ditlev bredahl on app
TRANSCRIPT
The challenges of our industry… Ditlev Bredahl, CEO OnApp @ditlev https://uk.linkedin.com/in/ditlev
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Today
I will talk about why I think the service provider industry is in trouble…
It’s not a pretty story I have to tell
Commoditization Scale Consolidation
But it’s flavoured with an excessive use of LEGO throughout.
and there’s a happy ending too…
120 slides in 30 mins!?
But first
My Service Provider CV…
Been in the hosting biz since ’96 @4 service providers
Last 6 years as CEO of UK2Group ($77M exit in 2011)
Plenty of M&A
Now founder and CEO of OnApp.com
Feel free to reach out for a chat!!
3 mins about OnApp…Automation platform for service providers
Cloud, Servers, CDN and Storage enablement
HQ in London, ~150 employees world wide
Founded late 2010, first Q of revenue in ‘12
+ DKK 100M runrate revenue
~ 30% marketshare
~ DKK 200M in funding from Lloyds+founders
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Haven’t heard of us?
APIs and PaaS hooks Web/Mobile Interfaces
Core Infrastructure Services
OnApp Cloud
Deployment & Automation
Compute
Load Balancing
Autoscaling
DNS
Networking
Template Store
OnApp CDN
Static Content Distribution
Live Streaming
OnApp Storage
Block Storage
Object Storage
User Management and Billing
OnApp Market
Future
Security-aaS
Database-aaS
VPN-aaS
Cloud servers Bare Metal Servers Smart Servers VPS via SolusVM
OnApp!
A complete platform for xSP’s
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Clients in DK/SE/NO?
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Axentus Web Solutions · Blanye · Host1 · ISPHuset Nordic · Meebox · Noisy Stream · NordkappNett · Planeetta Rapid Images · StayOn · Thor Data Center · Ehf Zoner · Azero · Bahnhof · Ballou Internet Services · Ember Sparks · FSD Internet Tjanster · GleSYS Interner Services · Ipeer · IP-Only Telecommunication · ITStaden · Nebula Oy Oderland Webbhotell · Oy Capnova · PRO ISP · Rackhosting.com · Suomen Hostingpalvelu · TDC Hosting · Avalonia.net · Solido Hosting A/S
Quite a few in DK!
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Axentus Web Solutions · Blanye · Host1 · ISPHuset Nordic · Meebox · Noisy Stream · NordkappNett · Planeetta Rapid Images · StayOn · Thor Data Center · Ehf Zoner · Azero · Bahnhof · Ballou Internet Services · Ember Sparks · FSD Internet Tjanster · GleSYS Interner Services · Ipeer · IP-Only Telecommunication · ITStaden · Nebula Oy Oderland Webbhotell · Oy Capnova · PRO ISP · Rackhosting.com · Suomen Hostingpalvelu · TDC Hosting · Telia · Avalonia.net · Solido Hosting
OnApp key clients…
CDN & cloud (2014) Cloud (2011) Cloud & Servers (2012) Cloud (2012) CDN (2013/14)
Cloud (2012) Cloud (2012) CDN & cloud (2011) CDN & cloud (2013)Product: Cloud (2013)
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And +1000 more…
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Now, stop the spam …or I will shoot the cat!
OK, so - Today…
Setting the scene…
451research numbers
~33000 service providers world wide
Megahosters…
AWS vs You
0"0.5"1"
1.5"2"
2.5"3"
3.5"4"
4.5"
AWS" Everyone"else"
Rackspace
451research numbers
!!
0%! 5%! 10%! 15%! 20%! 25%! 30%!
Amazon!
Microso3!
IBM!
Google!
Rackspace!
Cloud&Marketshare&
Marketshare!
YoY#Growth#
AWS# 51%#
MS# 96%#
IBM# 48%#
GCE# 81%#
RAX# :#
So#Cloud#is#probably#the#largest#commercial#opportunity#in#the#history#of#our#industry…
8#and#we#left#it#to#a#bookshop?
What the…? How did h*ll that happen!?
Let me start by asking…
What are your USP’s?
• Uptime?
• Price?
• Service levels // Support?
Where’s Waldo (Holger) Marketing!
hey - we all look the same!?
Higher CPA’s
Lower Prices
Race to the bottom…
What are your USP’s?
• Uptime?
• Price?
• Service levels // Support?
Build your own niche!
But, wait... Amazon sucks at
all that?!shhh!!
Uptime, Price & Support?
It’s true - AWS does suck at all that…
Uptime?!
Price?!
SLA’s? Support?
So…why are they stealing our
clients?!
