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.

Bigger than SaaS

IDC thinks the global SaaS market will be worth $19.3 billion by 2011, but BusinessWeek says the US pet products market passed the $20 billion mark well before George Bush took office. This year Americans will spend $41 billion on their pets ("more than the GDPs of all but 64 countries in the world"). Annual spending is expected to hit $52 billion by 2009.

Over 71 million American households own pets, while just 60 million have broadband Internet access. PetSmart's services business will generate $450 million in 2007 revenue, which is less than Salesforce.com's $497 million last fiscal year, but a lot more than RightNow Technologies' $110 million. Stats like these kind of put things in perspective...

Death to email?

Last October the Chronicle of Higher Education ran an article entitled Email is for Old People. It (as well as a 2005 Pew Internet report) said that teenagers see little need for email when they've got IM, text messages and social networking profiles. I remember thinking, just wait til they get jobs! But earlier today, I came across a bunch of different things that made me realize today's 12-17 year olds might not grow up to have email-centric professional lives.

Stephen O'Grady already doesn't. If you need to reach him in a hurry, he says you'll have better luck via IM than email. And if you'd like to schedule a meeting, check out his free/busy calendar. RedMonk also has an IRC channel, and all three analysts twitter.

Jeff Barr recently moved one stop closer to a future without email with the launch of Amazon's Evangelist on Demand, where interested developers can put themselves on his schedule. As Jeff explains it, this self-serve system cuts down on email traffic, leaving him more time to actually go out and talk.

Dennis Howlett has spent 7 weeks using Facebook as a business tool; he says the speed at which problems are solved is breathtaking. In particular, he mentions Robert Scoble's post on the Facebook + Google Reader combination. Instead of emailing interesting articles to individual friends, you could simply mark notable items as "shared" and let Facebook help prioritize by showing top shared items for the past 12 hours, by certain friends, across its entire system...

Many of my web hosting friends have told me that technology early adopters like Stephen/Jeff/Dennis aren't necessarily relevant examples. Their customers are "regular people" who aren't hip to newfangled communications tools; they're plenty happy with Hosted Exchange. Check out this New York Times article, though. It says Moosejaw Mountaineering's text message marketing campaign got a 66% response rate! In contrast, you'd be lucky if even 6% of your email newsletter's recipients opened it.

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?

Where does data belong?

Jon Udell wants a central repository for his digital assets, which include not just photos/videos/blog posts/etc, but also medical/financial/other records, and maybe social networking profiles/contacts too.

"Some are on websites that I control, and a lot more that I don’t. Others are on local hard disks that I control, and a lot more that I don’t... I’d be willing to pay for the service of consolidating all this stuff, syndicating it to wherever it’s needed, and guaranteeing its availability throughout — and indeed beyond — my lifetime."

He imagines a scenario that begins at birth: "In addition to a social security number, everyone gets a handle to a chunk of managed storage." The question is, where would this storage be located? Ilya Baimetov and I have been discussion 4 possible alternatives:

1. A "virtual personal server", as envisioned by Rod Boothby:

Your data would reside not in one single location but across a collection of services (such as Flickr, Zoho, etc) that you stitch together via interoperable APIs. The main drawback is, in order for your personal server to function properly, all underlying services must be up and running. In addition, Ilya points out that the larger your files, the less feasible it becomes to send them over the Internet for processing.

2. An enterprise-class storage system maintained by a hosting provider, as discussed in Hitachi CTO Hu Yoshida's recent blog post:

Ilya thinks it would be most efficient if you used applications that are hosted in the same data center also. But since this would require hosting providers to reach FAR beyond their accustomed role and get involved with selecting/maintaining/integrating/supporting large numbers of 3rd party apps, I'm not optimistic it will result in a coherent end user experience.

3. Multiple web apps, one storage vault:

Some time ago Fred Wilson mentioned he'd like to store his Gmail/Flickr/TypePad files on a 3rd party system so that he has more control over his data. OmniDrive CEO Nik Cubrilovic says that's exactly what he'd like to help accomplish.

"The idea is to aggregate your content from different apps and have them all in one place. Your files get cached with Omnidrive; from there you can open them up on your desktop or drag them into another folder which is linked to another app."

Of course, now you become dependent on OmniDrive's performance. Ilya also worries about the data transfer speed between OmniDrive and various apps.

4. Multiple web apps, distributed storage vault:

There's another storage provider called Cleversafe; its software splits your files into dozens of encrypted slices and stores each at a different data center. You can access your data as long as (and only when) you're able to access a majority of the slices. This simultaneously prevents data loss and unauthorized access. I'm fascinated by the possibility that when you sign up for Salesforce, Google Apps, etc in the future, you'd give each service your Cleversafe key so that any content you create is immediately encrypted/dispersed. But Ilya isn't sure it's possible to dis-assemble/re-assemble data on the fly without impacting performance.

Jon says a "hosted lifebits" service seems inevitable in the long run. Ilya thinks the shortest path between here and there is #2; he's even developed standards to help make it happen. I'm intrigued with #4 but thinking #1 is most realistic for now. You?

