On app Ditlev Bredahl

Lessons from the trenches( d h b ild fi bl l d h i b i )

Lessons from the trenches( d h b ild fi bl l d h i b i )(and how to build a profitable cloud hosting business)(and how to build a profitable cloud hosting business)

Cloud Expo Europe London 2nd February 2011Cloud Expo Europe, London, 2nd February 2011

Ditlev Bredahl, CEO, OnApp

@ditlev@ditlev linkedin.com/in/ditlevlinkedin.com/in/ditlev

Ditlev Bredahl, CEO, OnApp

@ditlev linkedin.com/in/ditlev@ditlev@ditlev linkedin.com/in/ditlevlinkedin.com/in/ditlev

facebook.com/ditlevfacebook.com/ditlevditlev@onapp.comditlev@onapp.com

@ditlev linkedin.com/in/ditlev

facebook.com/ditlevditlev@onapp.com

What is OnApp?

Cloud deployment & management p y gsoftware for hosting providers

What does OnApp do?

Commodity hardware Elastic cloud On demand resources End users

VM DeploymentVM DeploymentVM ManagementVM HA/Failover

User managementUtilit BilliUtility Billing

Company info

+45 employees in US and EU+45 employees in US and EU+45 employees in US and EU

45 +,000 servers deployed45 +,000 servers deployed45 +,000 servers deployed

10 +0 client clouds deployed10 +0 client clouds deployed10 +0 client clouds deployed

~Adding 1 cloud per day~Adding 1 cloud per day~Adding 1 cloud per day

So, what have we learned...

… +from 100 cloud deployments ?

Vendor & analyst chatter

EC2EC2

AzureAzure

I biliI biliCloud OSCloud OS

CloudwareCloudwareInteroperabilityInteroperability

Cloud Oriented ArchitectureCloud Oriented Architecture

CloudwareCloudware

Cloud Oriented ArchitectureCloud Oriented Architecture

PortabilityPortability Cloud StorageCloud Storage

Consumption Based PricingConsumption Based Pricing

This is what they’ll tell you…

They’ll tell you that it is very expensive…

Or very complicated…

=

=

That it will solve all problems

Or that cloud is just the same old same old…

What we thought hosts cared about

Security Security

I t bilit Interoperability

Compatibility

What hosts actually care about

Low entry costs Low entry costs

Ti t k t Time to market

Density/profitability

What challenges do hosts face?

Storage:

#1 concern

100+ clouds, close to 50 different storage configsdifferent storage configs

Ability to use multiple tiers of Ability to use multiple tiers of storage

Billing for IOPS

What challenges do hosts face?

Traditional storage vendorsTraditional storage vendors

Not always a fit for mass Not always a fit for mass-market hosts

The industry is crying out for storage innovationstorage innovation

What challenges do hosts face?

Infrastr ct reInfrastructure:

Ability to use existing Ability to use existing infrastructure

Capitalizing on depreciated hardwarehardware

Ability to mix ‘old’ & new gear Ability to mix old & new gear

What challenges do hosts face?

BillinBilling:

New billing structures New billing structures

Charging per hour per minute Charging per hour, per minute

Or should they? Or should they?

What challenges do hosts face?

Support:Support:

Finding hiring training staff for cloud hosting servicesFinding, hiring, training staff for cloud hosting services

“Support us like we support our clients”Support us like we support our clients

What challenges do hosts face?

Cloud hosting business planCloud hosting business plan:

Hosts need to pay attention to Hosts need to pay attention to their cloud business strategy

...even more so than usual

Business plan – ARPU & Profits

H Cli$35,640

$33,391 $35 000

$40,000

$700

$800Host Client

$25,000

$30,000

$35,000

300

99

$500

$600

$10,080 $8 030$10 000

$15,000

$20,000 300

$200

$300

$400

$8,030

$0

$5,000

$10,000 300

100$0

$100

$200

Dedicated Cloud

Monthly revenue Gross prof it

Dedicated Server Cloud Server

WebServer 1 WebServer 2 Load balancer

Business plan – ARPU & Profits

H Cli$35,640

$33,391 $35 000

$40,000

$700

$800Host Client

With the cloud:With the cloud:

$25,000

$30,000

$35,000

300

99

$500

$600

Potential revenue/cab increases – at a Potential revenue/cab increases – at a

$10,080 $8 030$10 000

$15,000

$20,000 300

$200

$300

$400higher margin too – BUT with lower ARPUs

higher margin too – BUT with lower ARPUs$8,030

$0

$5,000

$10,000 300

100$0

$100

$200

>> KEEP AN EYE ON CPAs <<>> KEEP AN EYE ON CPAs <<

Dedicated Cloud

Monthly revenue Gross prof it

Dedicated Server Cloud Server

WebServer 1 WebServer 2 Load balancer

Business plan – higher entry barriers

Hardware cost of bringing your first dedicated server

Hardware cost of bringing your first cloud server client y

:client live $2,500y

:live $25,000

Cloud – the end of overselling?

Shared hosting:Shared hosting: 540 seat Jumbo jet = 700 passengers

Dedicated server hosting: 540 seats = 540 passengers540 seats = 540 passengers

Cloud hosting:540 seats = 4-500 passengers

Underselling??

What does the future hold?

Cloud – 3 phases

1 The Cloud is cool and sexy1. 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 offeringg y g

3. The Cloud is no longer the cloud

I ’ h ff i d• It’s how stuff is done…

How will hosts compete?

De-commoditize the cloud offer

Add value with partner deals

Target specific niche markets Target specific niche markets

In summary

Cloud is here to stay

It isn’t as complex or expensive as you It isn t as complex or expensive as you might think

The time to act is now – late arrivalswill face a much tougher market

!Thanks!Thanks!Thanks!Thanks

Ditlev Bredahl, CEO, OnAppDitlev Bredahl, CEO, OnApp, , pp

@ ditlev@ ditlev linkedin.com/in/ditlevlinkedin.com/in/ditlev

, , pp

@ ditlev linkedin.com/in/ditlev

facebook.com/ditlevfacebook.com/ditlevditlev@onapp.comditlev@onapp.com facebook.com/ditlevditlev@onapp.com