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SWSOFT GLOBAL HOSTING SUMMIT 2006

Industry Trends and ChallengesSWsoft Products, Corporate Update and Future Plans

Serguei Beloussov, CEO

Kurt Daniel, VP Marketing and Alliances

Ezequiel Steiner, Director of Business Development

May 2006

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Agenda• SWsoft intro – why should you listen?

• Strategic Industry Challenges and Trends▪ Automation and SWsoft products are formed around addressing them

• Some of the tactical service provider challenges▪ Virtuozzo as a solution

• More tactical service provider challenges▪ OPEN FUSION as solution

▪ Plesk, other products and product strategy

• SWsoft corporate▪ Overview, status and plans

▪ Partnership update by Ezequiel Steiner

▪ Marketing update by Kurt Daniel

• Summary and Executive Q&A


• Serving Web Hosting Industry since 1999

• The global market leader in Web Hosting service provider software▪ Over 10,000 service providers in over 100 countries

▪ Control Panel Automation powering more than 150,000 physical servers

▪ 15,000+ additional physical servers each month

▪ Over 400,000 VEs on over 10,000 Virtuozzo servers

▪ 1000+ Virtuozzo servers (for hosting) every month, accelerating

▪ Over 10 mln domains/active sites, over 50 mln mailboxes

• Product and services portfolio which covers all aspects, all major platforms for all types of Web Hosting in 21+ languages

Why Should SWsoft Have a Perspective?


Strategic Hosting Market Challenges• Lack of Investment community interest

▪ Large players failed

▪ Perceived small market

▪ Results• Lack of capital led to

slower than possible growth

• Unique purchasing and payment patterns

• Lack of Media & Analyst coverage▪ Large players failed

▪ Results• Higher customer acquisition costs

• No medium to educate customers and partners about service differentiations

• Persistent confusion about the market size, structure and players


Unique Industry features• Mass Market Hosting defined

▪ Not Telco/ISP, Not Colo, Not Online Services and Not Enterprise IT Outsourcing

▪ Low-end, mid-size, high-end up to 20K$/service unit per year

▪ Sells - Domain, Shared, VPS, Dedicated, Managed, Application, Access, Certificates, Colo and Marketing – focus on the large numbers

• Different competitive landscape from general IT▪ 75%+ Linux only slightly changing with Microsoft push

▪ Dell is by far No.1 branded server vendor

▪ Germany is the most advanced market with the highest service penetration and sophistication, lowest prices but highest profits

• Web Hosting is a very segmented market▪ The largest players less then 5% in revenue share

▪ Each geographical market has its own leader

▪ On top of that variety of generalized and specialized players• Full service, dedicated, managed, application, mail, shared, registrar, certificates, VPS-only,

ISP/Telco, marketing monsters ?, domain portfolios ?, community sites


• More Full Service providers

• VPS & DS, DDS – Virtualization

• Advanced Windows hosting

• Discounted Dedicated

• Advanced & Managed Dedicated

• Registrar and HSP convergence

• Telco/ISPs moving back in

• BLOG hosting

• Discounted Advanced Shared

Market Trends as Suggested 1 Year Ago


• Potential Trends▪ Hosted Exchange, SharePoint, LCS

▪ Market Consolidation

▪ DSL & other connectivity

▪ Marketing Services

▪ Game Hosting

• Opportunities▪ Virtualized low to high-end dedicated/managed services

▪ Resurge of free web and email hosting

▪ Complete and easy-to-use CMS hosted

▪ Full service and easy-to-use eCommerce hosting

▪ Even more application hosting (CRM, etc)

▪ Resurge of investment community/press interest & IPOs

Potential Trends & Opportunities as of 1 Year Ago


Future Trends As We See Them Now• Virtualization everywhere

• Secondary domain services, domain hosting

• Managed, complex and high-end dedicated

• Shared hosting threatened by community sites, free hosting and monsters

• Rich email/collaboration

• Certificates resurge

• More full service providers including registrars

• Industry consolidation, continued interest from investment community and increasing valuations – 0.3x > 1x > 2x > 4x > what’s next?

• IT/Software as a service?

• Virtualization for complex hosting?


