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How Hosting Companies Can Survive Hyperscale Cloud And Hyper Competition In 2019

The hosting companies had a few good years. But hyperscale cloud providers such as Amazon Web Services (AWS), Microsoft Azure, Google Cloud, Alibaba Cloud or DigitalOcean are eating their lunch. This presentation is showing the state of the hosting & cloud industry and how both, hosting companies and ISVs need to react to it and become a managed services provider.

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How Hosting Companies Can Survive Hyperscale Cloud And Hyper Competition In 2019

  1. 1. How Hosting Companies Can Survive Hyperscale Cloud And Hyper Competition In 2019 Lukas Hertig, SVP Business Development
  2. 2. A Few Words About Me.. Working with a few startups to support them on their journey, mostly in the blockchain and SaaS space. 16+ Years in Sales, Management, Marketing & Business Development Based in Zurich and Barcelona Advisor, InvestorPlesk | cPanel | SolusVM 2015 - Plesk 2014 – Parallels/Odin 2005 - Parallels 2003 – Confixx/Swsoft/Parallels Chainstack Others LinkedIn: https://www.linkedin.com/in/lukashertig/ Twitter: https://www.twitter.com/LukasHertig Facebook: https://www.facebook.com/lukas.hertig
  3. 3. The hosting industry had a good few years…
  4. 4. Things are changing though…
  5. 5. Now the industry is in turmoil
  6. 6. 1. Market Consolidation GoDaddy - HEG Ι Endurance Group Ι Savvis Ι Zayo Ι SingleHop Ι Cogeco Ι IBM Ι web.com Ι United Internet (1and1) Ι Telecity Ι InterXion Ι UK2Group Ι Six Degrees Group Ι etc etc (= a few large guys buy everyone else)
  7. 7. 2. Capital requirements are absolutely crazy
  8. 8. 3.CPAs* are skyrocketing * Cost per Acquisition. Average in the cloud should be not more than 30% of the CLTV (customer life time value) – but many hosters spend up to 70% of the CLTV!
  9. 9. What worked yesterday does not work today!
  10. 10. Like…
  11. 11. What did Hosting clients care about? •Uptime // SLA ? •Price ? •Support // Service?
  12. 12. Yes – true, hosting clients did care about that…
  13. 13. The problem is that the whole industry is focused on those three (and only those three) USPs* *USPs are so-called «Unique Selling Points» , e.g. how you differentiate in the market
  14. 14. Hmm – we all look the same?!
  15. 15. So ok, Hosters all solve the same problem
  16. 16. And together, hosters raised the bar
  17. 17. But what were cool USPs before, are now only the entry ticket to the game…
  18. 18. Innovation died out, and we left the door open to the …
  19. 19. Megahosters
  20. 20. a.k.a
  21. 21. Hyperscalers
  22. 22. The Hosting Market The golden age for Hosters…... is transforming into a new paradigm... Source: Netcraft Dec 2018
  23. 23. aws = The Dark Side!
  24. 24. But AWS suck at price, uptime and support, right? Yup, hosters have nothing to worry about!
  25. 25. Yes, they really do
  26. 26. So how are they stealing the clients?
  27. 27. The AWS Jedi MindTrick
  28. 28. You do not care about uptime, price & support! HUH?! Hyperscalers and their JEDI mindtrick…
  29. 29. Why are Hyperscalers not focusing on Uptime, Price or Support?
  30. 30. Because ‘anyone’ can deliver good uptime, with decent support at fair pricing. It’s a commodity. … are you a commodity!?
  31. 31. Hyperscalers sell: 1. Scale 2. Geographical reach 3. Product breadth 4. Innovation (AWS #1 – in all IT Market) Because they know most Hosters can’t…
  32. 32. It’s normal …
  33. 33. Old school hosters will feel the pain!
  34. 34. Hyperscalers will eat them for breakfast…
  35. 35. Go big …or go home
  36. 36. That’s the new ‘normal’ Deal with it…
  37. 37. Back to the Hyperscalers
  38. 38. 50%+ (2018) 0% 10% 20% 30% Amazon Hosters Google IBM Microsoft IaaS Marketshare Marketshare YoY Growth AWS 51% MS 96% IBM 48% GCP 81% RAX -
  39. 39. want more details? Please refer to the reports of structure research.
  40. 40. So, clearly the fastest growing segment in the history of our industry… And we left it to a bookshop?!
  41. 41. Like a boss
  42. 42. It’s bound to happen to any industry that has grown up
  43. 43. It’s normal,right?
  44. 44. Meanwhile, hosters are thinking…
  45. 45. “We will be fine” “Our customers respect us for who we are” “They like that local touch…” “We have a special bond with our customers” “Loyalty…blah blah”
  46. 46. Let’s stick with what we know
  47. 47. Right!?
  48. 48. Peter Drucker thinks you are wrong! Peter who!? …Peter Ferdinand Drucker was an Austrian-born American managementconsultant, educator,and author, whose writings contributed to the philosophical and practical foundations of the modern business corporation
