The speaker proposes building a federation of service providers to combat commoditization in the industry by megahosters like AWS. By working together, service providers could achieve unmatched scale, global reach, and product breadth to compete on the same level as major cloud providers. However, the industry is fragmented and if service providers do not collaborate, they risk being consumed by larger players. The speaker urges action to build this federation and de-commoditize services through specialization, otherwise consolidation will continue and smaller providers may struggle to survive.

1. The challenges of our industry…
Ditlev Bredahl, CEO OnApp
@ditlev
https://uk.linkedin.com/in/ditlev
1

2. Today
I will talk about why I think the service
provider industry is in trouble…

3. It’s not a pretty story I have to tell
Commoditization Scale Consolidation

4. But it’s flavoured with an excessive use
of LEGO throughout.

5. and there’s a happy ending too…

6. 120 slides in 30 mins!?

8. But first

9. My Service Provider CV…
Been in the hosting biz since ’96 @4 service providers
Last 6 years as CEO of UK2Group ($77M exit in 2011)
Plenty of M&A
Now founder and CEO of OnApp.com
Feel free to reach
out for a chat!!

10. 3 mins about OnApp…
Automation platform for service providers
Cloud, Servers, CDN and Storage enablement
HQ in London, ~150 employees world wide
Founded late 2010, first Q of revenue in ‘12
+ DKK 100M runrate revenue
~ 30% marketshare
~ DKK 200M in funding from Lloyds+founders
10

11. Haven’t heard of us?

13. APIs and PaaS hooks Web/Mobile Interfaces
Core Infrastructure Services
OnApp Cloud
Deployment &
Automation
Compute
Load Balancing
Autoscaling
DNS
Networking
Template Store
OnApp CDN
Static Content
Distribution
Live Streaming
OnApp Storage
Block Storage
Object Storage
User Management and Billing
OnApp Market
Future
Security-aaS
Database-aaS
VPN-aaS
Cloud servers Bare Metal ServersSmart ServersVPS via SolusVM
OnApp!

14. A complete platform for xSP’s
14

15. Clients in DK/SE/NO?
15
Axentus Web Solutions · Blanye · Host1 · ISPHuset Nordic · Meebox ·
Noisy Stream · NordkappNett · Planeetta Rapid Images · StayOn · Thor
Data Center · Ehf Zoner · Azero · Bahnhof · Ballou Internet Services ·
Ember Sparks · FSD Internet Tjanster · GleSYS Interner Services · Ipeer
· IP-Only Telecommunication · ITStaden · Nebula Oy Oderland
Webbhotell · Oy Capnova · PRO ISP · Rackhosting.com · Suomen
Hostingpalvelu · TDC Hosting · Avalonia.net · Solido Hosting A/S

16. Quite a few in DK!
16
Axentus Web Solutions · Blanye · Host1 · ISPHuset Nordic · Meebox
· Noisy Stream · NordkappNett · Planeetta Rapid Images · StayOn · Thor
Data Center · Ehf Zoner · Azero · Bahnhof · Ballou Internet Services ·
Ember Sparks · FSD Internet Tjanster · GleSYS Interner Services · Ipeer
· IP-Only Telecommunication · ITStaden · Nebula Oy Oderland
Webbhotell · Oy Capnova · PRO ISP · Rackhosting.com · Suomen
Hostingpalvelu · TDC Hosting · Telia · Avalonia.net · Solido Hosting

17. OnApp key clients…
CDN & cloud (2014) Cloud (2011) Cloud & Servers (2012) Cloud (2012) CDN (2013/14)
Cloud (2012) Cloud (2012) CDN & cloud (2011) CDN & cloud (2013)Product: Cloud (2013)
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18. 18

19. 19

20. 20

21. 21

22. 22
And +1000 more…

23. 23
Now, stop the spam
…or I will shoot the cat!