Automation as Enabling Technology Marketing

50% of success ▪ Good Products▪ Good Pricing▪ Good Promotion

Service & Support20% of success

▪ Efficient▪ Satisfying

Operations & Finance10% of success

▪ Process Driven

Enabling Technology20% of success

▪ Ticket to the game▪ Must be single transparently

integrated systemAutomation & Virtualization

Operations&

FinanceMarketing

Service &

Support

Hosting Business


SWsoft Product Portfolio• Server Automation and Virtualization Software• Hosting Service Provider and Enterprise Markets• Windows and Linux/Unix Platform Support• Complementary Solutions:

▪ Powerful Server Virtualization and Tools

▪ Leading Hosting Control Panel

▪ Innovative Web-based Website Builder

▪ Comprehensive Hosting Automation Solution

▪ Carrier-Grade Datacenter Automation Solution

HSPcomplete


Tactical Industry Challenges• Facility Related Challenges

▪ Data center inventory is shrinking

▪ Building out from scratch is long and capital intensive

▪ Rising power use, costs and capacity

• Hardware Related Challenges▪ Hardware vendors offer bigger/faster servers per unit price – but it usually exceeds

customer requirements

▪ How easy is it to provision, manage and support 1000s of servers over many years?

▪ What to do with the old hardware?

• Customer Related Challenges▪ Low End: Shared hosting competition from Google, Yahoo!, and Microsoft

▪ Mid Level: Budget-conscious customers drive down prices of low-end dedicated servers. They prefer direct control over their hosting environment, but use only a fraction of server’s capacity

▪ High End: Developers of fast-growing web-applications demand rapid, seamless scalability


Historical Architecture vs. Virtualization

“…Virtualization is a framework or methodology of dividing the resources of a computer into multiple execution environments...”

http://www.kernelthread.com/publications/virtualization/

1000s of Specialized Servers

• High cost• Hard to automate• Inflexible Service Levels

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Software Costs

Hardware Costs

IDC Costs

Operating Systems History and Today

• Per Applications or User Group• Physically provisioned/managed• Poorly utilized <10%

• Single Task Single User• Multi-Task Single User• Multi-Task, Multi-User

Inefficient IT Infrastructure





Virtualization Provider Benefits• Enables dedicated-like services with shared-

like economies and infrastructure▪ Efficiency: direct cost savings, cashflow savings and oversell opportunities

• Hardware

• Electricity

• Datacenter

▪ Simplicity and Flexibility: • Zero cost of provisioning and automated management

• Comprehensive self management decrease support

• Better security

• Upgrade and migrate customers dynamically with no downtime

• Main result: GROW REVENUE FASTER!▪ More customers with new high margin services and pricing

▪ Upsell existing customers automatically

▪ Differentiate from Google, Yahoo! and Microsoft Live!


Virtualization End-Customer Benefits• Pay less:

▪ Better price for better service

▪ Easily upgradeable

▪ Burstable service

• Get more: ▪ Easier and less to manage

▪ Comprehensive self management

▪ Higher availability and performance:• more reliable and faster hardware and disk systems

• zero downtime migration

• faster management operations

▪ Sophisticated backup/restore capabilities

• Why not: There is nothing to lose!▪ Suitable for low-end, mid-level and high-end customer


Service Provider Virtualization Scenarios

• TrueVPS▪ Better alternative to shared and cheaper than low-end dedicated

• DS/DDS▪ Better alternative to low-end dedicated

• Split Dedicated▪ Enable your channel/customer to leverage virtualization

• Split Shared▪ Increase density, availability, security and manageability of shared

• ManagedVPS and Advanced Shared▪ More flexible and powerful shared or easier and managed dedicated

• Virtualized Infrastructure▪ Benefit from virtualization for all of your infrastructure

• The opportunity - Complex Hosting 60% of US hosting, over 6.2 billion $$

by ’08 per IDC


Virtualization Momentum • SWsoft Vision

▪ Virtualization software willbe used for all computing including server, desktop and even thin clients, and as such Will Run On Every Computing Resource

