1. Lessons from the trenches
(and how to b ild a profitable cloud h i b i
( dh build fi bl l d hosting business)
)
Cloud Expo Europe, London, 2nd February 2011
Europe London
Ditlev Bredahl, CEO, OnApp
@ditlev linkedin.com/in/ditlev
ditlev@onapp.com facebook.com/ditlev

2. What is OnApp?
Cloud deployment & management
p y g
software for hosting providers

3. What does OnApp do?
Commodity hardware Elastic cloud On demand resources End users
VM Deployment
VM Management
VM HA/Failover
User management
Utility Billi
Utilit Billing

4. Company info
45+ employees in US and EU
45,000+ servers deployed
100+ client clouds deployed
Adding ~1 cloud per day

5. So, what have we learned...
…from 100+ cloud deployments ?

6. Vendor & analyst chatter
EC2
Azure Cloud OS
Interoperability
I bili Cloudware
Cloud Oriented Architecture
Portability Cloud Storage
Consumption Based Pricing

7. This is what they’ll tell you…

8. They’ll tell you that it is very expensive…

9. Or very complicated…
=
=

10. That it will solve all problems

11. Or that cloud is just the same old same old…

12. What we thought hosts cared about
 Security
I t
Interoperability
bilit
 Compatibility

13. What hosts actually care about
 Low entry costs
 Ti
Time t market
to k t
 Density/profitability

14. What challenges do hosts face?
Storage:
 #1 concern
 100+ clouds, close to 50
different storage configs
 Ability to use multiple tiers of
storage
 Billing for IOPS

15. What challenges do hosts face?
Traditional storage vendors
 Not always a fit for mass-
mass
market hosts
 The industry is crying out for
storage innovation

16. What challenges do hosts face?
Infrastructure:
Infrastr ct re
 Ability to use existing
infrastructure
 Capitalizing on depreciated
hardware
 Ability to mix ‘old’ & new gear
old

17. What challenges do hosts face?
Billing:
Billin
 New billing structures
 Charging per hour per minute
hour,
 Or should they?

18. What challenges do hosts face?
Support:
 Finding hiring training staff for cloud hosting services
Finding, hiring,
 “Support us like we support our clients”
Support clients

19. What challenges do hosts face?
Cloud hosting business plan
plan:
 Hosts need to pay attention to
their cloud business strategy
 ...even more so than usual

20. Business plan – ARPU & Profits
Host
H $800
Client
Cli
$40,000
$35,640
$35,000
$35 000 $33,391 $700
99
$30,000 $600
$25,000 $500
300
$20,000 $400
$15,000 $300
$10,080
$10,000
$10 000 $8,030
$8 030 $200
300
$5,000 $100
100
$0 $0
Dedicated Cloud Dedicated Server Cloud Server
Monthly revenue Gross prof it
WebServer 1 WebServer 2 Load balancer

21. Business plan – ARPU & Profits
Host
H Client
Cli
$40,000 With the$800
$35,640 cloud:
$35,000
$35 000 $33,391 $700
99
$30,000 $600
$25,000 Potential revenue/cab increases – at a
$500
300
$20,000
higher margin too – BUT with lower
$400
$15,000 $300
$10,000
$10 000
$10,080
$8,030
$8 030 ARPUs$200
300
$5,000 $100
>> KEEP AN EYE ON CPAs << 100
$0 $0
Dedicated Cloud Dedicated Server Cloud Server
Monthly revenue Gross prof it
WebServer 1 WebServer 2 Load balancer

22. Business plan – higher entry barriers
 Hardware cost of bringing  Hardware cost of bringing
y
your first dedicated server y
your first cloud server client
client live: $2,500 live: $25,000

23. Cloud – the end of overselling?
Shared hosting:
540 seat Jumbo jet = 700 passengers
Dedicated server hosting:
540 seats = 540 passengers
Cloud hosting:
540 seats = 4-500 passengers
Underselling??

24. What does the future hold?

25. Cloud – 3 phases
1.
1 The Cloud is cool and sexy
• High margins, high conversions, low CPAs
2. The Cloud is commoditized
• A CPU is a CPU is a CPU = transparency = price erosion
• Focus on de-commoditizing your offering
gy g
3. The Cloud is no longer the cloud
• I’ h
It’s how stuff i d
ff is done…

26. How will hosts compete?
 De-commoditize the cloud offer
 Add value with partner deals
 Target specific niche markets

27. In summary
 Cloud is here to stay
 It isn t as complex or expensive as you
isn’t
might think
 The time to act is now – late arrivals
will face a much tougher market

28. Thanks!
Ditlev Bredahl, CEO, OnApp
, , pp
@ ditlev linkedin.com/in/ditlev
ditlev@onapp.com facebook.com/ditlev