24. OK, so - Today…

25. Setting the scene…

26. 451research numbers
~33000 service providers world wide

27. Megahosters…

30. AWS vsYou
0"
0.5"
1"
1.5"
2"
2.5"
3"
3.5"
4"
4.5"
AWS" Everyone"else"
Rackspace

31. 451research numbers

32. 0%! 5%! 10%! 15%! 20%! 25%! 30%!
Amazon!
Microso3!
IBM!
Google!
Rackspace!
Cloud&Marketshare&
Marketshare!
YoY#Growth#
AWS# 51%#
MS# 96%#
IBM# 48%#
GCE# 81%#
RAX# :#

33. So#Cloud#is#probably#the#largest#
commercial#opportunity#in#the#history#of#
our#industry…
8#and#we#left#it#to#a#bookshop?

34. What the…?
How did h*ll that happen!?

35. Let me start by asking…

36. What are your USP’s?
• Uptime?
• Price?
• Service levels // Support?

37. Where’s Waldo (Holger) Marketing!

39. hey - we all look
the same!?

40. Higher
CPA’s
Lower
Prices
Race to the bottom…

41. What are your USP’s?
• Uptime?
• Price?
• Service levels // Support?

42. Build your own niche!

43. But, wait...
Amazon sucks at
all that?!
shhh!!
Uptime, Price & Support?

44. It’s true - AWS does suck at all that…

45. Uptime?!

46. Price?!

47. SLA’s? Support?

48. So…why are
they stealing our
clients?!

49. 49
‘The AWS JEDI MindTrick’
“You do not care
about uptime, price
and support”
“Huh?”

50. Why are megahosters not focusing on
Uptime, Price or Support?

51. Because ‘anyone’ can deliver good uptime, with
decent support at fair pricing. It’s a commodity.

52. AWS
Gartner's IaaS Magic Quadrant:
“Amazon Web Services is the 800-pound gorilla”
“Its large pool of capacity in the cloud optimizes
it for batch computing,”
“richest IaaS portfolio of services”

53. Amazon has 3 things going
for them...
1. Scale Scale Scale
2. Geographical reach (with easy access)
3. Unmatched product breadth
Let me take them
one by one…

54. Scale
Only AWS can deliver 1000 servers instantly
with no contracts

55. Geographical reach
Only AWS can present one pane
of glass to 9 locations world wide

56. Product Breadth
AWS’ products used to be really basic…
But now their product portfolio is unmatched

57. Hard to
compete on those
three points; it is
1. Scale Scale Scale
2. Geographical reach (with easy access)
3. Unmatched product breadth

58. 20142011
Uptime,
Price
Support
2013
Geo
Reach
&
Data
Locality
2012
Scale
It’s getting more and more expensive to have a meaningful offering
to the market…
Product
Breadth
98% of service
providers still
focus there…

59. Product
Breadth

60. A step back for a bit of perspective…
on a serious note!

61. The rule of three’s

62. “The rule of three’s” is a rule of thumb
suggesting that there are always three
major competitors in any free market
within any one industry.
Boston Consulting Group in 1976

63. The Rule of Three’s
• If specialists are too big…
• If generalists are too small…
Their returns are too low, and
they end up in the ditch!
And 2-4 players end up winning…
Boston Consulting Group in 1976

64. Three companies own over 80 percent of the carbonated soft drink industry.
Three companies sell over 80 percent of the beer.
Three companies sell over 80 percent of the cigarettes,
and two companies sell over 70 percent of the cigars.
Four companies sell over 80 percent of all the recorded music.
Four companies own virtually all railroad operations.
Six companies produce and market over 85 percent of all the movies.
Two companies own a majority of the radio market.
Three companies make over 95 percent of all the razors and razor blades.
Two companies sell over 80 percent of all the cookies and crackers.
Two companies manufacture and sell over 50 percent of all the toys.
Two companies sell over 75 percent of all the carpets.
Four companies sell over 80 percent of all the breakfast cereals.

