MANAGED INFRASTRUCTURE MARKET OVERVIEW 2013

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1 EXECUTIVE OVERVIEW MANAGED INFRASTRUCTURE MARKET OVERVIEW 2013 Global Perspectives KEY FINDINGS Managed hosting as a subset of managed infrastructure remains the overwhelming bulk of the market opportunity in the IT infrastructure provider market, but the tide still favors IaaS providers against traditional dedicated server engagements. The technology gaps between all forms of infrastructure services are collapsing; value-added services, both human and technical, remain the differentiator between raw infrastructure provisioning capabilities and managed services. Hybrid cloud managing both external and internal IT resources from a single, software-defined management plane is increasingly a normative assumption for enterprises moving toward -asa-service IT deployments. Consolidation within the telecom market is nearly complete at the top end of the managed infrastructure market; however, a long tail segment of independent providers remains vibrant. SEPTEMBER 2013

2 REPORT SNAPSHOT TITLE Managed Infrastructure Market Overview 2013 ANALYST RELEASE DATE September 2013 LENGTH Carl Brooks, Research Analyst, Internet Infrastructure Services 35 pages ABOUT THIS REPORT This report takes an inclusive look at the managed IT infrastructure market, composed of the managed hosting segment but also including IaaS and dedicated hosting services. Moreover, it breaks out revenue estimates and key trends for various segments of infrastructure covered by 451 Research, with special focus on managed hosting as the largest segment of external infrastructure consumed by the market. The managed infrastructure market in North America is by and large mature and thriving and an area of strong economic activity, including mergers, acquisitions and investments as well as revenue growth. In other global regions it is in varying states of maturity but also experiencing strong growth and represents a diverse range of opportunity. There is a clear shift toward provider-centric IT in the enterprise and in the overall technology markets, including online applications, mobile development and general computing that all favor the hosted infrastructure provider. All of the macroeconomic pressures on the information technology market favor the continued adoption of external infrastructure services. By way of perspective, 451 Research estimates that within the near to mid-term, the overall opportunity for the hosting market, including Web and application hosting, dedicated and managed hosting providers and IaaS providers will be at more than $59bn in gross revenue by 2016, larger or equal to the same opportunity represented by global server sales in total. However, this market is also undergoing a fundamental competitive shift away from the traditionally designated categories based on technology and capability toward a model of value added by distinct service delivery capabilities based on the target vertical and customer demographic. As this competitive transition happens, it means more direct competition with traditional allies like network providers, multi-tenant data center (MTDC) providers and IT services organizations and increasing pressure to standardize and commodify base infrastructure to increase efficiency and retain healthy margins. This effect is more pronounced in certain regions like Asia-Pacific and Latin America, but the overall conclusion is that managed infrastructure is a rapidly expanding market around the world, driven by favorable economic conditions for providers.

3 EXECUTIVE OVERVIEW COMPANIES INCLUDED IN THIS REPORT AT&T Cable&Wireless Worldwide CenturyLink Choopa.com Dada SpA Deutsche Telekom Endurance International Group IBM iweb Technologies LeaseWeb Melbourne IT NaviSite NTT NTT Communications Orange Business OVH PEER 1 Hosting Rackspace Savvis SoftLayer SunGard Availability Services Time Warner Cable Verio Verizon Enterprise Services Verizon Terremark Vodafone MANAGED INFRASTRUCTURE MARKET OVERVIEW 2013

4 TABLE OF CONTENTS THE STATE OF THE MANAGED INFRASTRUCTURE MARKET 1 INTRODUCTION KEY FINDINGS METHODOLOGY THE MANAGED INFRASTRUCTURE MARKET AT A GLANCE 3 INTRODUCTION TO THE NUMBERS Figure 1a: Total Managed Infrastructure Market 3 Figure 1b: Total Managed Infrastructure Market 4 Figure 2: Managed Hosting Top 10 Leaderboard 4 Figure 3: Web and Application Hosting Market Share, (est.)... 5 DEDICATED HOSTING Figure 4: Dedicated Hosting Top 10 Leaderboard 6 CLOUD Figure 5: Aggregate IaaS Revenue ($bn) 7 GLOBAL PERSPECTIVES 9 Figure 6: Global Breakout of Hosting, by Region 9 Figure 7: Projected Growth by Region, (est.) 10 ENTERPRISE ADOPTION AND MOMENTUM 12 Figure 8: Off-premises IT Outsourcing, Dedicated/Managed Hosting/ Multi-tenant Colocation Technology Roadmap 12 Figure 9: 2014 vs Spending Change for Off-premises IT Outsourcing, Dedicated/Managed Hosting/Multi-tenant Colocation Technologies 13 Figure 10: 2014 vs Spending Change for Off-premises Public Cloud Services Technologies 14 CUSTOMER SENTIMENT Figure 11: What Enterprises Want From Infrastructure Providers 15 THE CHANGING COMPETITIVE LANDSCAPE 16

5 EXECUTIVE OVERVIEW INFRASTRUCTURE, CLOUD AND THE THREE-WAY RACE 16 Figure 12: Extrapolating Competitive Overlap 16 Figure 13: The Three-way Race CORE MANAGED INFRASTRUCTURE PROVIDERS 18 VERTICALS DRIVING DIFFERENTIATION AND GROWTH 21 Figure 14: How to Differentiate on Cloud 22 SELECTED PROVIDER PROFILES 23 RACKSPACE VERIZON ENTERPRISE SERVICES AT&T CONCLUSIONS 28 APPENDIX A 30 RELATED REPORTS AND RESEARCH 30 TAXONOMY 31 MANAGED INFRASTRUCTURE MARKET OVERVIEW 2013

6 ABOUT 451 RESEARCH 451 Research is a leading global analyst and data company focused on the business of enterprise IT innovation. Clients of the company at end-user, service-provider, vendor and investor organizations rely on 451 Research s insight through a range of syndicated research and advisory services to support both strategic and tactical decision-making Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice.