Blog Archives
More colo coverage
My colleague Alex Winogradoff (alex dot winogradoff at gartner dot com) has begun to pick up an increasing percentage of the colocation inquiry that myself and Ted Chamberlin have previously taken. Ted and I are both hugely busy (if you don’t know him, Ted is my co-author on the Magic Quadrant, and is our primary guy covering the purchase of network services), and Alex has been assigned to learn the data center market, which remains a hot topic among our clients.
Alex is interested in talking with a broad range of colocation and turnkey data center leasing vendors, since these are highly localized markets where we routinely see a mix of global, national, regional, and local players in any given deal that a buyer asks us to look at. Whether or not you’re a client, you can contact Alex and ask to brief him; I highly encourage you to do so if you are a vendor in this space serving typical Gartner clients (mid-sized business, enterprise, government, and technology vendors, primarily).
Alex has spent his career focused on carriers and other network operators. Since he’s relatively new to the data center market, this is a great opportunity to educate him about what you offer, and influence his thinking on the space, as he begins to shape his research agenda.
And for you industry-watchers: Retail colocation remains a relatively weak market this year, but wholesale colocation and data center leasing are certainly growing significantly, both in volume of deals and the degree to which they’re playing a major part in data center sourcing decisions.
Meeting up at VMworld
I’m going to be at VMworld next week. If you’re a Gartner client, and you’d like to meet up with me while I’m there, please contact your account executive to arrange it. If you’re not a Gartner client, please email me and I’ll see what I can arrange. (My days are mostly spoken for, but breakfast and post-5 pm are largely free.)
Recent research notes
Here’s a round-up of what I’ve written lately, for those of you that are Gartner clients and are following my research:
Data Center Managed Services: Regional Differences in the Move Toward the Cloud is about how the IaaS market will evolve differently in each of the major regions of the world. We’re seeing significant adoption differences between the United States, Western Europe (and Canada follows the WEU pattern), and Asia, both in terms of buyer desires and service provider evolution.
Web Hosting and Cloud Infrastructure Prices, North America, 2010 is my regular update to the state of the hosting and cloud IaaS markets, targeted at end-users (IT buyers).
Content Delivery Network Services and Pricing, 2010 is my regular update of end-user (buyer) advice, providing a brief overview of the current state of the market.
Is a Cloud Content Delivery Network Right for You? is a look at Amazon CloudFront and the other emerging “cloud CDN” services (Rackspace/Limelight, GoGrid/EdgeCast, Microsoft’s CDN for Azure, etc.). It’s a hot topic of inquiry at the moment (interestingly, mostly among Akamai customers hoping to reduce their costs).
Some of my colleagues have also recently published notes that might be of interest to those of you who follow my research. Those notes include:
- Andrea di Maio’s Criteria for Government to Evaluate Cloud Computing
- PaaS analysts collaborating on VMware and Salesforce.com: The Beginning of a Beautiful Friendship?
- Adam Couture and Stan Zaffos’s SNIA Launches First Cloud Storage Standard
- Matt Cain’s Make or Break Time for Microsoft Cloud E-Mail
Getting real on colocation
Of late, I’ve had a lot of people ask me why my near-term forecast for the colocation market in the United States is so much lower (in many cases, half the growth rate) when compared with those produced by competing analyst firms, Wall Street, and so forth.
Without giving too much information (as you’ll recall, Gartner likes its bloggers to preserve client value by not delving too far into details for things like this), the answer to that comes down to:
- Gartner’s integrated forecasting approach
- Direct insight into end-user buying behavior
- Tracking the entire market, not just the traditional “hot” colo markets
I’ve got the advantage of the fact that Gartner producing forecasts for essentially the full range of IT-related “stuff”. If I’ve got a data center, I’ve got to fill it with stuff. It needs servers, network equipment, and storage, and those things need semiconductors as their components. It’s got to have network connectivity (and that means carrier network equipment for service providers, as well as equipment on the terminating end). It’s got to have software running on those servers. Stuff is a decent proxy for overall data center growth. If people aren’t buying a lot of stuff, their data center footprint isn’t growing. And when they’re buying stuff, it’s important to know if it’s replacing other stuff (freeing up power and space), or if it’s new stuff that’s going to drive footprint or power growth.
