DECEMBER 2011

451 RESEARCH: HOSTING© 2011 THE 451 GROUP, 451 RESEARCH AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

CLOUD INFRASTRUCTURE SERVICESHERE COME THE HEAVYWEIGHTS - 2011 EDITION

HOSTING

451 RESEARCH: HOSTING 1 © 2011 THE 451 GROUP, 451 RESEARCH AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

REPORT SNAPSHOTTITLE Cloud Infrastructure Services: Here Come The

Heavyweights – 2011 Edition

ANALYSTS Doug Toombs, Research Manager – Tier1 Research

RELEASE DATE December 2011

LENGTH 40 pages

ABOUT THIS REPORTOver the past two years, the marketplace for cloud computing has gone through

dramatic and substantive changes. In the next several years, cloud computing is

projected to have stunning growth rates across all the major categories of service –

IaaS, PaaS and SaaS. With a projected growth rate greater than any other sector of the

service provider marketplace that Tier1 Research currently tracks, the overall combined

cloud services market is expected to reach $23 billion by 2014.

To that end, service providers are responding to the changes in the market by updating

their service catalogs to become more cloud-friendly. T1R expects that in the years

ahead, the lines and distinctions between traditional hosting descriptors – shared,

dedicated, managed – will become less relevant, as customers make more calculated

decisions based on financial considerations between dedicated systems and cloud/elastic

capacity needs.

Customer adoption of cloud computing services is showing a steady upward trajectory

within the data that 451 Research collects, with 20-25% of customers surveyed

indicating they are using some type of public cloud computing service – SaaS, PaaS

or IaaS. Among the workloads customers are moving into the cloud, development

and testing are obvious, but customers are also turning to cloud for collaboration

approaches, CRM and BC/DR needs – functions that could find their way to a cloud

product just as easily from a business unit as from centralized IT.

Finally, one of the most interesting data points to come out of 451 Research’s

acquisition of TheInfoPro and ChangeWave Research is input on what criteria customers

consider most important when evaluating cloud service providers. Perhaps counter-

intuitive to what service providers might expect, ‘technical specifications’ such as

network, compute and storage architectures seem to have the least level of importance

to customers, where as more ‘business-oriented’ attributes such as SLAs and support

models rank highest.

2 CIS - HEAVYWEIGHTS 2011© 2011 THE 451 GROUP, 451 RESEARCH AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

COMPANIES INCLUDED IN THIS REPORT

Amazon

1&1 Internet

8x8

AdvancedHosters

Akamai Technologies

Amazon.com

AT&T

BlueHost

BlueLock

Cbeyond

CenturyTel Internet Holdings

(CenturyLink)

Cogent Communications

Datapipe

Defender Technologies Group (Virtacore)

Dimension Data Holdings

Endurance International

Fusepoint Managed Services (Savvis/

CenturyLink)

GI Partners

GoGrid

Greensoft Solutions (GSI Hosting)

Group NBT

HgCapital

Hosted Solutions

Hosting.com

Hosting365

Hostway

IBM

IKANO Communications

Internap Network Services

Joyent

KKR

Layered Technologies

LeaseWeb

Level 3 Communications

Liquid Web

MaximumASP

Media Temple

NeoSpire

netdirekt

Network Solutions (Web.com)

New Dream Network (DreamHost)