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‘The AWS JEDI MindTrick’
“You do not care about uptime, price
and support”
“Huh?”
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.
AWS
Gartner's IaaS Magic Quadrant:
“Amazon Web Services is the 800-pound gorilla”
“Its large pool of capacity in the cloud optimizes it for batch computing,”
“richest IaaS portfolio of services”
Amazon has 3 things going for them...
1. Scale Scale Scale
2. Geographical reach (with easy access)
3. Unmatched product breadth
Let me take them one by one…
ScaleOnly AWS can deliver 1000 servers instantly
with no contracts
Geographical reachOnly AWS can present one pane of glass to 9 locations world wide
Product BreadthAWS’ products used to be really basic…
But now their product portfolio is unmatched
Hard to compete on those three points; it is
1. Scale Scale Scale
2. Geographical reach (with easy access)
3. Unmatched product breadth
20142011
Uptime, Price
Support
2013
GeoReach
&Data
Locality
2012
Scale
It’s getting more and more expensive to have a meaningful offering to the market…
Product Breadth
98% of service providers still focus there…
Product Breadth
A step back for a bit of perspective… on a serious note!
The rule of three’s
“The rule of three’s” 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
The Rule of Three’s
• 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…
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.
So, it’s a natural part of an industry growing up.
Big guys get bigger, small guys die or get acquired
And it will happen to you…
Right, we’re f*cked...
Unless you find a way to break the model and disrupt the market…
How to avoid getting ditched…
Similarities…Hotels and DC’s1. Unsold capacity = Lost money! 2. Utilization rate significant KPI 3. Capex requirements prohibitively high 4. Hotels totally commoditised (more about that later)
Hotel industry…
Rooms +500,000 678,630 147,388 675,623Market cap +$20bn 28bn $9bn $23bnFounded 2008 1919 1969 1927
50 slides left :)
Where am I going with this?
530 hotels 78 Countries @ ~$200M each ~100 years
HUGE entry barriers!!
More Locations in San Franciscothan Hilton has world wide
Zero capex investment Less than 10 year 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
Our industry is even more 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%
Can we build airbnb for service providers?
We think so…
Geographical Reach, check!Together, as an industry, we’d have more locations than anyone
OnApp alone +500 locations, in +100 countries
100K
80K
5K
3K 3K
OnApp alone ~200k servers
‘unlimited’ Scale, check!Together, as an industry, we’d have more scale than anyone
5K
Renewable energy
Clear water technology app
Ecommerce cluster app based
on OSS
Commercial CRM solution
Satellite navigation
OnApp alone +650k front facing apps
Product Breadth, check!Together, as an industry, we’d have more apps than anyone
Though, this should not be an OnApp-only project!
Together we stand strongScale, Reach and Product champions
AWS
Remember this one?
“Amazon Web Services is the 800-pound gorilla”
“Its large pool of capacity in the cloud optimizes it for batch computing,”
“richest IaaS portfolio of services”
AWS
“Amazon Web Services is the 800-pound gorilla”
“Its large pool of capacity in the cloud optimizes it for batch computing,”
“richest IaaS portfolio of services”
Together these guys would have more scale, reachor products than AWS would ever get…
Remember this one?
Oh - and it’s way better for the environment to utilise existing capacity
rather than building new
New times = New solutions
AWS is still a toddler
Time to act is now, in a few years it’s too late
So, summing up…Three Points today, was made:
1. De-commoditise; you must 2. Work together; or die you
will 3. Act now; important is
Did all that make sense?
What would I ask?1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…
What would it take?
1. A world wide network of Service Providers
2. A way to speak to them with one set of API’s
3. A real time marketplace to buy/sell spare capacity
4. A way to migrate workloads, to build fluidity
5. And a new way to look at your competition
What would I ask?1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…
What if we do not work together?
The big guys are taking over
‘The long tail’ is going away
This will be the end of the long tail of our
industry
Partner up
…or you’ll struggle to stay relevant
Megahosters will erode our niches, product and geographical.
The megahosters will eat us for breakfast
We have to look around for new niches
Or other ways to survive…
What would I ask?1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…
Eksempler på de-commoditization
What would I ask?1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…
Consolidation and Pluralisation
• We will see much more specialisation
• We will see service providers setting up without any infrastructure at all
• We will see loads of ‘Virtual service providers’ like Tesco Mobile, Virgin Mobile etc.
You’ll have to decide…
You build services You sell services
Only megahosters can succeed at both!
What would I ask?1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…
What would I ask?1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…
No
No, it really isn’t
Workloads do not care about cloud
- they just want to work
What would I ask?1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…