The New Normal Ditlev Bredahl :: CEO, OnApp
My Service Provider CV Been in the hosting biz since 96 Last 6 years as CEO of UK2Group ($77M exit 2011) Plenty of M&A Now founder and CEO of OnApp.com Don t be a stranger! We re at booth C09
Software stack that automates Cloud CDN Storage Bare Metal
30% Marketshare
So, this is my 5 th keynote at WHD
And, I ve learned a few things
Never start your presentation with a graph!
+
Few slides = Good!
So let me start with a graph showing the impact of my 150 slides in 30 mins
Number of slides Death by powerpoint me Deaths in audience
And it s flavored with an excessive use of LEGO throughout.
Right let s get started!
OK our industry had a good few years
Things are changing though
Now the industry is in turmoil
Consolidation Endurance Group Ι Savvis Ι Zayo Ι HostEurope Ι SingleHop Ι Cogeco Ι IBM Ι web.com United Internet (1and1) Ι Telecity Ι InterXion Ι UK2Group Ι Six Degrees Group Ι etc etc
Capital requirements
CPAs skyrocketing
What worked yesterday does not work today!
Like
What did your clients care about? Uptime // SLA? Price? Support // Service?
Yes true, clients did care about that
The problem is that the whole industry focused on those three (and only those three) USPs
Hmm we all look the same?!
Where s Waldo Marketing
So, you all solved the same problem
And together we raised the bar
But what were cool USPs before, are now only the entry ticket to the game
Innovation died out, and we left the door open to the
MegaHosters
AWS = The Dark Side!
But AWS suck at price, uptime and support, right? Yup, we have nothing to worry about!
Yes, they really do
So how are they stealing my clients?
The AWS Jedi Mind Trick
You do not care about uptime, price & support! HUH?! Megahosters and their JEDI mindtrick
Why are megahosters not focusing on Uptime, Price or Support?
Because anyone can deliver good uptime, with decent support at fair pricing. It s a commodity. are you a commodity!?
Megahosters sell: 1. Scale 2. Geographical reach 3. Product breadth Because they know you can t
It s normal
rule of three
The rule of three is a rule of thumb suggesting that there are always three major competitors in any free market within any one industry. Boston Consulting Group in 1976
Three companies own over 80 percent of the carbonated soft drink industry. Three companies sell over 80 percent of the beer. Three companies sell over 80 percent of the cigarettes, and two companies sell over 70 percent of the cigars. Four companies sell over 80 percent of all the recorded music. Four companies own virtually all railroad operations. Six companies produce and market over 85 percent of all the movies. Two companies own a majority of the radio market. Three companies make over 95 percent of all the razors and razor blades. Two companies sell over 80 percent of all the cookies and crackers. Two companies manufacture and sell over 50 percent of all the toys. Two companies sell over 75 percent of all the carpets. Four companies sell over 80 percent of all the breakfast cereals. Two companies sell over 85 percent of the light bulbs. Three companies sell over 90 percent of consumer batteries.
Return on assets The ditch Specialists 1% 5% 10% 40% Generalists If specialists are too big If generalists are too small Their returns are too low, and they end up in the ditch! And 2-4 players end up winning Market share
Three end up standing We rock!
Splitting up the market between them *Mumble mumble* world domination *mumble*
Old school hosters will feel the pain!
Megahosters will eat you for breakfast
That was the first 50 slides
Go big or go home
That s the normal Deal with it
Back to the MegaHosters
IaaS Marketshare Rackspace Google IBM Microsoft YoY Growth AWS 51% MS 96% IBM 48% GCE 81% RAX - Amazon Marketshare 0% 10% 20% 30%
2010 2011 2012 2013 2014 2015 2016 CAGR 10-16 Dedicated hosting $3,078 $3,257 $3,468 $3,690 $3,922 $4,166 $4,421 6% Shared hosting $8,584 $9,385 $10,455 $11,621 $12,888 $14,244 $15,689 11% Managed Hosting $12,808 $15,524 $18,931 $22,958 $27,655 $33,179 $39,648 21% IaaS $680 $1,572 $2,872 $4,475 $6,211 $8,152 $10,232 57% PaaS $316 $618 $1,358 $2,232 $3,177 $4,244 $5,347 60% Total infrastructure $26,161 $31,359 $38,506 $46,902 $56,389 $67,188 $79,251 20% Overall growth ~%20 YoY
2010 2011 2012 2013 2014 2015 2016 CAGR 10-16 Dedicated hosting $3,078 $3,257 $3,468 $3,690 $3,922 $4,166 $4,421 6% Shared hosting $8,584 $9,385 $10,455 $11,621 $12,888 $14,244 $15,689 11% Managed Hosting $12,808 $15,524 $18,931 $22,958 $27,655 $33,179 $39,648 21% IaaS $680 $1,572 $2,872 $4,475 $6,211 $8,152 $10,232 57% PaaS $316 $618 $1,358 $2,232 $3,177 $4,244 $5,347 60% Total infrastructure $26,161 $31,359 $38,506 $46,902 $56,389 $67,188 $79,251 20% Overall growth ~%20 YoY IaaS/PaaS %60 YoY
So, clearly the fastest growing segment in the history of our industry And we left it to a bookshop?!
Like a boss
It s bound to happen to any industry growing up
It s normal, right?
Meanwhile, hosters are thinking
We will be fine Our customers respect us for who we are They like that local touch We have a special bond with our customers Loyalty blah blah
Let s stick with what we know
Right!?
