Why is the mid-tier growing faster? - Open

Why is the mid-tier growing faster? - Open

Hosting and Cloud 2013
Why is the mid-tier
growing faster?
October 17, 2013 with Open-Xchange and Structure Research
1
Market Overview
Temperature check: 2Q13
Managed Hosting
Revenue Q/Q
Rackspace
Revenue Y/Y
EBITDA Q/Q
EBITDA Y/Y
3.8%
17.8%
-­‐‑1.5%
10.0%
PEER1 (2012)
14.5%
24.7%
12.3%
26.5%
iomart Group
n/a
29.0%
n/a
47.0%
Savvis (split)
7.2%
20.7%
n/a
n/a
Internap (split)
3.0%
10.0%
-­‐‑1.0%
15.0%
-­‐‑0.2%
-­‐‑2.0%
n/a
n/a
SunGard AS
5
Shared Hosting
Revenue Q/Q
Revenue Y/Y
EBITDA Q/Q
EBITDA Y/Y
Web.com
4.3%
21.7%
1.6%
5.0%
GMO
3.8%
6.5%
n/a
n/a
1&1
1.8%
6.8%
n/a
n/a
n/a
14.2%
n/a
n/a
-­‐‑8.0%
-­‐‑9.9%
-­‐‑27.0%
n/a
Tucows (domains)
3.9%
10.7%
n/a
n/a
eNom (domains)
3.6%
9.5%
n/a
n/a
Endurance *’11-­‐‑12
MelbourneIT
5
Messaging
Revenue Q/Q
Apptix
Revenue Y/Y
EBITDA Q/Q
EBITDA Y/Y
-­‐‑2.0%
-­‐‑2.0%
29.0%
21.0%
Intermedia*
n/a
25.0%
n/a
n/a
OX (seats 5yr)
n/a
75.0%
n/a
n/a
5
Sector growth
SEGMENT
Y/Y
Colocation
15 – 20%
Managed Hosting
18 – 22%
Hosting (mass-­‐‑market)
Cloud
7 – 11%
40 – 50%
Notes on growth
• 
• 
• 
• 
• 
• 
• 
More managed across board
More cloud
Cloud > Managed > Colocation
Virtual, cloud (Rax 50%)
ARPU up, new subs down
Emerging markets, int’l expansion
No negative, little flat growth
9
Takeaway: things slowing
•  Several quarters of slowing … but …
• 
• 
• 
• 
• 
• 
Fundamentals solid
Churn low, bases intact
Growth positive, just slower
Trajectory same
Game changers? None.
But yes, things tightening …
9
Status
What is changing?
Headwinds
• 
• 
• 
• 
• 
• 
• 
• 
Economy
Pricing pressure
Commodification
Virtualization
Amazon
Other big players
Tough competition
Less low-hanging fruit
Competitive landscape
•  A big four: 1&1, GD, WWWW, EIG
•  M&A 2013
• 
• 
• 
• 
Go Daddy and Media Temple
1&1 and Arsys
Endurance and Directi
Go Daddy and technology
•  Intuit out, Ingram Micro in
•  More telcos on to SaaS/mail
•  Demand: SI, VAR, MSP
9
Changing Sector
Profile
• 
• 
• 
• 
• 
• 
Virtualization
Cloud
Automation
Hybrid
Density
Transactional
Mid-Tier Growth
20-­‐‑40%
10-­‐‑20%
5-­‐‑10%
Small
Hosters
Mid-tier
Hosters
Large-tier
Hosters
The mid-tier: growth better
• 
• 
• 
• 
• 
• 
• 
Math, size
Up-market, shedding legacy
Doubling down, investment
Regionalization
Targeted offerings
Automation
Third party innovation
9
Directions
What is going on in the segments?
Shared Hosting
Then
Now
Pure shared
Next-­‐‑generation shared
Big three
Big three +
Few services
Advanced, high-­‐‑touch services
13
Shared / SMB hosting
• 
• 
• 
• 
• 
• 
• 
• 
Timing of up-sell
Investing in existing ARPU
Packaging of add-on services
No guidance = no decision
Add-on user experience
Portal engagement
Sell in portal
M&A = buy technology
9
Messaging
Then
Now
Email
Business-­‐‑class
Messaging, collaboration UC, productivity
Plain vanilla
Add-­‐‑on services
13
Graduation
Graduationday
Day = Trust
Trends
What are we seeing?
Data location is key
Last thing
Small is
beautiful
AMBITION
Key questions
Topics of interest to the sector
Key Questions
• 
• 
• 
• 
• 
• 
• 
• 
Will Microsoft and Google steamroll the sector?
Is MS and Google winning email from hosters?
Will shared hosting go away?
Should I build, buy or partner to innovate?
How much growth runway is out there?
Is the low-hanging fruit gone?
What are customers looking for?
Does service provider value prop still resonate?
Thank You!
Any questions?
How can we help?
Philbert Shih,
MANAGING DIRECTOR
www.structureresearch.net
Twitter: @phils88888
Twitter: @structureres
+1.647.822.1404 { Toronto }
41