• Facts confirm the momentum▪ 60%+ of Plesk licenses sold Virtualized,

compared to <30% 12 months ago

▪ Rate of Virtuozzo licenses shipped increased 7x from 12 months ago, 50x from 24 months ago

▪ Over 20,000 Virtuozzo partitions were sold in Feb’06 compared to 10,000 Feb’05

• SWsoft believes ▪ Within the next 36 months majority of the new

revenues in the hosting market would come from virtualized infrastructure

Q2’05 Q3’05 Q4’05 Q1’06

X

2X

3X

4X

5X

6X

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Plesk vs. Plesk in Virtuozzo VPS

Plesk Plesk in Virtuozzo VPS

Q2’05 Q3’05 Q4’05 Q1’06

1x

2x

3x

4x

5x

6x

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Virtuozzo : Physical Servers


Different Types of Partitioning • Hardware partitioning

▪ Multiple OSs run natively

▪ IBM, Sun, HP, Unisys, more

• Virtual Machine Monitors▪ Virtualizes access to hardware

▪ Host OS and each guest has full OS running

▪ VMware, Microsoft Virtual Server, Parallels, XEN, UML

• OS Virtualization▪ Virtualizes access to the OS

▪ Single kernel is running

▪ Virtuozzo, BSD jail, Solaris Zones

Operating System Virtualization

OS

Hardware

Hardware

Host OS

CPU

Virtual Machine Monitor

ExecutionEnvironment #1

Users

Applications

System Apps

OS

Hardware


Users

Applications

System Apps

OS

Hardware


Users

Applications

System Apps

OS

Hardware


Users

Applications

System Apps

Guest OS


Users

Applications

System Apps

Guest OS


Users

Applications

System Apps

Guest OS


Users

Applications

System Apps


Users

Applications

System Apps


Users

Applications

System Apps


• Dynamic Partitioning of servers into hundreds of VEs with full dedicated-server functionality - root access, re-bootable, install any application, change any file, any IP settings

• Resource Management – CPU, memory, disk, I/O + min/max values and full isolation

• Migration allows VEs to be moved between physical machines w/zero downtime

• Mass Management – Tools and OS & Application Templates to enable automated mass management/deployment/updates of 10s of 1000s of VEs and 1000s of servers

Virtuozzo creates multiple isolated Execution Environments or partitions or Virtual Environments (VEs) on a single physical server to share DC, hardware, software and management effort with maximum efficiency. Works as light add-on for commodity operating systems and hardware

: Operating System Virtualization

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Virtualization

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Physical Server #1 Physical Server #2

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ProvisionUpdate


Momentum

5+ years10,000 Servers

400,000 VEs

750+

250+


: Unique Advantages for Hosting • Efficiency

▪ Highest Density• 500+ VE/server in production • Lowest TCO per virtual server

▪ Performance• Zero overhead, especially I/O

▪ Scalability• Each VE can scale up to the

resources of the whole physical server

• Manageability▪ Manage Once▪ Fast Management Operations▪ Dynamic, Near Real-Time and Fair

As-Needed Resource Allocation

• Management Tools ▪ Designed for 10s of 1000s of VEs▪ Full multi-server API/SDK ready

for integration▪ Browser Based and GUI▪ Unique VE Owner recovery UI

• Zero-Downtime Migration▪ With or without shared storage

• Extensive Platform Coverage▪ Windows and Linux

▪ x86, x86-64 and IA64

• Full Isolation and Security

Mature & Complete & ProvenSince early 2001: 400,000+ VE, 10,000+ servers, by 750+ providers

1000s of provider requested features in the product


Lack of Automation - Another Industry Challenge• Losing Money

▪ Low density levels▪ High provisioning and management cost with manual operations▪ Wasted marketing dollars with inefficient ordering processes

• Losing Customers▪ Low service levels, multiple sign-on▪ Lack of self management▪ Incomplete service offerings

• Losing Opportunity▪ Lack of automatic upsell, multiple control panels ▪ Extremely hard to launch new advanced services▪ Lack of differentiation makes marketing difficult

• Automation is the key▪ Must be fully integrated single system▪ Also must be Complete, Comprehensive, Flexible and Different

