isabel wang

Let us go and make our visit

My 10th grade English teacher made the whole class memorize The Love Song of J. Alfred Prufrock, a T.S. Eliott poem about... the relationship between web hosting providers and SaaS. No, really.

Do I dare
Disturb the universe?

So Prufrock is a lonely guy who is intrigued by romance but hesitates to make a move. He ponders over "a hundred visions and revisions" but ultimately concludes "No! I am not Prince Hamlet, nor was meant to be..."

Web hosting companies, likewise, are fascinated with SaaS. As 1&1 CEO Andreas Gauger tells eWeek: "web hosting is becoming more and more of a commodity play... In three or four years, SaaS will overtake the revenue we get from hosting." But in the meantime, 1&1's website calls bandwidth and web space the "core features" of its service.

After all, bandwidth/web space are traditional web hosting providers' bread and butter. At a time when the commodity hosting business seems to be humming along, is it really worth it to reach beyond the industry's shared/VPS/dedicated comfort zone?

Is it perfume from a dress
That makes me so digress?

And yet... Who can resist the allure of analysts' optimistic projections? Or Salesforce.com's $4.72 billion market cap? That's 7.27x annualized revenue compared with Web.com's 2.06x or Savvis' 2.50x. (Poor Savvis. Its valuation fell by 25% in July!) The Planet, for one, seems to be paying attention. Have you seen how "SaaS Hosting" is at the top of its Managed Hosting service catalog, four spots above "Website Hosting"?

Still, my Texan friends don't seem any better equipped to engage with SaaS developers than Prufrock is to pick up girls. The Planet's view of "SaaS business challenges" encompasses only infrastructure issues - which is only a small subset of what's on a SaaS CTO's mind. For instance, check out Bill Boebel's blog post on why Webmail.us moved its storage from Rackspace to S3. Amazon has web services he could leverage to build stuff faster!

Why can't traditional web hosting providers understand that time is sooo often more important to customers than money??

I have heard the mermaids singing, each to each.
I do not think that they will sing to me.

Speaking of Amazon, I've been told time and again that S3 and EC2 are "not web hosting". Same goes for Office Live. Or Google Apps. Or MySpace. Or Flickr. Or Salesforce.com. Or Demand Media's ChannelMe.tv. Not. Web. Hosting.

But do end users care? Do developers? 265,000+ people have signed to to build stuff on Amazon's platform. 7,000+ attended Salesforce's developer conference last year. Besides, didn't Andreas - CEO of the largest hosting company in the world - say that SaaS will overtake commodity hosting within 3-4 years?

Oh, do not ask, “What is it?”
Let us go and make our visit.

If you work for a company that's in the commodity hosting business, you could weigh SaaS risks and opportunities in Prufrock-like isolation - or come to San Francisco on September 5-7!

At last year's Office 2.0 Conference, I got to talk to hundreds of SaaS developers about their infrastructure *and* business challenges. Your product manager should have been there. And he ought to be there this year. He (and every other attendee) will get an iPhone, which might help him meet girls, even as he figures out how to lure in more SaaS customers. What could be better?

PS - Early bird registration ends on July 31; the ticket price will go up by $500 starting Wednesday. Office 2.0 is produced by Ismael Ghalimi, who is the CEO of Intalio and keeper of the Office 2.0 Database. Check out the list of SaaS providers, end users and VC investors who have already signed up. See you there! :)

Can hosting partners make any contribution to the Microsoft cloud?

I was telling Suren Singh (who is a Hosting Solutions Manager at Microsoft) that I'm not sure it'd be wise for a web hosting provider to consider MSFT its partner. Microsoft is investing zillions on its data centers, in which server count has doubled over the past year. It's already hosting Exchange and SharePoint for Energizer and plans to sell hosted services to others "vigorously and transparently". The reassurances it gave at its partner conference earlier this month were fuzzy at best...

In retrospect, my objection was poorly phrased. What I should have said was, I'm not sure how much sense it makes for Microsoft to have a hosting partner program.

