Done right, hosting can be very profitable for partners, but it’s hard to compete with the mega-vendors without taking a co-location approach.
Now that I’m out of the hosting business, competitive concerns no longer limit me from sharing my insights.
Done right, hosting can be very profitable. But the hosting landscape is changing rapidly and there are many pitfalls.
Most hosting providers run their own datacenters or they rent space for their equipment in a bigger facility (co-location). In every country where I’ve had hosting discussions, a key element is that the hosting provider will note that the data will stay in their country and that’s why Microsoft, Amazon Web Services (AWS) or Google is less trustworthy. This is like sticking your head in the mud and hoping potential customers will not perform their due diligence.
In reality, all three vendors are working hard on data privacy and data protection. Both Microsoft and AWS are aggressively rolling out datacenters in multiple countries, so the risk is imminent that one of their datacenters will pop up within your borders. You’re toast if that was your key competitive edge.
Running your own datacenters isn’t sustainable in the long run. Today the cost for a local hosting provider to operate its own datacenters is less than buying services from one of the three giants, but this is something that’s likely to change. The cost for running computing at a mega scale is far less than any regional player can ever compete with. I expect prices will keep falling for a few years until it becomes less profitable to run your own datacenter than to buy computing power from someone like Microsoft, AWS or Google.
To prepare, don’t invest in your own datacenter facility. Instead, go with co-location, which will help your profitability short term and make it easier for you to gradually cut over to Azure or AWS.
To be able to scale up while being profitable, you need to make big bets and take an industrialized approach. At my old hosting company, Idenet, we did this by building our solutions with standardized building blocks.
It was also key to not be shy about the fact that with standardization and automation, you can reduce man hours. At Idenet we managed to grow the business without adding people, and you might even be able to reduce the number of people if you do it right. You will need great people taking care of delivering your services, but more and more basic tasks are being done through great tools.
That leads me to another key insight: Don’t let your technical people go out and buy best-of-breed tools and solutions. I found it crucial to take a strategic approach where we said that our preferred vendor was Microsoft for everything. Microsoft doesn’t have the best software in every single category, but that’s not important. It often has solutions that are good enough, and with the company’s pace of innovation, a better release will be coming soon.
The main advantage with Microsoft is that its products often work well together. If you go with best-of-breed, you end up with more people, less integration and higher costs.
If you want to survive and thrive as a hosting provider, you can’t run your own datacenters in the long run, and you can’t just focus on infrastructure like virtual machines. Instead, you’ll need to climb the value chain and take responsibility for complex applications and workloads. That’s where the magic happens! Only then will you be in a place that keeps you from becoming obsolete.
When you focus on applications and workloads, it becomes less important who actually owns the datacenter. The true margins lurk higher up in the stack.
More Columns by Per Werngren:
About the Author
Per Werngren has held many roles at the worldwide level of the International Association of Microsoft Channel Partners (IAMCP), including chairman and president.
- Cloud Hosting Services - Secure Managed Cloud Hosting - Bluehost - October 26th, 2018
- Indias Best Cloud Hosting | Cloud Servers | Cloud Service ... - October 16th, 2018
- QuickBooks Hosting Fast, Secure Cloud Hosting | Ace Cloud ... - October 2nd, 2018
- Cloud Services - Deploy web apps & APIs | Microsoft Azure - October 2nd, 2018
- HIPAA Compliant Cloud Hosting Services - atlantic.net - September 15th, 2018
- 2018's Best "Cloud Hosting" Providers | 100% Real Reviews - September 15th, 2018
- Best Cloud Hosting Providers of 2018 | HostAdvice - August 27th, 2018
- Shared Hosting vs Cloud Hosting - How To Start A Blog - August 27th, 2018
- 10 Best Cloud Server Hosting Providers (2018): Top Cloud ... - August 21st, 2018
- Google Cloud IoT Reviews and Pricing - 2018 - July 12th, 2018
- Cloud Hosting Plans - Secure & Scalable Services | HostGator - May 18th, 2018
- Best cloud hosting providers in 2018 | TechRadar - May 14th, 2018
- Cloud Hosting - Cloud - Windows - March 2nd, 2018
- Cloud Servers | Cloud Hosting | Web Hosting - Cirrus Hosting - February 20th, 2018
- Managed Dedicated, Cloud and Hosting Services - February 20th, 2018
- What is Cloud Hosting? | Web Hosting Sun - February 12th, 2018
- Cloud Hosting - Managed Cloud Services - January 9th, 2018
- Cloud Hosting by Perry Hosting - December 11th, 2017
- What Is Cloud Hosting? | GoDaddy - YouTube - December 11th, 2017
- Linux VPS | Best Managed Linux Cloud Hosting - RoseHosting - November 24th, 2017
- Cloud hosting platforms. Part one: Pantheon | ADCI Solutions - November 24th, 2017
- Get to know Linode, the new (big) kid in town - Technical.ly - September 7th, 2017
- 500 Cloud Operators, Managed Service Companies and Hosters to Gather at the 13th Annual Hosting & Cloud ... - Benzinga - September 7th, 2017
- Cloud ERP: The rising alternative to hosting your own - Networks Asia - September 7th, 2017
