I spent the last few days in Las Vegas at Tier 1's Hosting Transformation Summit getting a taste of hosting in the 21st Century.
Rather than just pass around my notes internally I thought I'd share them with you faithful Tucows Blog reader. A word of caution - despite being in the business for 12 years I'm a relative newbie to hosting as a business so this was very much a "figure out what our partners are up against" kind of thing for me.
Hosting 2.0 Keynote
Andrew Schroepher President and Founder of Tier 1 kicked off the event with a keynote called "Hosting + Web 2.0 = Hosting 2.0"
Andy's core message here (and for much of the conference) was that "functional hosting" (companies that provide hosting for a particular type of online content - think TypePad, Flickr and Google's Gmail) are a significant threat to "traditional" hosting firms.
Essentially, such sites (while they might not see themselves as hosts) replace the need for traditional web hosting for some situations and the number of such services are increasing every day. Andy points out that a "web site" is not important to most people or businesses, but a "web presence" is. Hosts need to think about presence and how they can creatively help their customers be creative. He also nixed the suggestion that Web 2.0 concepts are just for consumers noting that most technologies adopted by consumers become business applications a few years later. Consumer adoption leads to business adoption because we're all consumers.
Andy made a logical argument that low-price services (he suggested less than $5 per month) might be better suited to ad-supported models. He also suggested that many services could "throw in the domain for free" as part of the overall cost rather than looking at it as a separate sale or line item.
One passing quip (in relation to consumer generated media on sites like YouTube made my ears perk up - "Everyone gets two and a half minutes of fame. 2.5 minutes is the new 15 minutes."
Note to Andy from another presenter: You seriously need to rethink your slides. They're killing the impact of your presentation. You had a lot of great ideas here but the slides didn't support what you were saying - they were what you were saying. Take a day or so and read everything on Presentation Zen and Beyond Bullets.
Leadership Perspectives
This session included Kevin Rose from digg.com, Ben Horowitz of Opsware, Jonathan Crane of Savvis, Tony Klockenbrink of Egenera, and Anand Vridhagiri of AMD.
Anand at AMD started by stating that hosting company's concerns are costs vs. increasing computing demands, energy efficiency, IT manageability, resource utilization, and security. He then gave a pitch for AMD as a solution because it has 1P-8P scalability, best performance/watt/dollar, platform stability, open standards.
One interesting element of his presentation was a comparison of AMD's product mix to Intel's. He showed Intel's processor roadmap and pointed out that right now they have twelve different processors in the market, compared to AMD having one processor being phased out and another being introduced. Actually, he fudged it a bit since there are three or four variants on each AMD processor so there are actually six to eight processor types at AMD.
Ben Horowitz at Opsware, a data center automation service, talked about the companies origins at Netscape (1.0). After they were acquired by AOL, Ben worked on AOL Shopping and found they had a real problem because when they "turned on the AOL traffic" they would bring sites like Barnes And Noble to their knees. They started LoudCloud to answer that problem and then found that manual labour was an issue in hosting big applications. Hence Opsware which automates much of the manual labour related to software.
Ben made an interesting correlation between "manual" and "quality issues" essentially saying that manual processes lead to configuration errors and therefore required far more QA.
Tony's pitch was positioned as "Business Value Through Utility Computing" and talked about "achieving data center nirvana". Key "opposing forces" to said nirvana are power, quality data center space, rigid infrastructure (one app per server, "server hugging"), proliferation of servers (physical and virtual), and software licensing. He talked about creating a "PAN" a Processor Area Network, similar in structure to a SAN (Storage Area Network).
Kevin Rose gave a quick explanation of Digg and showed digg swarm and digg stack. I'm not sure what he thought he was getting into as part of this session but it was clear that most of the others - particularly Savvis' Jonathan Crane - saw him as a customer.
Kevin shared some digg.com stats. The site is now getting a million visitors a day and daily page views range between 10 million and 15 million. He noted that they started with $99 shared hosting in the early days and while they have a MUCH more sophisticated hosting set-up now, they get real benefits from the nature of Digg. Since most of the site is text with lots of little AJAX calls, digg is very efficient. Serving up the site is not a significant headache.
On the other hand, the Diggnation podcast is a big hosting problem. Each weekly DiggNation episode is 200 - 300MB and they are getting over 300,000 downloads per week. And of course everyone hits the file at the same time. Apparently they use as service Cachefly to deal with this.
Kevin talked about how hard it was to deal with big companies when you are a small company (like being on hold for hours Sun vs. overnight shipping from Penguin Computing)
Jonathan talked about five things important to hosts and introduced what Savvis does. He also provided me with a new word for buzzword bingo - "MASP" meaning Managed Application Service Provider.
Someone said "IT is a "hair on fire" business" - they don't plan and strategize as vendors might like/expect."
Kevin was all too correct when he said "I feel like that "I'm A Mac" guy from the TV ads". He's much younger than most at the show and casually dressed in a sea of suits. I'd also note there were VERY few women present. Out of 200 attendees I doubt there were 20 women.
