The Market Dynamics of Cloud and Hosted Infrastructure

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Al Sadowski, Liam Eagle, Jim Davis, Carl Brooks

Internet Infrastructure Services, 451 Research

The Market Dynamics of Cloud and

Hosted Infrastructure

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451 Research Internet Infrastructure Services Team

Al Sadowski Research Director New York Rory Duncan Senior Analyst London

Team Coverage Areas

 Managed Hosting  _{Shared Hosting}  Dedicated Hosting  _{Web Infrastructure}  _{Content Delivery} Liam Eagle Analyst Toronto Carl Brooks Analyst Boston Jim Davis Senior Analyst San Francisco  IaaS  _PaaS  EMEA  _OpenStack

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Examples of Internet Infrastructure Services coverage

 Vendor coverage: “The in and the out: IaaS landscape shifts again” – Carl Brooks

 Earnings: “ChinaCache Q2 2013 earnings grow 30% as it broadens scope” – Jim Davis  Trends: “Evolving hosting channel

strategies for service providers and vendors” – Liam Eagle

 EMEA: “Amazon Web Services receives approval from Dutch National Bank” – Rory Duncan

 LATAM: “ALOG is rolling along with managed IT service growth in Brazil” – Al Sadowski

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Internet Infrastructure Market Cloud Computing aaS Infrastructure aaS Platform aaS Infrastructure Software aaS Managed Hosting

Web & App

Hosting CDN



Trends



_Highlights



Market Sizing



Q&A

Agenda

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Liam Eagle, Research Analyst

Web and Application Hosting

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Global web and application hosting revenue

Web & Application Hosting: Global Market Share 2012-2016

$0 $5,000 $10,000 $15,000 $20,000 $25,000 2012 2013 2014 2015 2016 Dedicated Hosting $3,468 $3,690 $3,922 $4,166 $4,421 Shared Hosting (VPS) $10,455 $11,621 $12,888 $14,244 $15,689 Web & Application Hosting $13,922 $15,311 $16,810 $18,410 $20,110

In

Millio

n

s

of USD

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Traditional market drivers

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Price pressure on traditional services

Automation, virtualization, efficiency & scale

Upselling, value-added services

Consolidation

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Strategic trends

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Cloud as a hosting SP line of business

Shift away from AWS-like cloud servers Toward fixed-cost, user-specific solutions

Evolving SMB web presence

Emphasis on mobile, social

SMBs spending to avoid complexity, decisions

Disruptive effect of

freemium hosting model

SaaS-style site builder, front and center

Ease of use, bridging low-end, functional gap

Higher-value service increasing ARPU

Bundling around specific use cases

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Key findings

 IIS growth slowing as workloads move to best execution venues

 Hosts applying cloud technology to existing hosting models

 Evolving SMB web presence creating new requirements, offering new lines of business

 Hosts reversing commoditization of plain infrastructure with bundling, higher-value offerings

 Appetite for business productivity apps is growing, creating wholesale opportunity among VARs

 NA remains largest international region, however growth numbers favor other regions

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Jim Davis, Senior Analyst

Content Delivery Networks (CDN)

Not just for Telcos and Media outlets anymore

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Acquisition and investment activity on the upswing

 The total deal value of acquisitions in the CDN sector

was $73.5m in 2012

 The number of deals in the CDN market increased in 2012 compared to 2011

 A new crop of startups have raised $43m through the first half of 2013

 Incumbents raising money and refinancing to the tune of another $255m

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Carl Brooks, Research Analyst

Global Managed Infrastructure

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Managed infrastructure market components

$0 $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 2012 2013 2014 2015 2016 IaaS $2,872 $4,475 $6,211 $8,152 $10,232 Managed Hosting $18,931 $22,958 $27,655 $33,179 $39,648 R e ve n u e ($M)

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Managed infrastructure by segment

Managed Hosting

53% Web & App

Hosting 39% IaaS 8% 2012 Managed Hosting 57% Web & App

Hosting 29%

IaaS 14%

2016

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State of the market

 Managed Infrastructure (dedicated, managed,

physical, virtual) is the largest part of the IIS market.

 From IaaS and raw server rentals to managed OS and support services

 Outsourced operations is the driver

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IT services/outsourcers are the competition, and the differentiator

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Off-premise IT Outsourcing: What is your status of implementation for this technology?

6% 35% 41% 51% 2% 1% 1% 25% 2% 2% 15% 4% 4% 5% 2% 3% 1% 81% 58% 52% 44% 1% 0% 20% 40% 60% 80% 100% On-Ramp Services Mgd or Dedicated Server Hosting Colo Svc in a MTDC Information Tech Outsourcing

In Use Now In Pilot/Eval (Budget Alloc)

Near-Term Plan (6 mos) Long-Term Plan (6-18 mos) Past Long-Term (Later than 18 mos) Not in Plan

Don't Know

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Market trends

 Consolidation: only 2 of the top 10 providers aren’t owned by a major telecommunications provider

 Rackspace remains the single largest independent provider

 451 Research tracks dozens of providers from $1b+ to >$10m Robust growth across the board

 Managed Hosting: Top ten control 24% of the revenue spent

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Global demand is growing fast

NA 63% EMEA 27% APAC 8% LATAM 2% 2012 Source: 451 Research NA 57% EMEA 26% APAC 13% LATAM 4% 2016

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Webinar recording

A recording of this webinar along with the slides will be posted on our website within 48 hours:

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The Market Dynamics of Cloud and Hosted Infrastructure

Al Sadowski, Liam Eagle, Jim Davis, Carl Brooks