  49. 49. The winners will be people who break the mold and change the way stuff is done…
  50. 50. Who create a ‘new normal’
  51. 51. Disruption!
  52. 52. Future hosters have to become MSPs – small and medium sized specialists, some even multi-cloud
  53. 53. Future hosters are not running any – infrastructure, they manage it
  54. 54. The rest either sell their company to someone who has (some) scale - or transform on productized and subscription based managed services (1.5M$ investment approx. Per Microsoft)
  55. 55. Hosters and IT channel (SI/VAR), Agencies etc. will be all the same – MSPs. Distributors may die and others also.
  56. 56. What’s that we hear Hosters say? “I like to be in control…”
  57. 57. What’s that we hear Hosters say? “I want to compete over price - it’s easy…”
  58. 58. Well – the model is not exactly new to our industry…
  59. 59. At least 40% or more of our industry revenue is tied into reselling infrastructure or services & products outside of our control
  60. 60. Hosters are already a reseller and already manage many 3rd party products!
  61. 61. Power Etc… Etc.. Software OS Servers Network DC gear gear DC IP
  62. 62. IP Power Etc… Etc.. Software OS Servers Network DC gear gear DC
  63. 63. DC IP Power Etc… Etc.. Software OS Servers Network DC gear gear
  64. 64. DC gear DC IP Power Etc… Etc.. Software OS Servers Network gear
  65. 65. DC IP Power DC gear Network gear Etc… Etc.. Software OS Servers
  66. 66. DC IP Power DC gear Network gear Servers Etc… Etc.. Software OS
  67. 67. DC IP Power DC gear Network gear OS Servers Etc… Etc.. Software
  68. 68. DC IP Power DC gear Network gear Software OS Servers Etc… Etc..
  69. 69. DC IP Power DC gear Network gear Etc.. Software OS Servers Etc…
  70. 70. DC IP Power DC gear Network gear Etc… Etc.. Software OS Servers Hosters are not producing all that, right?
  71. 71. DC IP Power DC gear Network gear Etc… Etc.. Software OS Servers Most Hosters are probably in this space… And reselling the rest to offer a full stack…
  72. 72. Sales Business processes Management Applications Operating system Server Infrastructure Network Infrastructure Data center Infrastructure Datacenter plant and building IP/bandwidth/internet connectivity Redundant powersupply Margins YESTERDAY
  73. 73. Sales Business processes Management Applications Operating system Server Infrastructure Network Infrastructure Data center Infrastructure Datacenter plant and building IP/bandwidth/internet connectivity Redundant powersupply Margins TODAY
  74. 74. Technology has reduced transaction costs, creating and accessing assets is cheaper and easier than ever - and therefore possible on a much larger scale
  75. 75. What’s next?
  76. 76. #ThugLife
  77. 77. Trends Source: Structure Research Report – Q4/18
  78. 78. Value of the IT channel company in a hyperscale world Guide the end customer Control the value chain Monetize every interaction Choose the partners who need you
  79. 79. The Channel challenge (Cloud) Solutions & Vertical Focus New Revenues Breakthrough in X/upselling Baseline Selling infrastructure only • With a singleplatform, SPs reduce capitalexpenditures (CapEx) and increase margin. • Plesk is the layer on top of the infrastructure enabling SPs to add value to product siloes Low/flatdemand, high riskof churn, margins in freefall Adoptionof Pleskextensions andsolutionbundles to addresscurrentcustomer needs,reachout to new targetaudiences Newand focusedproducts influence consumer’s purchase decisions, and prevent churn. Ideallybundledwithprofessional& managedservices as a differentiator around managed AWS/Google/Azure/Alibaba or even on top of DO, grow both revenues and margins • New revenues: Taking advantage of a lightweight Plesk core deployed in the baseline layer to offer application portability, standardization and version control combined with a rich extension catalogue generating upsell opportunities • This allows continuous deployment, followed by an ongoing increasein “sales” • New opportunities to take advantage of deployed services in the medium layer to create new and innovativevalues addressing technology trends and current buying behaviour • Provide consistentenvironments from development to production to customers Successful MSPs view the monetization opportunities as set of layers, infrastructure independent
  80. 80. Maybe running a bookshop is not all bad… We have a shot at it - we can totally do this!
  81. 81. Oh, and it’s the right thing to do for the environment as well…
  82. 82. Oh, and it’s the right thing to do for the environment as well… Thank You! Twitter: @LukasHertig Linkedin: Lukas Hertig

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