Getting Ready for Hosting 3.0 with Antonio Piraino of Tier1 Research

The Tuesday morning keynote at HostingCon was delivered by Antonio Piraino of Tier1 Research, who delivered a session entitled “Are You Ready for Hosting 3.0,” a title that promised to illuminate the opportunities in the upcoming market for hosting.

He uses examples from some of the huge and growing tech giants to illustrate his point that we are in a second tech bubble. But he doesn’t think that should be confused with what he refers to as “cloud 2.0” or “Hosting 3.0”

He says phase 3 (3.0) of hosting has to do with a lot of new layers being placed on top of the hosting resources, which creates a new layer of expectations, including some around performance and security. It’s a lot like what “cloud 2.0” is at the same time.

Cloud computing was originally a playground for developers, and it’s only in the last two or three years that we’ve seen businesses migrating their processes onto the cloud. Businesses are looking to cloud or hosting providers to enable business-to-business communication and other connections.

Piraino refers to some research produced by one of the 451 Group’s properties, ChangeWave research, which illustrates that businesses’ IT spending expectations (charted on a graph of time) is followed almost exactly by the S&P 500, about two months later. Very interesting data, more of which he says is available at ChangeWave’s site.

He also says the debt reduction issue in the US has had 16 percent of US enterprises saying they plan to reduce IT spending in the near future.

The point, generally, is that IT spending is very sensitive to macro-economic issues, as well as influential over them.

The cloud era, he says, is characterized by IT being consumerized into a product that is taken in the same way workers consume services in their day to day lives (online banking being the example offered by Piraino).

He also showed some data illustrating the fact that a significant chunk of websites are now being hosted on cloud infrastructure services, like those provided by Amazon or Rackspace. And these are the kinds of sites that would ordinarily been on traditional hosting.

Amazon, and IaaS in general is a growing market. But he sees another opportunity in the cloud services space, which is in the 70 to 80 percent of cloud services spending that goes toward software as a service.

The growth in the more traditional internet infrastructure market is still coming. And the market is still bigger – in the $45 billion dollar range – than cloud. For now, at least. Growth numbers in the shared and dedicated hosting markets are single-digit, however. Managed hosting, however, is growing at 20 percent per year. Here’s a big opportunity. Though people are spending less on IT, they’re spending more on services around people helping them migrate into hosted environments.

Among small businesses, the workloads most commonly put into the cloud are email and CRM, followed by document management, collaboration tools and business intelligence and analytics.

There are threats to your hosting business, says Piraino. He has a long list, but a few of the key ones are new entrants to the market (including the big companies – Microsoft, Amazon, Salesforce, Facebook, etc.), customer perceptions around the reliability and security of cloud computing and the increasing complexity of cloud services.

He says there are some clear options for competing – virtualizing and automating, taking advantage of IaaS and PaaS in-a-box products, focusing on management, control, security and reliability, and very importantly avoiding price wars.

Ultimately, he says, hosts need to make a decision: partner, build, be acquired, change shape or compete. To that end, he says there are opportunities in the venture capital and private equity space. There are companies out there looking to partner with innovative hosting companies. Larger players in the hosting space are looking for acquisitions. He also believes really strongly in the opportunity to provide services, and not just infrastructure.