▪ Single system/vendor could not deliver all – cooperation is required >


OPEN FUSION: A Vision for Integration

Example: OPEN FUSION with HSPcomplete

OPEN FUSION is service provider automation integration platform to be used by all SWsoft products and fully open for 3rd party and in-house developers

Core Ingredients

• Consolidated API

• Pluggable, Integrated UI

• Authorization Engine (AE)

• Common Licensing

• Unified Versioning

• Unified Safe Updates

• Consolidated Localization

• Documentation

• Open Fusion SDK

• Open Fusion Community


• Aggressive development from 2003 to date▪ 5x development team size resulting in 9+ major releases in 3- year

▪ Plesk6 > Plesk6.5 Win > Plesk7 > Plesk7 Win > Plesk7 Reloaded > Plesk 7 Win Reloaded > Plesk 7.5 > Plesk7.5 Win > numerous point releases > Plesk8

▪ Plesk Expand 1.0 > Expand 1.1 > Plesk Expand 2.0 and Plesk Antivirus

Plesk: The Most Important Product

PSA 5 Plesk 6

Plesk 6.5 Plesk 7

Plesk 7 Reloaded Plesk 7.5 Reloaded

Plesk 8


Plesk Future R&D Directions - QUALITY• We are not stopping

▪ Focus on quality of releases and upgrades

▪ Longer development and release cycles – move to 12-15 months, multi month public Beta > RC > RTM

▪ OPEN FUSION and better Virtuozzo integration

▪ Flexible and more support of 3rd party (mail, webmail, app server, cms, ecom, backup etc)

▪ Rapid and complete distribution and component support

▪ Ease of use, more server administration, distributed and provider feedback

• Specifically – visit Plesk session


Other products update and roadmap• - newest and simplest

▪ Transparent Plesk integration and OPEN FUSION▪ More full CMS features one way or another▪ Free on Windows until September 30th 2006!

• - committed▪ OPEN FUSION will quickly make it more solid and complete

(effectively 10x development team)▪ Over time complete small to mid-size provider packaged BSS ++▪ Any service shall be possible

• – 5x development team▪ Aggressive development – advanced shared Linux/Windows,

packaged Exchange, game, virtualized, high availability, streaming▪ 15+ implemented reference live accounts, many in implementation▪ Soon - 100% native Microsoft PEM + more Microsoft applications ▪ Future – stronger customer focus, quality, flexible, complete and OPEN FUSION

• BM – new as standalone product!▪ Sophisticated, flexible and scalable Billing, Ecommerce, Marketing, CRM and Support▪ Stellart RAD platform, proven process and very experienced separate team

HSPcomplete


Overall R&D Direction – QUALITY and Completness• Longer development cycles – 12-15+ month

• Longer release cycles – few months for beta/rc/rtm

• Much higher attention to quality and upgrades

• Open complete API/SDK specifically OPEN FUSION

• More 3rd party

• Native Windows and continued Linux support

• Continued evaluation of customer feedback▪ Carefully study how product changes could decrease support load

• Lots of work – perfection is very distant still


• Headquartered in Herndon, VA Offices in USA, Europe and Asia

• Privately funded, strong financials Founded end ‘99, financed to profitability by founders SWsoft is profitable, revenue at tens of millions, growing at 170+% Jun’05 closed 12.5mm$ round by Bessemer, Intel Capital and Insight

• Expert team 700+, 450+ top-notch engineers and 100+ support

Alexey Kuznetsov, TCP/IP in Linux kernel Unique hiring model at MIPT, NSU;

hiring gradually as revenue allows

28+ patents pending

• Successfully expanding to Enterprise Market

Moscow,RussiaR&D

HeadquartersWashington DC

Sales & MarketingSupport, Services

Frankfurt,Germany

International Operations

Novosibirsk,RussiaR&D

Tokyo,JapanSales &

Marketing

SingaporeSales &

Marketing

London, UKSales &

Marketing

Beijing,China

Sales & Marketing

SWsoft Corporate Overview and Growth


Growing Ecosystem of 500+ Technology Partners


Strategic Partners – Update and Plans•

▪ Joint Windows SiteBuilder offering▪ Microsoft HCM automation through PEM, Plesk▪ Cooperation on Windows-based DDS/VPS enablement through Virtuozzo▪ Product certification