Collectively, analysts at Gartner take over a quarter-million client inquiries a year, an awful of lot of them related to purchasing decisions of one sort or another. We also do direct primary research in the form of surveys. So when we forecast, we’re not just listening to vendors tell us what they think their demand is; we’re also judging demand from the end-user (buyer) side. My colleagues and I, who collectively cover data center construction, renovation, leasing, and colocation (as well as things like hosting and data center outsourcing), have a pretty good picture of what our clientele are thinking about when it comes to procuring data center space, in addition to the degree to which end-user thinking informs our forecast for the stuff that goes into data centers.
Because of our client base, which not only include IT buyers dispersed throughout the world, but a lot of vendors and investors, we watch not just the key colocation markets where folks like Equinix have set up shop, but everywhere anyone does colo, which is getting to be an awful lot of places. If you’re judging the data center market by what’s happening in Equinix Cities or even Savvis Cities, you’re missing a lot.
If I’m going to believe in gigantic growth rates in colocation, I have to believe that one or more of the following things is true:
- IT stuff is growing very quickly, driving space and/or power needs
- Substantially more companies are choosing colo over building or leasing
- Prices are escalating rapidly
- Renewals will be at substantially higher prices than the original contracts
I don’t think, in the general case, that these things are true. (There are places where they can be true, such as with dot-com growth, specific markets where space is tight, and so on.) They’re sufficiently true to drive a colo growth rate that is substantially higher than the general “stuff that goes into data centers” growth rate, but not enough to drive the stratospheric growth rates that other analysts have been talking about.
Note, though, that this is market growth rate. Individual companies may have growth rates far in excess or far below that of the market.
I could be wrong, but pessimism plus the comprehensive approach to forecasting has served me well in the past. I came through the dot-com boom-and-bust with forecasts that turned out to be pretty much on the money, despite the fact that every other analyst firm on the planet was predicting rates of growth enormously higher than mine.
(Also, to my retroactive amusement: Back then, I estimated revenue figures for WorldCom that were a fraction of what they reported, due to my simple inability to make sense of their reported numbers. If you push network traffic, you need carrier equipment, as do the traffic recipients. And traffic goes to desktops and servers, which can be counted, and you can arrive at reasonable estimates of how much bandwidth each uses. And so on. Everything has to add up to a coherent picture, and it simply didn’t. It didn’t help that the folks at WorldCom couldn’t explain the logical discrepancies, either. It just took a lot of years to find out why.)
Who’s Who in CDN
I’m currently working on writing a research note called “Who’s Who in Content Delivery Networks“. The CDN space isn’t quite large enough yet to justify one of Gartner’s formal rating methodologies (the Magic Quadrant or MarketScope), but with the proliferation of vendors who can credibly serve enterprise customers, the market deserves a vendor note.
The format of a Who’s Who looks a lot like our Cool Vendors format — company name, headquarters location, website, a brief blurb about who they are and what they do, and a recommendation for what to use them for. I like to keep my vendor write-up formats pretty consistent, so each CDN has a comment about its size (and length of time in the business and funding source, if relevant), its footprint, services offered, whether there’s an application acceleration solution and if so what the technology approach to that is, pricing tier (premium-priced, competitive, etc.), and general strategy.
Right now, I’m writing up the ten vendors that are most commonly considered by enterprise buyers of CDN, and then planning to add some quick bullet-points of other vendors in the ecosystem but who aren’t CDNs themselves (equipment vendors, enterprise internal CDN alternatives, etc.), probably more in a ‘here are some vendor names’ with no blurbs, fashon.