The day before yesterday, Ray Ozzie outlined the three layers of Microsoft's software + services platform in his presentation to Wall Street analysts. These include:

1. Global Foundation Services: huge data centers in which "reliability is achieved through redundancy, not the fail-safe nature of any given component"

2. Cloud Infrastructure Services (which Nicholas Carr calls the Cloud OS): virtualized utility computing fabric with application framework that supports horizontal scaling and manages load balancing/performance optimization

3. Live Platform Services: data and features - such as identity management, contact lists, user presence and advertising - that are shared across multiple Microsoft and 3rd party apps

Now, in which of these layers can a commodity hoster make ANY contribution?

Ozzie went on to describe Microsoft's target audiences. Individuals, he said, will enjoy connected entertainment and productivity. Companies will be able to move their IT infrastructure into the cloud at the "lowest, lowest possible cost". And developers will have limitless access to computing and storage capacity at "very, very low cost".

(Quote from CNET: "Microsoft is trying to make sure that its business terms are attractive enough to woo the next MySpace or YouTube to bet on its technology. It has spent months talking to existing partners, but also to venture capital firms and start-ups. For now, Microsoft is offering up many of its services free for up to 1 million users, while saying it wants to strike some kind of deal if a service exceeds that threshold.")

Let's think - can traditional shared/VPS/dedicated hosting providers help deliver any of these benefits, considering their track record of fostering NO connections between customers and stranding user data on non-redundant, stand-alone servers?

Ozzie did acknowledge that some companies will want to maintain on-premise servers ("the ultimate in customization and control") and others will work with partners to “take advantage of unique vertical expertise or vertical solutions”. Unfortunately, I don't think such expertise/solutions are available from 99% of the folks Suren met at HostingCon.

Ozzie's vision reminded me a lot of Amazon Web Services, for which its evangelists have built a vibrant developer ecosystem. Why, in contrast, would Microsoft want to sign up hosting partners who are not at all equipped to advance its cause?

PS - Duncan Strong from Melbourne IT made a more compelling case for Microsoft's hosting partners program than any Microsoft employee I've met. He said since MSFT product managers have P&L responsibility, they generally gear development efforts toward distribution channels that deliver the highest ROI. Up until now, the hosting channel has done better than Xbox Live, let's say. But... software + services is sooo much farther from traditional hosters' core competency than Windows Server SPLA licenses.

Reverse delegation

Jess and Jeff (who are two of my most insightful friends) came to the same realization at HostingCon: most people they met "operate a company", while very few "run a business".

Jess explains that operating a company means jumping in the trenches and rolling up one's sleeves. Lots of multi-talented web hosting company founders, for instance, get personally involved with closing sales, configuring servers, writing code, answering support calls...

Running a business, on the other hand, means setting goals, developing procedures and delegating as much as possible to appropriate talent. Jeff points out that just as bureaucracy stifles innovation within large organizations, the reluctance to hand off responsibilities hinders smaller companies from reaching the next level.

An interesting corollary to Jess' and Jeff's discovery is, most folks at the show target do-it-yourself customers (smaller/lower growth?) instead of those who are looking to delegate (higher potential?).

As a point of reference, let's consider 1&1, whose CEO obviously doesn't spend his time in the trenches. Its web hosting service includes a bewildering array of features: in addition to my site creator/form builder/Perl syntax checker, I could install SMF, Brim, Mantis and many other applications I'm not familiar with. If I were a multi-talented customer who's ready to roll up my sleeves, I might even be able to take advantage of the pay per click and CitySearch ad vouchers. 

But... is learning to use my web hosting account the highest and best use of my time and attention? Should web hosting CEOs help me recognize that it isn't - and offer to take on more of my responsibilities even as they hand off tasks on their own plates?

IDC says use of dedicated servers to totally plummet

Earlier this week IDC analyst Chris Ingles *conservatively* estimated that within 4 years, only 50% of all physical servers will run as standalone machines (versus 93% today).

Other analyst predictions for 2011 include the virtualization services market reaching $11.7 billion (says IDC, up from $5.5 billion in 2006), and the global SaaS market reaching $19.3 billion (says Gartner, up from $6.3 billion in 2006). In contrast, the server hardware market will "struggle to maintain growth rates of more than 2% annually" (IDC).