- Melbourne Server Hosting Renamed to iomart - Web Host Industry Review - September 6th, 2017
- Cloud ERP: The rising alternative to hosting your own - CIO Australia - September 6th, 2017
- Dean Dorton Technology named to Sage Intacct President's Club, Rookie of the Year and New Partner of the Second ... - The Lane Report - September 6th, 2017
- Microsoft Signs Deal to Put More Apps on Huawei's Cloud in China - eWeek - September 6th, 2017
- Cloud Hosting Providers CommsTrader's UK Channel Guide 2017 - CommsTrader - September 5th, 2017
- Huawei announces Microsoft cloud apps partnership - ZDNet - September 5th, 2017
- Trump Effect Could Cost US Cloud Providers Over $10 Billion: Report - Web Host Industry Review - September 2nd, 2017
- Cost Reduction Strategies on Java Cloud Hosting Services - InfoQ.com - August 30th, 2017
- Cloud Native The Perfect Storm for Managed SD-WAN Services - Network World - August 30th, 2017
- Why 2017 is the Year to Understand Cloud Computing - Business 2 Community - August 28th, 2017
- President Trump Could Cost US Cloud Computing Providers More Than $10 billion by 2020 - The Data Center Journal - August 28th, 2017
- What You NEED To Look For In A Cloud Hosting SLA - TG Daily (blog) - August 27th, 2017
- President Trump Could Cost US Cloud Computing Providers More ... - The Data Center Journal - August 27th, 2017
- State of Cloud - 2017 - Read IT Quik - August 22nd, 2017
- President Trump could cost US cloud computing providers more than $10 billion by 2020 - Bdaily - August 22nd, 2017
- Microsoft No Longer a PC Company with Deals Like Halliburton, Says Credit Suisse - Barron's - August 22nd, 2017
- Did Snap Make a Mistake With Its $3 Billion in Cloud Contracts? - Madison.com - August 21st, 2017
- Right Networks continues focus on tech improvement with new CIO - Accounting Today - August 21st, 2017
- Altinity Provides Cloud Version of ClickHouse on Kodiak Data MemCloud - Markets Insider - August 21st, 2017
- NASA calls on cloud for online eclipse streaming - GCN.com - August 21st, 2017
- Cloud Hosting Reviews and Comparisons | Cloud Hosting Directory - August 19th, 2017
- Free cloud hosting: comparing the top providers offer - August 19th, 2017
- Microsoft Expands HPC Cloud Portfolio With Cycle Computing Acquisition - eWeek - August 19th, 2017
- UC San Diego Health: Moving Its EHR to the Cloud, Strategically - Healthcare Informatics - August 19th, 2017
- Rackspace's first in-house attorney for international moves on - San Antonio Business Journal - August 19th, 2017
- Microsoft Acquires Cycle Computing to Bulk Up its HPC Cloud Services - eWeek - August 18th, 2017
- Massive Potential Attracts International Players to Iran's Cloud Computing Market, Despite Challenges - PR Newswire (press release) - August 18th, 2017
- These Inventors Need To Conquer Cryptocurrency To Change Cloud Computing - Celebrity Net Worth - August 18th, 2017
- 360 Cloud Solutions now offers Adaptive Insights - Accounting Today - August 18th, 2017
- Hackers breach third party cloud vendor TekLinks - Healthcare IT News - August 18th, 2017
- Stronger security and disaster planning fuel healthcare's migration to the cloud - Healthcare IT News - August 16th, 2017
- Hackers hit dermatology practice through cloud vendor - Information Management - August 16th, 2017
- Hackers hit dermatology practice through cloud vendor - Health Data Management - August 15th, 2017
- Unisecure Hybrid Cloud Hosting Introduces New Integration And Collaboration Support. - HostReview.com (press release) - August 14th, 2017
- CenterGrid Names Kevin Westendorf As Chief Technology Officer - Markets Insider - August 14th, 2017
- Earth911.com - Earth911.com - August 14th, 2017
- Commerce Department Plans to Move Cybersecurity to the Cloud - FedTech Magazine - August 13th, 2017
- Snap CEO Evan Spiegel Makes A Case For Slow User Growth - Fortune - August 11th, 2017
- RiverMeadow and WSM Announce Agreement to Facilitate Cloud Migrations - GlobeNewswire (press release) - August 11th, 2017
- Driving operational excellence with your cloud vendors - Network World - August 10th, 2017
- Amazon jumps on Kubernetes bandwagon - ZDNet - August 10th, 2017
- Epic Move: UC San Diego Health Transitions to Cloud Technology - UC San Diego Health - August 10th, 2017
- St. Cloud to Host Summer Sizzler Downtown Art Crawl - WJON News - August 10th, 2017
- Cloud management platforms offer a unified approach to hybrid IT - TechTarget - August 10th, 2017
- CA Health System Begins Cloud-Based Epic EHR Implementation - EHRIntelligence.com - August 10th, 2017
- Home Office seeks partner for AWS switch after current hosting ... - www.channelweb.co.uk - August 9th, 2017
- Planning Your Journey to the Cloud - TV Technology - August 9th, 2017
- Marias Technology adds Microsoft Azure to its Hosting Services - GlobeNewswire (press release) - August 9th, 2017
- IBM CIO leaves for AWS and Big Blue flings sueball to stop him - The Register - August 9th, 2017
- Epic Move: UC San Diego Health Transitions to Cloud Technology - Newswise (press release) - August 8th, 2017
- Global Health wins contract to deploy cloud system at Sydney hospital - Proactive Investors Australia - August 8th, 2017
- As Tech Execs Rally Around Kushner, Government Cloud Adoption Still Has Ways to Go - Windows IT Pro - August 8th, 2017
- Heavy clouds in IT world make it rain gold for UPS box manufacturers - The Register - August 8th, 2017
- Project Manager - Amazon, Google, Microsoft Cloud Hosting - Dorking and Leatherhead Advertiser - August 6th, 2017
- From Public Cloud to Hybrid IT Straight From the Horse's Mouth - InfoWorld - August 6th, 2017
- How companies can boost their website in China's clouded market - Cloud Tech - August 4th, 2017