For those of you who follow my research, I’m also about to publish my yearly update of the CDN market that’s targeted at our IT buyer clients (i.e., how to choose a vendor and what the pricing is like), along with another note on the emergence of cloud CDNs (to answer a very common inquiry, which is, “Can I replace my Akamai services with Amazon?”).
Q1 2010 inquiry in review
My professional life has gotten even busier — something that I thought was impossible, until I saw how far out my inquiry calendar was being booked. As usual, my blogging has suffered for it, as has my writing output in general. Nearly all of my writing now seems to be done in airports, while waiting for flights.
The things that clients are asking me about has changed in a big way since my Q4 2009 commentary, although this is partially due to an effort to shift some of my workload to other analysts on my team, so I can focus on the stuff that’s cutting edge rather than routine. I’ve been trying to shed as much of the routine colocation and data center leasing inquiry onto other analysts as possible, for instance; reviewing space-and-power contracts isn’t exactly rocket science, and I can get the trends information I need without needing to look at a zillion individual contracts.
Probably the biggest surprise of the quarter is how intensively my CDN inquiry has ramped up. It’s Akamai and more Akamai, for the most part — renewals, new contracts, and almost always, competitive bids. With aggressive new pricing across the board, a willingness to negotiate (and an often-confusing contract structure), and serious prospecting for new business, Akamai is generating a volume of CDN inquiry for me that I’ve never seen before, and I talk to a lot of customers in general. Limelight is in nearly all of these bids, too, by the way, and the competition in general has been very interesting — particularly AT&T. Given Gartner’s client base, my CDN inquiry is highly diversified; I see a tremendous amount of e-commerce, enterprise application acceleration, electronic software delivery and whatnot, in addition to video deals. (I’ve seen as many as 15 CDN deals in a week, lately.)
The application acceleration market in general is seeing some new innovations, especially on the software end (check out vendors like Aptimize), and there will be more ADN offers will be launched by the major CDN vendors this year. The question of, “Do you really need an ADN, or can you get enough speed with hardware and/or software?” is certainly a key one right now, due to the big delta in price between pure content offload and dynamic acceleration.
By the way, if you have not seen Akamai CEO Paul Sagan’s “Leading through Adversity” talk given at MIT Sloan, you might find it interesting — it’s his personal perspective on the company’s history. (His speech starts around the 5:30 mark, and is followed by open Q&A, although unfortunately the audio cuts out in one of the most interesting bits.)
Most of the rest of my inquiry time is focused around cloud computing inquiries, primarily of a general strategic sort, but also with plenty of near-term adoption of IaaS. Traditional pure-dedicated hosting inquiry, as I mentioned in my last round-up, is pretty much dead — just about every deal has some virtualized utility component, and when it doesn’t, the vendor has to offer some kind of flexible pricing arrangement. Unusually, I’m beginning to take more and more inquiry from traditional data center outsourcing clients who are now looking at shifting their sourcing model. And we’re seeing some sharp regional trends in the evolution of the cloud market that are the subject of an upcoming research note.
And so it begins
We’re about to start the process for the next Magic Quadrant for Cloud Infrastructure Services and Web Hosting, along with the Critical Capabilities for Cloud Infrastructure Services (titles tentative and very much subject to change). Our hope is to publish in late July. These documents are typically a multi-month ordeal of vendor cat-herding; the evaluations themselves tend to be pretty quick, but getting all the briefings scheduled, references called, and paperwork done tends to eat up an inordinate amount of time. (This time, I’ve begged one of our admin assistants for help.)
What’s the difference? The MQ positions vendors in an overall broad market. CC, on the other hand, rates individual vendor products on how well they meet the requirements for a set of defined use cases. You get use-case by use-case ratings, which means that this year we’ll be doing things like “how well do these specific self-managed cloud offerings support a particular type of test-and-development environment need”. The MQ tends to favor vendors who do a broad set of things well; a CC rating, on the other hand, is essentially a narrow, specific evaluation based on specific requirements, and a product’s current ability to meet those needs (and therefore tends to favor vendors that have great product features).