Many dedicated servers providers will say the good news is, they already offer VPS or grid hosting and Hosted Exchange! But such offerings represent only a pin-sized tip of the virtualization/SaaS iceberg. And of course, every hosting company wants to "help customers do business online". But typical web-hosting-industry definitions of customer service (timely hardware replacement, prompt ticket resolution, etc) fall far short of what Salesforce.com, for instance, delivers.

Salesforce EMEA co-president Lindsey Armstrong's presentation at Data Centres Europe really opened my eyes as to what vendor/customer relationships should be like. She said her sales reps are held responsible for not just sign-ups, but making sure users are getting value out of their purchase. Are people logging in? How much time are they spending on the system? What features are they using? Because once software becomes shelfware, you can start looking forward to cancellations. (Which reminds me, I've got a couple of unused hosting accounts that I should cancel. Customers who don't have pending support tickets aren't necessarily happy customers!)

A dedicated server sales manager I recently spoke to gasped when I suggested he should find out what customers are doing with their gear. He can't afford to! There's not enough hours in a day! But I'm wondering if he can afford NOT to, with billions of dollars on the line?

Jeff is making me want to start a hosting company

Jeff from rackAID points out a whole bunch of auxiliary revenue opportunities that hardly anyone is taking advantage of.  9 out of 10 hosting companies claim their target audience is small business owners - so why not go one step farther and think about what these folks might need besides a website?

"Why not have a deal with CafePress or Zazzle to sell merc based on the domain? Want a coffee cup with that shared hosting account?

Why not take the info entered at sales time and pipe to a VistPrint API to order new business cards?

Why not immediately suggest all related domain names and offer discounted pricing on purchasing them?  Go beyond the silly .net and .org suggestions.  Offer mis-spellings, synonyms, plurals?

Why not offer boiler-plate press releases ready for submission with name and hosting info filled in?  Work out a deal with PRWeb to auto submit a mini-release for a client every time a new account is purchased. The client can edit and select a release date?

Why not have a Q&A form to find out the types of apps the client needs and either pre-install them for link them to appropriate software that has paid support options?"

Also, why not sell customers web design/online marketing/server security books from Amazon? Partner with Staples and let them order office supplies right from their web hosting control panel? Show them flight deals from their home city?

I think GoDaddy, in particular, could start a marketplace like Threadless for customers to share TheirName.com t-shirt designs. There must be sooo much creative talent among the millions of domain name owners it serves.

I keep telling my web hosting friends about this BusinessWeek article, which says RyanAir  (aka "Wal-Mart with Wings") made $332 million last year through sales of non-air-ticket items such as rental cars, hotel rooms, ski packages, etc. But maybe nobody wants to be "Wal-Mart with servers" because Josh from DreamHost might say they've sold out :)

It's like spaghetti

I was talking to my friend Alex, who's a developer at a major web hosting company. Back in 1999, he said, all browsers acted differently, forcing site owners to use proprietary markup. But now that we've got standards like CSS and XHMTL, everyone benefits. 

The data center world is unfortunately still stuck in the Dark Ages. Most hosting facilities are populated with a wide variety of hardware (Dell, HP, Super Micro, Sun...), on which users run many operating systems (Windows, Solaris, Linux, BSD). This means Alex and his counterparts have to code 100 different ways of remote rebooting servers, monitoring CPU utilization, etc. Wouldn't it be nice if there were an industry-wide API so that instead of IPMI/DRAC/iLO/ALOM, every machine at any hosting company understood the same language?

Whereas web standards have given rise to greater web design creativity, I'm afraid data center standards (through either the API Alex described or virtualization technologies that deliver a consistent user experience regardless of server-specific hardware performance) would make web hosting providers even more indistinguishable than they already are from one another.

