It's a Cloud World: Are Hosters Doomed?
Tuesday, November 12, 2013
Flying around Europe this fall, I met a lot of worried hosters. In the cloud computing era, what kind of future does a relatively small local hoster have? Given that they're now competing against behemoths like Amazon Web Services and Windows Azure, do they even have a future?
Hosters definitely have a future, but it's different from their present in some ways. Here are some of their challenges:
- Cloud platform providers like Microsoft and Amazon can offer lower prices. While this isn't always true today, it will be in a few years as the cutthroat competition between these giants continues to force prices down. Most hosters won't have anything like the scale and automation of the big cloud providers, and so hosters' higher costs are likely to require them to charge higher prices.
- Some cloud platform providers, such as Microsoft, have relationships with customers that a typical hoster can only dream of. A Microsoft salesperson with a Windows Azure quota is a fierce competitor for a small hoster.
But hosters will survive--they also have some advantages. These advantages include:
- In-country datacenters. Even though regulations that constrain data to remain within a single country's borders are likely to be loosened, this will take time (and it may never happen for some kinds of data). For an organization that wants to outsource its computing infrastructure, this reality constrains them to use a hoster datacenter within their national borders. Large as they are, the big cloud vendors will never have datacenters in every country.
- The ability to offer customized services. Cloud platform vendors provide massive, automated, low-cost computing platforms. To do this, they rely on consistency--they don't do much customization. Local hosters, by contrast, rely on personalized service. They can potentially do anything the customer wants, including providing both physical and virtual machines, installing custom hardware, and more.
- Better SLAs, at least for some customers. I don't mean that hosters will be more reliable--they probably won't be--but they can offer SLAs that provide compensation for business losses. SLAs from the big cloud platform vendors just give you discounts for downtime--they're about pricing, not promises. For some customers, this can be attractive.
- The potential for better support. Especially in smaller countries, local hosters can offer things like support in the local language. The overall relationship with customers might be more personal, too, with the potential for long-term relationships with the people who run the hosters. Big cloud platforms may be cheap, but they also tend to be remote and impersonal.
Should hosters welcome the rise of global-scale cloud platforms? Probably not--they're strong competitors in some parts of their business. But are the countless local hosters scattered across the world doomed? No. They have some advantages that the big guys don't. Even in a cloud world, hosters have a significant role to play.