HostingCon 2015, the 11th instance of an annual event that is a focal point for the community around the Web and application hosting business, took place in San Diego in late July, gathering hosting service providers and technology vendors from around the US and beyond. HostingCon looked to the hosting industry's future with a session program that touched on new technologies, modes of service delivery and go-to-market strategies, as well as the evolving influence of public policy. Its keynote looked to the industry's past, with a presentation by former SoftLayer CEO Lance Crosby, who detailed the story of the hosting company he ultimately sold to IBM for $2.2bn.
According to organizers, the event grew slightly from the previous year, attracting just more than 1,100 attendees (or 1,800 including exhibitors). 451 Research participated in the event as attendees, exhibitors and speakers, with our analysts moderating and participating in four separate sessions.
The 451 Take
HostingCon, a bit of a venerable institution in the hosting space, is an event in transition – a reflection of the fact that the traditional hosting market is undergoing a transition. Business models have been tied for many years to a fairly limited set of infrastructure-based products, such as shared, dedicated and virtualized hosting; domain names; SSL certificates; and other add-on features. In recent years, the technology has stratified to include utility infrastructure as a service, SaaS-based Web presence and email services, and other technologies. HostingCon is evolving to incorporate these technologies as hosting providers themselves evolve to remain relevant in a shifting technology market. HostingCon remains a central meeting point for the hosting industry, and a source of insight with regard to that changing landscape. The hosting market is a key area of coverage within the Service Provider channel for 451 Research, which also seeks to be a source of critical insight on the shifting trends in the hosting market.
Building a billion-dollar business
Hosting providers of all sizes were eager to hear Crosby discuss how he went about building a two-billion-dollar business at the 11th annual HostingCon keynote. He started the company with nine other founders in 2005, and eventually sold to IBM for $2.2bn in 2013. Along the way, he learned valuable lessons that he passed on to the eager entrepreneurs in the room. Among Lance's recommendations:
- Don't let people bully you.
- Build a culture embraced at all levels of the company.
- If there is investor money or financing available, take it.
- Make decisions that are best for the company, not ones that are best for an individual.
The changing face of hosting M&A
Mergers and acquisitions continue to be an important aspect of 451 Research's coverage of the hosting business, as well as a category of coverage for our Market Monitor service. Recent examples include SingleHop's acquisitions of Server Intellect in March and Datagram in June, as well as the June acquisition of Codero by a consortium of regional telcos and the May pickup of Liquid Web by PE firm Madison Dearborn Partners.
In a Monday morning session that included participation from 451 Research, panelists discussed the changing nature of M&A in the hosting space. Consolidation was once the driving force behind acquisition in the space. Indeed, over the years shared hosting providers have had a reasonable expectation that they could, at some point, be acquired for their customer bases. This may no longer be the case. While acquisition is still considered an avenue for subscriber acquisition to some extent, that driver is changing. Rather than looking mainly to increase their subscribership, large hosting providers are focused on increasing per-subscriber revenue through the offering of adjacent services to existing users. In some cases, they are turning to acquisition to procure this type of technology.
Consequently, the characteristics that make hosting businesses valuable to prospective acquirers are changing. More so than just customer count, these characteristics include a proprietary technology that can be cross-sold to hosting customers (uncommon for a small hosting provider), in-house expertise in supporting a particular user application (such as WordPress or Magento) or a particular vertical market (such as pro Web designers and developers), and an effectively deployed platform for distributing a popular technology – such as infrastructure as a service or Office 365.
DevOps for the enterprise
According to 451 Research's 2014 Q1 DevOps Study, 36% of enterprises built their own continuous-integration tools, and 28% are still not using any CI tools, even though 60% of these same enterprises are spending more than 25% of their time on adapting applications and processes for cloud services and platforms. At HostingCon, several sessions and many of the vendors hawking wares at the event were focused on DevOps – the confluence of developers and IT operations teams for faster, more efficient software iteration and releases, as well as improved responsiveness. For example, cloud providers are increasingly offering infrastructure and application layer management, orchestration, and automation to DevOps-oriented users and customers.
During the 'DevOps and the Enterprise Cloud' session moderated by 451 Research, the panel debated the potential hype in DevOps. The conclusion was that, if a development team or line of business wants to use a tool, framework or process for faster releases, they will quickly be tasked with proving it. DevOps has always been about proving improvements with metrics, such as time to deploy, time to market, time to respond, uptime, quality, efficiency, cost savings and effectiveness. While enterprises are eager to use new cloud technologies to deliver their software more frequently, among the conclusions were that, for DevOps in general, it's still early among large and mainstream enterprises.