Alex thinks good service will remain a key differentiator. As with the restaurant business, customers who are treated right will keep coming back. But imagine if every Italian chef in your town adopted the same pasta-making standards, guaranteeing on-demand availability of perfect spaghetti. Would fast and courteous spaghetti delivery become your sole criteria for restaurant selection? Or might you look for an ambiance that matches the occasion? Or beyond-the-spaghetti menu options?

Don't say this is where any similarity between restaurants and web hosts ends. Instead, check out the latest issue of Amazon's developer newsletter. Scroll two thirds of the way down and read the "Intro to Amazon" tutorials for C#, Java, PHP and Ruby developers. All are written by 3rd party experts who are actual S3/EC2 users, and each section contains case studies and performance optimizing tips.

You, too, could offer customers and prospects the specific experience they're looking for. As my other friend Jeff (who helped me close deals with and hold on to more EV1 customers than I can remember) recently pointed out, you've just got to start asking what they want.

Web 3.0 magic

There's an article in the latest issue of Business 2.0 (sorry, not yet online) about the semantic web (aka Web 3.0). I was reminded of this passage while watching 3Tera's mega-grid demo last week (504 instances of UnixBench running across 400 CPUs with 1TB RAM, 40 TB storage and 200 Gbps of bandwidth capacity!).

Say you want to organize a dinner at an upcoming conference. Today you might go through your address book and ping folks by email to see who's attending. Then you go back and forth with the group on the time and place. In the semantic web, your software agent could cull the conference attendees and make a list of potential invitees, negotiate the date and time with everyone else's agents via a calendar database, pick a restaurant from another database based on availability...

This pretty much sums up the difference between physical and virtual infrastructure. Let's say you want to build a server cluster. Yesterday you might have assembled and installed software on individual servers, connected them to a switch... Now you could simply sketch out the desired components on your AppLogic canvas and press go. Your "software agent" would immediately head over to the data center and do all the work - within minutes. As Jimmy Guterman puts it, sometimes technology feels like magic.

In contrast, earlier today I had lunch with Hillary and Frank Stiff from Cheval Capital and David Snead. (We are getting ready for a HostingCon workshop about metrics that impact web hosting success; please join us!) We joked that when asked how their companies are exceptional, most web hosting providers offer the identical response: they've got great support! (Unrelated note - sales guru Jeff Thull says widely-shared value propositions make  a company sound more equal than different from competitors. It gives everyone "expected credibility" rather than the "exceptional credibility" one needs to rise above the noise.)

The problem is, "great support" might be the wrong basis for a vendor-customer relationship. "Great support" implies that you're focused on getting tricky technology to work properly - instead of exploring ways to do cool things with magical technology.

"Great support" proponents often remind me that no automation tool will ever diminish the importance of customer service - customers crave that personal touch! And I somewhat agree. But I think we might be entering an era in which "great support" starts giving way to "great advice". Instead of troubleshooting technology problems, winning web hosting vendors (and their software agents!) will soon be helping individual customers concoct magical solutions for achieving their particular business goals.

Undervalued & illiquid near-equals a long way from achieving escape velocity

Andy Schroepfer wrote a long post about the WebSitePros/Web.com merger earlier this week. He points out that the combined entity joins Hostway/Affinity and Endurance/iPowerweb as new members of the $100M+ annual revenue club. The "undervalued and illiquid near-equals" he says, remain "undiscovered for the most part, and still battling for a slice of the massive SME market opportunity, which both firms have always talked about but barely shown the results..."

Will consolidation make WebSitePros/Web.com more appealing to end users? Based on the services that they offer, I'm not optimistic. WebSitePros says its "web designers, copywriters, editors and quality control specialists" will "take the time to get your site right". Sadly, your content will start going stale the minute your brochureware package is delivered. And Web.com's site creation software provides "relevant starter text based on the template you select". With this wonderful time saver, you could launch a website just like 1000s of others!

In short, both WebSitePros and Web.com (not to mention many of their competitors) are still stuck on the increasingly antiquated notion of web presence. Microsoft's Chris Jones, on the other hand, says web services are all about helping customers stay connected. Marc Andreessen, too, thinks over 1 billion people have become Internet users because we want "new ways to connect, new ways to share, new ways to communicate -- new ways to be part of the network, part of the world."