Also, we’ve decided the CC note is going to be strictly focused on self-managed cloud — Amazon EC2 and its competitors, Terremark Enterprise Cloud and its competitors, and so on. This is a fairly pure features-and-functionality thing, in other words.
Anyone thinking about participation should check out my past posts on Magic Quadrants.
The last quarter in review
The end of 2009 was extraordinarily busy, and that’s meant that, shamefully, I haven’t posted to my blog in ages. I aim to try to return to near-daily posting in 2010, but this means creating time in my schedule to think and research and write, rather than being entirely consumed by client inquiry.
December was Gartner’s data center conference, where I spent most of a week in back-to-back meetings, punctuated by a cloud computing end-user roundtable, a cloud computing town hall, and my talk on getting data center space. Attendance at the conference is skewed heavily towards large enterprises, but one of the most fascinating bits that emerged out of the week was the number of people walking around with emails from their CEO saying that they had to investigate this cloud computing thing, and whose major goals for the conference included figuring out how the heck they were going to reply to that email.
My cloud computing webinar is now available for replay — it’s a lightweight introduction to the subject. Ironically, when I started working at Gartner, I was terrified of public speaking, and much more comfortable doing talks over the phone. Now, I’m used to having live audiences and public speaking is just another routine day on the job… but speaking into the dead silence of an ATC is a little unnerving. (I once spent ten minutes giving a presentation to dead air, not realizing that the phone bridge had gone dead.) There were tons of great questions asked by the audience, far more than could possibly be answered in the Q&A time, but I’m taking the input and using it to figure out how to decide what I should be writing this year.
Q4 2009, by and large, continued my Q3 inquiry trends. Tons of colocation inquiries — but colocation is often giving way to leasing, now, and local/regional players are prominent in nearly every deal (and winning a lot of the deals). Relatively quiet on the CDN front, but this has to be put in context — Gartner’s analysts took over 1300 inquiries on enterprise video during 2009, and these days I’m pretty likely to look at a client’s needs and tell them they need someone like Kontiki or Ignite, not a traditional Internet CDN. And cloud, cloud, cloud is very much on everyone’s radar screen, with Asia suddenly becoming hot. Traditional dedicated hosting is dying at a remarkable pace; it’s unusual to see new deals that aren’t virtualized.
I’ll be writing on all this and more in the new year.
Recent inquiry trends
It’s been mentioned to me that my “what are you hearing about from clients” posts are particularly interesting, so I’ll try to do a regular update of this sort. I have some limits on how much detail I can blog and stay within Gartner’s policies for analysts, so I can’t get too specific; if you want to drill into detail, you’ll need to make a client inquiry.
It’s shaping up into an extremely busy fall season, with people — IT users and vendors like — sounding relatively optimistic about the future. If you attended Gartner’s High-Tech Forum (a free event we recently did for tech vendors in Silicon Valley), you saw that we showed a graph of inquiry trends, indicating that “cost” is a declining search term, and “cloud” has rapidly increased in popularity. We’re forecasting a slow recovery, but at least it’s a recovery.
This is budget and strategic planning time, so I’m spending a lot of time with people discussing their 2010 cloud deployment plans, as well as their two- and five-year cloud strategies. There’s some planning stuff going around data centers, hosting, and CDN services, too, but the longer-term the planning, the more likely it is that it’s going to involve cloud. (I posted on cloud inquiry trends previously.)
There’s certainly purchasing going on right now, though, and I’m talking to clients across the whole of the planning cycle (planning, shortlisting, RFP review, evaluating RFP responses, contract review, re-evaluating existing vendors, etc.). Because pretty much everything that I cover is a recurring service, I don’t see the end-of-year rush to finish spending 2009’s budget, but this is the time of year when people start to work on the contracts they want to go for as soon as 2010’s budget hits.
