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Hosting Transformation Summit - Europe 2009
We love to participate in Tier 1's Hosting Transformation Summits - both to meet with an important section of our customers and to discuss trends in the industry. There were two key themes that emerged at the European edition of this Summit in London this week; business is great, but the future is cloudy.
First the business is great bit: While they may not have seen the breakneck growth of earlier years, hosting companies have continued to keep bobbing along while the rest of the world economy sinks. According to Dan Golding, VP & Research Director of Tier 1, co-location continued to lead the charge with a modest but respectable 4% growth rate from Q1 08 to Q1 09. Managed hosting was a point or two behind that, with CDN the only part of the industry that has been really floundering. The CDN business has been suffering from a number of low-level entrants that have kept prices suppressed, and will likely continue in this vein until some of the current players depart.
There were a few scare stories running around a couple of years ago about the amount of data center space being built and warnings that we were returning to the boom and bust Exodus days. It turns out that much less data center space was actually being built than advertised, and the flashy press releases for 300,000 square foot data centers were really 300,000 square foot warehouses looking for someone willing to spend the considerably higher investment needed to turn them into real data centers. The fact that only a fraction of the advertised space has actually been built out is great news for hosters that have capacity, and is actually great news for everybody in terms of ensuring prices head North rather than South in the next couple of years.
There is still not a lot of capacity being added to ease the tightness on the supply side, mostly due to financing limitations. Many of the mid and large tier hosters are already heavily leveraged, and with banks extremely risk averse there are not a lot of debt funding options, while lower valuations have discouraged hosting companies from equity financing of new data center capacity.
Chances are, there will be a meeting of the minds over valuations in the coming months, and that plus easing credit restrictions will mean a lot more money available for data center build-outs. Nevertheless the consensus here was global data center capacity is going to be tight for the foreseeable future.
We heard lots about trends in build-out, and one that has been quietly gathering steam over the last few years is modular expansion techniques. This is not necessarily the container-park approach that Microsoft has embraced, but is more often a question of dropping self-contained modules into an existing data center. The "hot-aisle" or rack containment methods employed by these modules mean that a high density module can sit in an older low density data center without impacting the existing limited cooling capacity, thereby prolonging the life of existing data centers.
In a panel discussion, Peter Hannaford from APC emphasized the importance of software in monitoring environmental systems and spotting hot-spots for heat and power consumption. Given our great Dynamic Applications for APC devices, we know he was thinking about EM7 in this point of the discussion!
So now for the cloudy future. We are of course referring to the server and storage clouds here that are a big target for us with EM7 G3 in particular. Interestingly all the major hosting companies at the summit claimed to already have a cloud offering in some fashion. The furthest along seems to be RackSpace who do seem to have an edge at the moment and are actually making quite a lot of money with their cloud products already.
Fortunately, with all the talk of clouds and continual peppering of bad puns about the weather throughout the day, the real weather in London was perfect - 75 degrees and not a cloud in sight!
About the Author David Link is president and CEO of ScienceLogic. He and his partners built a thriving company from the ground up by focusing on delivering "products that just work" to the underserved IT infrastructure management marketplace. He has held senior management and corporate officer positions at large public companies.
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