65. So, it’s a natural part of an industry
growing up.
Big guys get bigger, small guys die or
get acquired

66. And it will happen to you…

67. Right, we’re f*cked...

68. Unless you find a way to break the
model and disrupt the market…

69. How to avoid getting ditched…

71. Similarities…Hotels and DC’s
1. Unsold capacity = Lost money!
2. Utilization rate significant KPI
3. Capex requirements prohibitively high
4. Hotels totally commoditised (more about that later)

72. Hotel industry…
Rooms
+500,000 678,630 147,388 675,623
Market cap
+$20bn 28bn $9bn $23bn
Founded
2008 1919 1969 1927

73. 50 slides left :)

74. Where am I going with this?

75. 530 hotels
78 Countries
@ ~$200M each
~100 years

76. HUGE entry barriers!!

77. More Locations in San Francisco
than Hilton has world wide
Zero capex investment
Less than 10 year in the making
~doubling in capacityYoY

78. World wide hotel occupancy rate ~65%.
So, around 1 out of 3 rooms are empty!
Statistica.com 2015

79. Our industry is even
more capex intensive

85. Gartner study from 2012 sets Data Center utilization
rate at less than 13% world wide
For whole sellers the number is closer to 60%
For server capacity it’s below 5%

86. Can we build airbnb for
service providers?

87. We think so…

88. Geographical Reach, check!
Together, as an industry, we’d have more locations than anyone
OnApp alone +500 locations, in +100 countries

89. 100K
80K
5K
3K 3K
OnApp alone ~200k servers
‘unlimited’ Scale, check!
Together, as an industry, we’d have more scale than anyone
5K

90. Renewable
energy
Clear water
technology app
Ecommerce
cluster app based
on OSS
Commercial
CRM solution
Satellite
navigation
OnApp alone +650k front facing apps
Product Breadth, check!
Together, as an industry, we’d have more apps than anyone

93. Though, this should not be an OnApp-only project!

94. Together we stand strong
Scale, Reach and Product champions

95. AWS
Remember this one?
“Amazon Web Services is the 800-pound gorilla”
“Its large pool of capacity in the cloud optimizes
it for batch computing,”
“richest IaaS portfolio of services”

96. AWS
“Amazon Web Services is the 800-pound gorilla”
“Its large pool of capacity in the cloud optimizes
it for batch computing,”
“richest IaaS portfolio of services”
Together these guys would have more scale, reach
or products than AWS would ever get…
Remember this one?

97. Oh - and it’s way better for the
environment to utilise existing capacity
rather than building new

98. New times = New solutions

99. AWS is still a toddler
Time to act is now, in a
few years it’s too late

100. So, summing up…
Three Points today, was made:
1. De-commoditise; you must
2. Work together; or die you
will
3. Act now; important is

101. Did all that make sense?

102. @ditlev :: d@onapp.com :: www.onapp.com
Q&A!

103. What would I ask?
1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…

104. What would it take?
1. A world wide network of Service Providers
2. A way to speak to them with one set of API’s
3. A real time marketplace to buy/sell spare capacity
4. A way to migrate workloads, to build fluidity
5. And a new way to look at your competition

105. What would I ask?
1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…

106. What if we do not
work together?

107. The big guys are taking over
‘The long tail’ is going away

108. This will be the end of
the long tail of our
industry

109. Partner up
…or you’ll struggle to stay relevant

110. Megahosters will erode our niches,
product and geographical.

111. The megahosters will eat us for breakfast

112. We have to look around for new niches

113. Or other ways to survive…

115. What would I ask?
1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…

116. Eksempler på de-
commoditization

119. What would I ask?
1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…

120. Consolidation and
Pluralisation
• We will see much more specialisation
• We will see service providers setting up without any
infrastructure at all
• We will see loads of ‘Virtual service providers’ like
Tesco Mobile,Virgin Mobile etc.

121. You’ll have to decide…
You build services You sell services
Only megahosters can succeed at both!

122. What would I ask?
1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…

124. What would I ask?
1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…

125. No

126. No, it really isn’t

127. Workloads do not care
about cloud
- they just want to work

128. What would I ask?
1. What would it take to build this federation?
2. What happens if we do not work together?
3. Do you have examples of de-commoditsation?
4. How will the market change because of this?
5. Is cloud really that big a deal?
6. Where was ‘Waldo’ (find Holger)?
Or come up with your own question…