Are hosting partners an asset or a encumbrance to Microsoft's S+S aspirations?

Microsoft will soon start selling Dynamics Live CRM, a hosted service, for $44-$59 per user per month. Seattle Post-Intelligencer's Todd Bishop points out that these rates are significantly lower than the $70-$100+ that Salesforce.com and other SaaS vendors currently charge. Techdirt's Joe Weisenthal thinks low prices won't be Microsoft's trump card. Instead, it's MSFT's extensive partner network that will help make Live CRM a success. But I wonder...

Microsoft did announce Live CRM at its worldwide partner conference. According to CNET's reports, COO Kevin Turner and CRM general manager Brad Wilson worked hard to make nice. Yes, the product's on-premise, partner-hosted and Microsoft-hosted versions share the same code base. And yes, it's possible some end users might want Microsoft and not partners to do the hosting. But "partners of record" who help sign up customers will get a 10% cut of ongoing subscription revenue. That's a much better deal than first-year-only commissions offered by certain competitors.

And Allison Watson, head of Microsoft's worldwide partner program, also did her best to reassure. She notes the possibly difficult changes ahead but promises that Microsoft will point partners in a new direction: "In cases where Microsoft is hosting the software, we’ll clearly outline areas in which partners can participate... As more products become available in the software plus services area, we will continue to define the partner revenue possibilities for each."

But ZDNet's Mary Jo Foley seems unconvinced that "creating partner opportunity is in Microsoft's DNA". She says if history is any indicator, Microsoft won't hold back from pursuing every possible market segment directly. 

Think about it: Steve Ballmer is building $500 million data centers. He says he will start selling managed services (such as hosted SharePoint and Exchange, which Energizer has been piloting) "much more vigorously and transparently". And his COO thinks Office Live "has the potential to become one of the three or four most-used Microsoft products".

Somehow I get the feeling that for Microsoft, hosting partners are more of an albatross than a strategic priority. And the wonderful new place that Microsoft wants to help them "move comfortably into" is on the sidelines.

PS - Zoli and Sridhar are right! $59 might be cheaper than Salesforce, but it doesn't undercut Zoho CRM.

Email is not a killer app!

groupSPARK CEO Ravi Agarwal has an interesting take on Google's $625 million Postini acquisition.

"Overall the SaaS messaging space is heating up... After all, email is the killer app for SMBs...  This is the first volley from Google attacking Microsoft's hold on the lucrative messaging software for SMB's. Google ultimately wants to go after the Microsoft Exchange Server market, but hasn't much success so far getting SMB's to pay for services... Google is playing catch-up here, but clearly will pose a strong challenge to Microsoft in the future."

But email is NOT a killer app (let alone THE killer app)! Instead, what SMBs really want is a coherent, 360 degree solution for managing their front- and back-office operations. As SMBLive CEO Matt Howard puts it, running a business is all about maintaining 5 conversations: you use office productivity apps to organize your own ideas, collaboration platforms to share information with colleagues and partners, transaction and contact management tools to keep track of current vendors and customers, sales/marketing/networking services to connect with new ones...

While email can play a role in these interactions, it's a means rather than an end. A means whose usefulness may one day end. As Dennis Howlett writes on ZDNet: "I see a combination of Twitter and Facebook as having the potential to replace 90% of the email I receive while improving my personal productivity."

RedMonk (the most influential analyst firm on the web, with THREE top 10 spots on Technobabble's league table!) recently switched from Zimbra to Google Apps, a move which Stephen O'Grady described as trying out a new *collaboration platform* rather than a different messaging service. That makes me think it's Microsoft, not Google, that needs to play catch-up.

Every Google Apps account (whether paid or free) exposes new users to not just Gmail, but also Google Talk, Google Calendar and Google Docs/Spreadsheet. Sooner or later Google will integrate Google Checkout, Google Base, JotSpot, GrandCentral, etc. Google Apps is evolving into a switchboard for our 5 conversations (whether we choose to conduct them via email, wiki, IM, phone calls...). Its all-in-one-ness will turn the SaaS messaging space into a too-narrow niche for most SMBs to explore. Unless Microsoft begins bundling Office, SharePoint and everything else it's got with each Exchange Server license, it won't be able to hold on to the email market. And neither will its hosting partners.

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".

The personal server

Rod Boothby makes a very interesting point:

"The personal server is actually not one dedicated machine. Instead it is a collection of services that end users select, run, customize and connect over time. Get a blog at wordpress.com, get a page at Facebook, another at LinkedIn, etc."

Rod thinks companies/teams/individuals will choose among endless varieties of hosted apps for whatever tasks at hand. These apps will be woven together by "new types of web services that take advantage of open APIs and deliver useful tools to support process integration".

He sees personal servers being delivered not by one single vendor, but through a "constantly evolving heterogeneous collection of services with open APIs and tied together by integration services".

Rod's vision makes more sense to me than the prevailing view among hosting providers that SaaS means creating islands on which applications they select run on their networks, are provisioned through their billing systems, and are supported by their staff. After all, no single company can keep track of every potentially useful tool on the market?