NTT America

OneNeck IT Services

OpSource

pair Networks

PEER 1 Hosting

Quantcast

Rackspace

Savvis

451 RESEARCH: HOSTING 3 © 2011 THE 451 GROUP, 451 RESEARCH AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

ServePath

ServInt

Silver Lake Partners

SingleHop

Singtel

SoftLayer Technologies

Standing Cloud

SunGard Availability Services

TDS Telecommunications

Technology Crossover Ventures

Terremark Worldwide

The Go Daddy Group

tw telecom

Verizon Business

Verizon Communications

VISI

VMware

Web.com

WEBZILLA

Windstream Communications

Yahoo

Zerigo

COMPANIES INCLUDED IN THIS REPORT

4 CIS - HEAVYWEIGHTS 2011© 2011 THE 451 GROUP, 451 RESEARCH AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

TABLE OF CONTENTS

EXECUTIVE SUMMARY 1

INTRODUCTION . . . . . . . . . . . . . . . . . . . . . . . . . 1

KEY FINDINGS. . . . . . . . . . . . . . . . . . . . . . . . . . 2

METHODOLOGY . . . . . . . . . . . . . . . . . . . . . . . . . 2

DEFINING THE CLOUD COMPUTING MARKET 4

CORE CLOUD ATTRIBUTES . . . . . . . . . . . . . . . . . . . . . 4

TYPES OF CLOUD COMPUTING. . . . . . . . . . . . . . . . . . . . 4

FIGURE 1: Market Taxonomy 5

IAAS DEFINED . . . . . . . . . . . . . . . . . . . . . . . . . . 5

COMPUTE-AS-A-SERVICE MARKET OVERVIEW 6

COMPUTE-AS-A-SERVICE MARKET SIZE, 2010-2014 . . . . . . . . . . . 6

FIGURE 2: Compute as a Service Market Sizing and Projection 7

FIGURE 3: 2010 & 2014 Compute ‘as a Service’ Revenue by Geography 8

COMPUTE-AS-A-SERVICE GLOBAL LEADERBOARD . . . . . . . . . . . . 8

FIGURE 4: 2010-2014 Compute ‘as a Service’ Global Leaderboard 9

PROVIDER SHARE OF TOP 100,000 WEB SITES . . . . . . . . . . . . . . 10

FIGURE 5: Share of Top 100,000 Websites Attributed to Providers 11

CLOUD CUSTOMER BUYING TRENDS 15

CLOUD ADOPTION BY BUSINESSES SURPASSES 20% IN 2011 . . . . . . . . 15

FIGURE 6: Public Cloud Computing Adoption Trend 15

WHICH WORKLOADS ARE COMPANIES MOVING TO THE CLOUD?. . . . . . . 16

FIGURE 7: Workloads Moving to the Cloud 16

RELIABILITY NOT A SIGNIFICANT CONCERN . . . . . . . . . . . . . . 18

FIGURE 8: Perceptions of Cloud Reliability 18

FIGURE 9: Effects of AWS Outage on Future Cloud Use 19

WHAT ATTRIBUTES ARE CUSTOMERS LOOKING FOR IN CLOUD

SERVICE PROVIDERS . . . . . . . . . . . . . . . . . . . . . 19

FIGURE 10: Service Provider Selection Criteria 20

SECURITY AND CHANGE ARE STILL LARGEST OBSTACLES . . . . . . . . . 21

FIGURE 11: Reasons for Not Using Cloud 21

451 RESEARCH: HOSTING 5 © 2011 THE 451 GROUP, 451 RESEARCH AND/OR ITS AFFILIATES. ALL RIGHTS RESERVED.

PROJECTED CLOUD SPENDING CHANGES IN 2012 . . . . . . . . . . . . 22

FIGURE 12: Cloud Spending Changes in 2012 22

EVENT ANALYSIS 23

CLOUD OFFERINGS EVOLVING INTO MANAGED CLOUD . . . . . . . . . . 23

FIGURE 13: Hosted Services Consolidating Around Axis of

Services, Elasticity 24

BLENDED CATALOGS OF OFFERINGS GAINING TRACTION . . . . . . . . . 24

SERVICE PROVIDERS LAUNCHING OFFERINGS ON TOP OF

AMAZON AWS . . . . . . . . . . . . . . . . . . . . . . . . 25

VMWARE LINKS PROVIDERS’ CLOUDS WITH GLOBAL CONNECT . . . . . . . 25

OPEN DATA CENTER ALLIANCE PUBLISHES CLOUD USAGE MODELS . . . . . 26

OPENSTACK PROJECT KICKS OFF, GROWS AND LAUNCHES CLOUDS

WITHIN 18 MONTHS . . . . . . . . . . . . . . . . . . . . . 27

M&A ACTIVITY BRISK THROUGH 2010-2011, NO SIGNS OF SLOWING DOWN . . 28

FIGURE 14: Merger and Acquisition Activity, 2009-11 29

THE $64,000 QUESTION: DOES CLOUD EVENTUALLY CANNIBALIZE HOSTING? 30

FIGURE 15: Projected Impact of Cloud Computing on Hosting

Revenues through 2013 31

APPENDIX A: DEFINITIONS AND DELIVERY MODELS FOR THE CLOUD 32

CORE CLOUD ATTRIBUTES . . . . . . . . . . . . . . . . . . . . . 32

FIGURE 16: Cloud Infrastructure Criteria 32

WHAT ARE THE CLOUD DELIVERY MODELS? . . . . . . . . . . . . . . 36

APPENDIX B: HOSTING TAXONOMY 38

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