Power Huggers Are The New Server Huggers
This panel session moderated by Tier 1's Dan Golding featured Chris Dolan of 365Main, Tesh Durvasula at NYC Connect, Jason Starr at Equinix and Bill Minkle from TelAxis. I just caught the last bit of this session but they seemed to be having some really good interaction with the audience. Apparently "server hugger" is not a complement. Someone later told me they hate server huggers at Hooters too.
The Last SaaS vs. Hosting Discussion You Should Ever Need
Ah, a real panel session moderated by Andrew Schroepher from Tier 1 featured:
- Ravi Argawal, GroupSPARK
- Rob Bernshteyn, SuccessFactors
- Elliot Curtis, Microsoft
- Ian Wening, Zoho
- Treb Ryan, OpSource
- Dave Hofstatter, CallWave
The group talked about "ecosystems" surrounding services and "displacement" is a key issue with adoption. If people can't start quickly it's hard to overcome hurdles. Ease of use, and business value quickly delivered is key. Uptime is critical but to a certain extent it is determined by the type of customer you have and how critical they are.
Not a lot of time for questions left. I wish we'd had more conversation with the audience and more cross-talk between panel members - they basically took turns or said "I agree" and then repeated what the last person said. I think I'm getting spoiled by BarCamp and CaseCamp. :(
How To Succeed In E-commerce Hosting If You Aren't eBay
(Goodness Tier 1 likes loooong session titles)
Tier 1's Phil Shih moderated a panel with Jim Collins from Affinity Internet, Stephan Schambach Demandware, Andrew Schroepher subbing for Jackie Fisher of Digital River, and an unannounced addition of someone from GeoTrust/Verisign whose name I didn't catch.
Some random notes from the discussion:
Yahoo! coming into the market for hosting and e-commerce is a good thing ("validates the market") and the panel generally felt that they'd never do a good job on small business support. Big Amazon partners (retailers using a white labeled Amazon site) are moving away from it. There was discussion about Target being able to drive traffic to a site that has not only products that directly compete with Amazon, but also digital downloads and other online services.
A real estate agent (for example) doesn't know about mash-ups and doesn't even want you to teach them about mash-ups. They just want they're listings to appear as bubbles on a map on their site "just like you see on Google".
Schambach talked about brand. Small guys might want homegrown to build own brand, to differentiate, have a unique user experience etc. Companies need to "replatform" every 3 years - AOL, to web, to web 2.0. Demandware is SaaS ecommerce provider that allows people to customize their sites heavily. You wouldn't know one of their sites if you saw it because they all look so different.
Collins says lots of companies don't want (care?) about brand and differentiation. He made a bad joke saying that your nine-year-old neighbour isn't reliable as a web designer because he's now off doing his own web start-up (and suggested Kevin Rose was such a nine-year-old).
Analytics - Demandware has an analytics package - it's built in and does 80% of what stand-alone services do, but it doesn't require an analyst, it needs a merchandiser. Traditional small business owners don't care about analytics - they don't know what it is. They're more likely to say "that's your problem, why should I care?" or "If you are down a lot you don't deserve to be in the business".
Can we help walk-in traffic for very small businesses? More and more even small providers are starting to drop out of the yellow pages.
Google and Intuit - Could Google Maps replace simple hosting? Not sure but Yellowpages.com might. But really you need an online presence where your customers are.
Lots of retailers graduate from Yahoo, eBay and Amazon because they want to do more and those guys can't offer it. "Those sites get a lot of people started but a limited mass market product doesn't meet all retailer's needs and we help them then". "Yahoo is one of our best sources of new business."
There are differences in Net retailing once you get outside the US. Schambach notes that Yahoo Stores aren't generally available outside North America. Europe is about two years behind US. Multilingual sites are a key driver - European companies are more interested in being multinational at the outset than US ones. Some differences in data privacy and currency conversion but they are not as big an issue as some people make out. Greater demand for integration with mobile services. Automatic translation just doesn't work - particularly for retail. But there are "human based services" that can automate through APIs.
Temperature Check: M&A and Investment Climate for Hosting Services
Andrew moderated this session that got moved from Day 2 to Day 1 (for no stated reason). The three panellists were Peter Hopper, DH Capital, William Charnock from EV1/The Planet, and Douglas Webster of Signal Hill Capital (with a name like that I was expecting Newfies.)
The EV1/Planet was a merger of two dedicated hosting providers. They both respected each other and often emulated each other. Having the founders out of both firms made it easier to get the deal done.
"Founder's Syndrome" - bubble had a big impact on people's vision of themselves and where their business can go. This time people are more realistic.
Pick any part of the market - valuations are up. Public companies have performed well and that makes a better market, but people still have a long memory and the bubble still impacts people". "Multiples of revenue are really multiples of cash flow in drag". "Watch that "public comps" are really comparable - sometimes they aren't". "I can't believe all the healthy companies out there".
The day ended with some Q&A and thoughts on the day with the Tier 1 analysts. Phil Shih made my day when he, without prompting or much context, recounted our buying Kiko on eBay.
I'll post my thoughts on Day Two in a few days. I was a bit more concise on Day Two, so don't expect an opus like this again!