Happens to Complex Managed Hosting?

• Convergence with data center outsourcing - Driven by the universality of cloud-style IaaS - More tactical than DCO • • • Hybrid environments are and will be the norm Universal flexible, on-demand provisioning Automation will take place at the lower levels - Customers will be pushed towards standardized solutions in order to obtain cost savings • Customization will still require people

Who are You?

• • • The classic hosting business dilemma: assets, technology, or people?

Are you a software company?

- Hosters are traditionally

integrators developers

of technology of technology, not - The lack of true turnkey cloud solutions is pushing hosters into doing more development - But turnkey solutions will emerge How are you going to compete with software companies?

Microsoft, Google, VMware…

Gartner Research

Lydia Leong, Research Director

Internet Infrastructure and Emerging Enterprise Services

[email protected]