Opinion: Buy a hoster today!

Talk about timely. I've been thinking and writing a lot about cloud recently, like every other IT journo on the planet.

I realised that I had been making several assumptions about cloud services, but these assumptions began to unravel while talking to resellers and vendors for the March issue of CRN, which is on Software as a Service.

Cloud is all about scale, so therefore the bigger the player the more effectively they can provide a high-quality service at a low price.

Take security, for example. A bigger hosted security provider could afford more expensive hardware which could do a better job at stopping malware and spread the capital cost over a broader number of customers.

Smaller competitors might not have the capital to invest nor have as broad a customer base to spread the cost, therefore the cost of the service would be higher, and the quality possibly lower.
 
This fact lead me to Wrong Assumption #1:

There is no room in the market for small providers of cloud or hosted services.

It's just not true, because I've spoken to resellers who are happily making money providing hosted security services, such as Watchguard resellers Netforce and Hotline IT.

Even though Symantec will sell you antispam, antivirus, content filtering, encryption and email data leak prevention for $35 per user per year.

How Netforce and Hotline IT make it work I'll write up in another article (or take a look at the March issue of CRN).

Most of the major cloud-service vendors have multiple data centres spread around the world, all swapping information seamlessly to give customers the appropriate service. this lead me to Wrong Assumption #2:

The most important skill for a cloud service provider is running massive data centres.

Details slip out occasionally of the gargantuan data centres used by Google and Microsoft. It seemed logical that few companies could set up cloud services without a big background in running a data centre.
 
Then I spoke to Rob Lovell, the man behind ThinkGrid, a hosted applications provider that started out in the UK.

ThinkGrid is targeting SMBs with virtual desktop, Microsoft Office on demand, and can stream a whole range of software including server-client like Sage, web-based and desktop applications.

The company has built a profitable business in the US and UK and came to Australia three months ago. I asked Rob about his background and learnt that he and all the others in the management team had spent the past 10 years building their own web hosting companies.

By the time Lovell sold Hostway it had over a million customers. Two other ThinkGrid managers had started the UK's largest webhosting company FastHost, now owned by United Internet, the second largest hoster in the world.

ThinkGrid hasn't built any data centres and it doesn't run any. Lovell's team has just written smart software that can connect their equipment sitting in rented racks in other people's data centres.

Then last week Melbourne managed service provider TLC IT Group picks up server hosting company Vigabyte to jump start the MSP's cloud services portfolio.

"Technology is moving to the cloud now and if you're not in the cloud you'll be wiped out by the cloud. We don't want that to happen to us, we want to lead it," Alan Chapman, TLC IT's managing director, said.

Since the Vigabyte acquisition I've spoken to three more resellers about web hosting and the cloud. They all agreed that acquiring web hosting was a good way to get into cloud services - and at least one was looking for prospects.

So, here's a hot tip for 2010. You can acquire for customer base, or you can acquire for techonology and skills.

Some, like Peter Kazacos, are going for breadth and buying up resellers across the country to create a national player overnight.

Others like TLC IT are going for depth and moving into cloud or hosted services themselves.

If you're in that second category it might be worthwhile doing some due diligence on your web hosting provider.

It could be an easy stepping stone into cloud services and the lucrative recurring revenue streams that follow.

Sholto