• ▪ Developing automation to acquire, resell, manage SSL certificates▪ Introducing new online services through automation tools (like news feeds)

• ▪ Efficient server technology, especially designed for Internet Datacenters▪ Server certification; cooperation to provide complete solution

• ▪ Product certification; support of RH/Virtuozzo & SUSE/Virtuozzo kernel

• ▪ Server certification; future cooperation on virtualization and automation solutions

• ▪ Advocating to raise awareness of the hosting opportunity/strategic implications


• Overall Strategy: OPEN FUSION▪ Facilitate integration of new products & services

• Some Recently Added

• Types of 3rd Party Solutions in Pipeline ▪ Collaboration

▪ More antivirus/antispam options

▪ Secondary domain

▪ Marketing, CMS and eCommerce

▪ Hosted Web Services

3rd Party Solutions – Update and Pipeline


SWsoft Marketing – How We Can Support You• Joint PR

▪ Contact info directly on our website

• Hosting Analysts/Hosting Association

• Events/Seminars▪ Industry, Yours, Ours, Others

• More/Better Communication▪ Added documentation to website▪ Communicating product launches/roadmaps in future in advance

• Whitepapers/Tools/Other Product Marketing

• International Support

• Pre-packaged Content/Demos for Your Website

• More Partner Marketing

• What can we do better? [email protected]


Marketing – Direct/Indirect Support Metrics Selected Deliverable Annual #

Product launches (betas, major/minor releases) 50+

Customer/partner emails 80+

Press releases 70+

Media interviews 50+

Articles/media coverage 500+

Analyst briefings 40+

Events/seminars 70+

Advertising vehicles (print and online) 15+

New case studies 5+

New whitepapers/bylines 10+

New/updated brochures 6+

Partnerships/deals 30+


New SWsoft Branding – Snapshot• Why are we doing it?

▪ Many products, multiple acquisitions, OPEN FUSION

▪ More professional, cooler

▪ Customer and partner clarity, ease

• New Logos, New Website, Stronger SWsoft▪ Elevation of company brand (many don’t know Plesk is SWsoft’s)

▪ Completely new company and product logo SYSTEM

▪ New corporate style for ALL marketing materials • Business system

• Emails, whitepapers, case studies, datasheets

• Upgraded www.swsoft.com website

• Full Implementation this Summer/ASAP▪ Process included 10+ interviews/feedback from trusted partners, analysts


Branding – Vision/Promise and Who We Are• Brand Vision

▪ Virtualization + Automation = Optimization

▪ Virtualization and Automation for the Real World

▪ We envision a world where computing and can infinitely optimized for business success

• Brand Positioning▪ No company is more relentless about optimizing

computing and business than SWsoft

• Brand Promise▪ “I am confident SWsoft will always deliver the most

efficient solution for my business”

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Branding – Corporate Logo (Work in Progress)New Corporate Logos (Work in Progress)


Summary• SWsoft is committed to Web Hosting market

▪ Product strategy built around addressing industry challenges and trends▪ Who could be your best and most independent partner today?

• SWsoft is real, stable and rapidly growing

• AttendVirtuozzo session▪ Virtualization is inevitable as both threat and opportunity▪ Will Virtuozzo bring you higher ARPU enterprise customers soon?

• Attend OPEN FUSION session

• Attend Plesk session

• Attend all other sessions!

• Meet our people and provide feedback

• Network! Lots of interesting/useful people to meet

• Have Fun and Ask Questions NOW and tomorrow!


SWsoft Executive (1st) Public Q&A• Serguei Beloussov – CEO/Chairman

• Yakov Zubarev – COO/Head of Worldwide Sales

• Kurt Daniel – VP of Marketing and Alliances

• Soeren von Varchmin – Head of International Sales and Operations

• Alexei Kandikov – Head of Hosting Automation Engineering and Support

• Ezequiel Steiner – Director of Biz Development

• Another and complete executive Q&A/feedback tomorrow

• Do not hesitate to ask any question and provide direct feedback – they are welcome!

Documents

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