Peter Drucker thinks you are wrong! Peter who!? Peter Ferdinand Drucker was an Austrian-born American management consultant, educator, and author, whose writings contributed to the philosophical and practical foundations of the modern business corporation
The winners will be people who break the mold and change the way stuff is done
Who create a new normal
50 slides left how are we doing? you still with me here?
Disruption!
Examples
What is the sharing economy? The Sharing Economy is a socio-economic ecosystem built around the sharing of human and physical resources
Keys for sharing economy 1.Unused capacity 2.Critical mass 3.Trust between strangers
Hotel industry Rooms +500,000 678,630 147,388 675,623 Market cap +$20bn 28bn $9bn $23bn Founded 2008 1919 1969 1927
530 hotels 78 Countries @ ~$200M each ~100 years
More Locations in San Francisco than Hilton has world wide Zero capex investment Less than 10 years in the making ~doubling in capacity YoY
World wide hotel occupancy rate ~65%. So, around 1 out of 3 rooms are empty! Statistica.com 2015
Where am I going with this?
Similarities Hotels and DCs 1. Unsold capacity = Lost money! 2. Utilization significant 3. Capex requirements prohibitively high
Q: Can we build airbnb for service providers?
Let s take those points again
Keys for sharing economy 1.Unused capacity 2.Critical mass 3.Trust between strangers
Keys for sharing economy 1.Unused capacity 2. Critical mass 3. Trust between strangers
our industry is super capex intensive
Gartner study from 2012 sets Data Center utilization rate at less than 13% world wide For whole sellers the number is closer to 60% For server capacity it s below 5%
Keys for sharing economy 1.Unused capacity 2.Critical mass 3.Trust between strangers
Keys for sharing economy 1. Unused capacity 2.Critical mass 3. Trust between strangers
OnApp only: ~200k servers
OnApp: 3,000 service providers
OnApp: 500k web apps
Keys for sharing economy 1.Unused capacity 2.Critical mass 3.Trust between strangers
Keys for sharing economy 1. Unused capacity 2. Critical mass 3.Trust between strangers
Trust is best achieved with FULL TRANSPARENCY!
This is how we do that in the OnApp Federation and marketplaces
For the first time ever Buyers can make an informed decision
And your clients have full transparency as well This is how we ve done it at cloud.net >>
Keys for sharing economy 1.Unused capacity 2.Critical mass 3.Trust between strangers
What would it take? A worldwide network of Service Providers A way to speak to them with one set of APIs A real time marketplace to buy/sell spare capacity A way to migrate workloads, to build fluidity And a new way to look at your competition
What s that I hear you say? I like to be in control
Well the model is not exactly new to our industry
At least 30% of our industry revenue is tied into reselling infrastructure or services outside of our control
You are already a reseller!
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
You re not doing all that, are you? Power IP DC DC gear Network gear Servers OS Software Etc.. Etc
Most are you are probably in this space Power IP DC DC gear Network gear Servers OS Software Etc.. Etc And reselling the rest to offer a full stack
Sales Business processes Management Applications Operating system Server Infrastructure Network Infrastructure Data center Infrastructure Datacenter plant and building IP/bandwidth/internet connectivity Redundant power supply
Margins Sales Business processes Management Applications Operating system Server Infrastructure Network Infrastructure Data center Infrastructure Datacenter plant and building IP/bandwidth/internet connectivity Redundant power supply
Technology has reduced transaction costs, making sharing assets cheaper and easier than ever - and therefore possible on a much larger scale
Sharing economy is reseller hosting on steroids!
What s next?
Marketplaces should not be closed
For ISPs, access is better than ownership
For now just: and
More to come this year
How does OnApp fit in?
In 2015 Uber, the world s largest taxi company owns no vehicles. Facebook the world s most popular media owner creates no content. Alibaba, the most valuable retailer has no inventory. And Airbnb the world s largest accommodation provider owns no real estate
How does OnApp fit in?
OnApp is to AWS what Airbnb is to Hilton
With OnApp you Have a competitive automated platform Get access to worldwide capacity on tap Monetize spare capacity in your data centers
#ThugLife
Together we have a shot at it - we can totally do this! Maybe running a bookshop is not all bad
d@onapp.com @ditlev skype: ditlev.dk Linkedin.com/in/ditlev
QA?
No? OK, so I brought my own...
Q&A 1. Who is OnApp again? Never heard of you 2. What does this mean to the environment? 3. Who else has done this? 4. How can we get started? 5. Do you have de-commoditization examples? 6. What else did Peter Bruckner say? 7. How many slides did you do a minute?
150/30 = 5 slides/min
Q&A 1. Who is OnApp again? Never heard of you 2. What does this mean to the environment? 3. Who else has done this? 4. How can we get started? 5. Do you have de-commoditization examples? 6. What else did Peter Bruckner say? 7. How many slides did you do a minute?
Q&A 1. Who is OnApp again? Never heard of you 2. What does this mean to the environment? 3. Who else has done this? 4. How can we get started? 5. Do you have de-commoditization examples? 6. What else did Peter Bruckner say? 7. How many slides did you do a minute?
Oh, and it s the right thing to do for the environment as well
Q&A 1. Who is OnApp again? Never heard of you 2. What does this mean to the environment? 3. Who else has done this? 4. How can we get started? 5. Do you have de-commoditization examples? 6. What else did Peter Bruckner say? 7. How many slides did you do a minute?
Q&A 1. Who is OnApp again? Never heard of you 2. What does this mean to the environment? 3. Who else has done this? 4. How can we get started? 5. Do you have de-commoditization examples? 6. What else did Peter Bruckner say? 7. How many slides did you do a minute?