How Cloudy is the Future? HostingCon KeyNote 19 July 2010 Lydia Leong Research Director Internet Infrastructure and Emerging Enterprise Services.

How Cloudy is the Future?

HostingCon KeyNote19 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?

1980 1990 2000 2010 2020

Cloud Computing:Multiple Perspectives, Multiple Origins

VirtualizationSubsidized Applications

Web 2.0 and Mashups

Global-Class Consumer Applications

Management Discipline

Internet

Web

Cloud

Connectivity

Information and Browser UI

Services and WebAPI/Arch.

Googleplex

SaaS

From the EnterpriseFrom the Web

Real-Time Infrastructure

Utility Models

Data Center Pressures

Grid

Web Platforms

Focus on "Computing"Focus on "the Cloud"

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."

"It's about economies of scale

with effective and dynamic sharing."

Acquisition ModelService

Business Model Pay for use

Technical Model Scalable, elastic, sharable

Access Model Internet

"I want accessibility from anywhere,

from any device."

Vendors UsersSell tech to:

Implement tech bought from:

The Seller The Buyer

Providers ConsumersSell service to:

Consume service from:

Cloud computing promotes a provider-consumer

relationship over a vendor-

user relationship.

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“.

What is Cloud Computing?

Internet TechnologiesServices are delivered through use of Internet Identifiers, Formats, and Protocols.5

Metered By UseServices are tracked with usage metrics to enable multiple payment models.4

SharedServices share a pool of resources to build economies of scale. 3

Scalable & ElasticServices scale on-demand to add or remove resources as needed.2

Service BasedConsumer concerns are abstracted from provider concerns through service interfaces1

5 A

ttri

bu

tes

that

su

pp

ort

ou

tco

mes

Private Cloud

Public Cloud

Outsourced Private Cloud

Cloud Provider

The Spectrum of Private to PublicCloud Services

Anyone

Exclusive

ACCESS

Users Third PartyOWNERSHIP/

CONTROL

Private Cloud Services

Public Cloud

ServicesShared

data/grid service

Web search

Internal dev/test service

Targeted industry service

Consortia-owned service

Dedicated SaaS

instances

Business partner cloud

services

Virtual private cloud

Exclusive provider (IT

spinoff)

Slicing the Cloud

System Infrastructure Services

Business Services

Information Services

Application Services

App. Infrastructure Services

CloudEnablers M

gmt.

and

Sec

urityV-Cloud

SaaS

IaaS

PaaS

Same Old IT…New Abstractions, Delivered as a Service

Application Infrastructure

Application

Information / Data

Process

System Infrastructure

Middleware

Application

Information / Data

Process

Operating System

Hardware

Data Center Facilities

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

Vendor ManagementContracts (or lack thereof), service-level agreements, vendor relationships.5

InteroperabilityStandards, portability, interoperability, vendor lock-in, public/private hybrids.4

Suitability for NeedsWhat workloads and applications are suitable to cloud environments?3

Security / ComplianceCloud services introduce new security issues. Perception (and reality) of risk.2

Ownership / ControlTypical outsourcing concerns apply to external cloud services.1

Th

e C

on

cern

s o

f IT

Man

ager

s

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

11

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

Hosting Market Segmentation

• Shared (Mass-Market) Hosting- Virtual hosting, traditional VPS

• Colocation- Small and large-footprint

• Self-Managed Hosting- “Server rental”

• 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)

Middleware

Application

Operating System

Hardware

Data Center Facilities

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 of technology, not

developers of technology- 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]