My colo inquiries this year have undergone an interesting shift towards local (and regional) data centers, rather than national players, reflecting a shift in colocation from being primarily an Internet-centric model, to being one where it’s simply another method by which businesses can get data center space. Based on the planning discussions I’m hearing, I expect this is going to be the prevailing trend going forward, as well.
People are still talking about hosting, and there are still plenty of managed hosting deals out there, but very rarely do I see a hosting deal now that doesn’t have a cloud discussion attached. If you’re a hoster and you can’t offer capacity on demand, most of my clients will now simply take you off the table. It’s an extra kick in the teeth if you’ve got an on-demand offering but it’s not yet integrated with your managed services and/or dedicated offerings; now you’re competing as if you were two providers instead of one.
The CDN wars continue unabated, and competitive bidding is increasingly the norm, even in small deals. Limelight Networks fired a salvo into the fray yesterday, with an update to their delivery platform that they’ve termed “XD”. The bottom line on that is improved performance at a baseline for all Limelight customers, plus a higher-performance tier and enhanced control and reporting for customers who are willing to pay for it. I’ll form an opinion on its impact once I see some real-world performance data.
There’s a real need in the market for a company who can monitor actual end-user performance and that can do consulting assessments of multiple CDNs and origin configurations. (It’d be useful in the equipment world, too, for ADCs and WOCs.) Not everyone can or wants to deploy Keynote or Gomez or Webmetrics for this kind of thing, those companies aren’t necessarily eager to do a consultative engagement of this sort, and practically every CDN on the planet has figured out how to game their measurements to one extent or another. It doesn’t make them without value in such assessments, but real-world data from actual users (via JavaScript agents, video player instrumentation, download client instrumentation, etc.) is still vastly preferable. Practically every client I speak to wants to do performance trials, but the means available for doing so are still overly limited and very expensive.
All in all, things are really crazy busy. So busy, in fact, that I ended up letting a whole month go by without a blog post. I’ll try to get back into the habit of more frequent updates. There’s certainly no lack of interesting stuff to write about.
Hype cycles
I’ve recently contributed to a couple of our hype cycles.
Gartner’s very first Hype Cycle for Cloud Computing features a whole array of cloud-related technologies and services. One of the most interesting things about this hype cycle, I think, is the sheer number of concepts that we believe will hit the plateau of productivity in just two to five years. For a nascent technology, that’s pretty significant — we’re talking about a significant fundamental shift in the way that IT is delivered, in a very short time frame. However, a lot of the concepts in this hype cycle haven’t yet hit the peak of inflated expectations — you can expect plenty more hype to be coming your way. There’s a good chance that for the IaaS elements that I focus on, the crash down into the trough of disillusionment will be fairly brief and shallow, but I don’t think it can be avoided. Indeed, I can already tell you tales of clients who got caught up in the overhype and got themselves into trouble. But the “try it and see” aspect of cloud IaaS means that expectations and reality can get a much faster re-alignment than it can if you’re, say, spending a year deploying a new technology in your data center. With the cloud, you’re never far from actually being able to try something and see if it fits your needs.
My hype cycle profile for CDNs appears on our Media Industry Content hype cycle, as well as our brand-new TV-focused (digital distribution and monetization of video) Media Broadcasting hype cycle. Due to the deep volume discounts media companies receive from CDNs, the value proposition is and will remain highly compelling, although I do hear plenty of rumblings about both the desire to use excess origin capacity as well as the possibilities that the cloud offers for both delivery and media archival.
I was involved in, but am not a profile author on, the Hype Cycle for Data Center Power and Cooling Technologies. If you are a data center engineering geek, you’ll probably find it to be quite interesting. Ironically, in the midst of all this new technology, a lot of data center architecture and engineering companies still want to build data centers the way they always have — known designs, known costs, little risk to them… only you lose when that happens. (Colocation companies, who have to own and operate these data centers for the long haul, may be more innovative, but not always, especially since many of them don’t design and build themselves, relying on outside expertise for that.)
CloudPundit: Massive-Scale Computing 