With many millions of MySpace and Facebook users, Marc says social networking has reached escape velocity. With 234K subscribers, WebSitePros/Web.com haven't - and won't. Unless they start thinking beyond hosting static websites to helping customers engage their audiences. BT Tradespace (which is powered by software from my friend Matt Howar'ds company SMBLive!) for one, invites visitors to rate and comment on vendors' products. And TypePad offers a growing catalog of widgets that help site owners collect feedback and build communities.

Of course, Web.com, as Andy mentions, is holding on to the hope that its control panel patent claim will be upheld.  The legal proceedings might cause GoDaddy some grief, but it sure won't create market leadership in the "massive SME opportunity".

A few additions to Ilya's 10 commandments of SaaS

SWSoft's Ilya Baimetov wrote a really good post listing 10 requirements for an efficient software-as-a-service infrastructure (from the perspective of web hosting providers who want to become SaaS aggregators). Among the points he makes are the importance of automated provisioning/licensing/billing, and the need for simultaneously achieving user density and isolation.

Ilya also mentions integration, in terms of having single sign on and a consistent UI across multiple applications, but that's only the tip of the iceberg. What about giving customers and 3rd party developers API access so that they can combine functionalities you've developed or aggregated with those available elsewhere? As David Berlind puts it, open APIs bring large numbers of developers into "the mashup ecosystem of software where they can draw upon multiple APIs from multiple sources to produce unique and innovative applications" - which create far more value than can be delivered by any single vendor.

By the way, the quote above is from David's post on Google Gears, which gives users offline access to their hosted data. This is sort of related to Ilya's notion of portability - though Ilya's idea is to allow customers to painlessly migrate between different hosting providers who support the same SaaS app. As a SaaS user, I have to say that I am more interested in accessing my calendar and spreadsheets on a plane than being able to switch hosting plans at will.

But the main thing I wanted to add to Ilya's list is data aggregation (in either implicit or explicit forms). As Zoli Erdos wrote last October, this is THE hidden business model enabled by SaaS. FreshBooks publishes industry average stats so that customers can benchmark their companies' financial performance against peers. Wesabe helps users identify opportunities for cost-savings based on each others' purchasing behavior. ThinkFree has a marketplace where customers can share/reuse each other's work... If a hosting provider wants to be in the SaaS aggregation business, it should at the very least be able to tell me which apps are the most popular among companies like mine.

A couple of weeks ago, Doug Johnson (Ilya's co-author of SWSoft's SaaS blog, which I highly recommend that you subscribe to) quoted from an IDC report that "it's unclear what the hosting provider’s role will be in the SaaS market”. Doug proposes that hosters should be SaaS market leaders, but I feel like they first have a whole lot of catching up to do. As a point of reference, none of SWSoft's 10,000+ hosting partners have managed to win Ilya's and Doug's business; their blog is hosted on Google.

That's why I'm not a fan of Hosted Exchange

From Mary Jo Foley over at ZDNet: Microsoft will be promoting its hosted CRM and hosted messaging/collaboration services at NXTComm this week. Not software licenses, mind you, but services. Four corporate customers, including Energizer, are already using Microsoft-hosted apps, plus-

"Earlier this month, Ron Markezich, Microsoft Vice President of Managed Solutions, said Microsoft is looking to build and support a Microsoft-hosted service component for almost every one of its software products. Next up are a Microsoft-hosted business-intelligence solution and some kind of Microsoft-hosted SoftGrid application-virtualization offering... Microsoft currently has a “very small sales team” selling Microsoft-hosted services. Microsoft is relying primarily on its dedicated account executives to let customers know they can buy these services directly from Microsoft."

Now seems like a terrible time to be a Windows hosting provider, especially if you've developed any kind of SaaS strategy based on Microsoft products... Of course, Microsoft would be glad to have you resell its version of Google Apps for Partners. They develop and host the software; you sign up customers and provide support. Does this arrangement leave hosting partners (well, soon to be support partners) with enough room for differentiation? I'm not so sure.