A few reasons why

WEB HOSTINGwill increasingly be a

SOFTWARE business

2007 cPanel Training Seminar

Says Charlie Giancarlo, Cisco Chief Dev. Officer

“We Are A SOFTWARE Company”

• 65% of Cisco engineers are software engineers; management expects significant increase going forward

• Software encompasses more than end user apps like PhotoShop and PowerPoint. It provides framework for business processes

Thanks to 200,000 lines of new code each month

• Competitive research• All-in-one store building + advertising• Listing interface auto-generates

product descriptions using UPC/ISBN• Print postage/mailing label, request

pick-up and track packages from PayPal interface

• When you sign up for an eBay store, what you get is seamless business process automation, NOT oversold web space and bandwidth!

As Nick predicted, data centers disappear into software too

• Nicholas Carr: yesterday’s answering machines have evolved into today’s voicemail

• BT: yesterday’s telco network has involved into Web21C

• Open API allows external developers to integrate functionalities such as SMS, voice calls and subscriber presence into 3rd party apps

“Software Kills Hardware”

Network World + Computer World: “Category Breaker!”

• Savvis CTO, Jul 06: “You'll be able to encapsulate in software the config of an entire data center. Need to set up a new data center? Just run the program.”

• Entire “server” clusters now available for copy-and-paste re-deployment & point-and-click migration between physical facilities

Layered Tech’s Virtual Private Data Centers

SoftLayer sold 1,000+ servers in Feb & is ramping up!

• With SoftLayer’s open API, developers can integrate provisioning, remote reboot, bandwidth graphs, etc into 3rd party apps

• Resellers can order more servers right from cPanel interface!

• Enterprise customers are integrating API with corporate intranet

“We’re Becoming a Software Company”

Software is Modular (Like Lego)

Why Webmail.us chose Amazon vs Rackspace

“Amazon's web services allowed us to build something new. S3 allowed us to build faster and start saving money earlier.”

Software is Powerful

Can U complete w/ 1-size-fits-all sales pitch?

• Amazon: recommendations responsible for 30% of revenue

• Google CEO: wants to answer questions like “what shall I do today?”

• Quantcast CTO: “eCommerce is destiny”

• MIT Media Lab: can predict your schedule with 79% accuracy

“Web 3.0 = 4C + P + VS”

Straight-up commerce is going out of fashion

• Commerce• Content• Context• Community• Personalization• Vertical Search• Says

ReadWriteWebPhoto from http://www.flickr.com/photos/robdurdle/170469445/

The More They Use, The More U Lose

How to better align incentives?

GoDaddy: 1000 GB for $6.99

DreamHost: 1600 GB for $7.99

1&1: 2500 GB for $7.49

LunarPages: 2500 GB for $6.95

iPowerWeb: 3000 GB for $7.95

BlueHost: 3000 GB for $6.95

PowWeb: 3000 GB for $5.77

The Utilization/Monetization Gap

Blue = YHOO, Red = GOOG

• 2000: Banner ads generated 34x more revenue ($3.8B) than search ads ($109M). Yahoo! is king

• 2006: Google improves system for aligning business model with naturally occurring behavior (search); generates $7B from AdWords

• (According to MarketWatch)

How does this apply to web hosting?

A Few Other Business Models

Is your ARPU increasing by 42% per year?

• SaaS: Pay per seat• Amazon: Pay per hour, pay per

GB, pay per GET request• OpSource: Success based

pricing• Shopster: Hosting + 700K

wholesale products, shipped directly to customers

• MySpace: Free hosting; got $900M Google ad contract

• Google/Yahoo: May triple revenue per user from free services

Says Morgan Stanley

Says Morgan Stanley

2006 2011

Customers as Assets

Blue: DreamHost.com; Red: TheWHIR.com

Fun fact: The 10 highest traffic web hosting providers each have more reach than the 10 highest traffic web hosting directories.

What Now?

• “Do it yourself” vs “do it for me” solutions

• Hardware replacement SLAs are obsolete: the question is no longer how to stay online, but what to do online

• Overselling may seem like easy way out, but you are missing opportunities

• Know your customers: if you understand their behavior, you can optimize business model to monetize it

Think software!

My friend Irakli builds amplifiers by hand – to many customers, web hosting is no easier

• Without cPanel, we’d still be provisioning web space and email accounts by hand. And billing customers manually!

• Virtualization? Grid hosting? Distributed storage? CDNs? None of that would be possible without software

Starting with Some Familiar Solutions

Thank you, cPanel :)

And Move Up the Stack

infrastructure

interface

service definition

sales + crm

• How to make your platform more redundant and secure?

• What kind of usage should you bill for? How to meter?

• How to connect customer apps with your infrastructure?

• How to maximize sales effectiveness, ARPU & customer stickiness through real time knowledge of preferences

Conclusion? Hosting success takes more than big servers