Steadfast Networks, "The Cloud," and the Future

I was reading this article at Data Center Knowledge, one of my favorite blogs for keeping up on changes and news in the industry, and I was thinking I should write a blog article to detail our outlook on some of the same topics.

I agree whole-heartedly with Duke Skarda, the chief technology officer at SoftLayer, who said, “I think dedicated hosting will continue to grow. A lot of people tell us that it won’t. If you go back 5 or 6 years in the hosting industry, people thought shared hosting was going to disappear as well. It’s done nothing but continue to grow, even as the other options have grown along with it. I don’t think dedicated is going anywhere.”

In addition, we have had many people come to us asking if our business model is out of date since, as the article addresses, "Some cloud enthusiasts would have you believe that cloud services are reducing the need for data centers. In fact, the opposite is true – the growth of the cloud boosts business for providers of colocation and wholesale data center services."

What IS "the cloud"?

Much of the confusion comes from the use of the term "cloud" as it is one term that means many things. To consumers it generally just means "the Internet" or "data centers" as with products such as iCloud or "cloud" software like SalesForce, you're simply taking data or software you would normally keep locally and making it globally accessible over the Internet. For us, and companies like us, this is a great thing as it is actually creating more demand as more and more things are being put into data centers. Next, you have the "cloud" as it applies to developers, start-ups, and small-medium business which is a scalable and flexible infrastructure, such as our cloud services and Amazon Web Services.

Now that we have that defined, we'll be referencing the second, the Infrastructure as a Service (IaaS).

So how does "the cloud" actually affect everything?

First of all, virtualization, in the form of Virtual Private Servers (VPS) or Virtual machines (VM) has been around for a long time, as this timeline shows, but has really hit stride in the past ~8 years. Over that time the shared hosting business has only increased, as is shown by GoDaddy (largely a shared hosting company at this point) selling for $2+ billion when it was valued at half that just a year ago, while many predicted its doom. Instead of failing, the shared hosting industry picked up things from virtualization technologies, allowing them to keep their businesses largely unchanged, but still taking advantages of the new technology. Some shared hosting businesses have changed to virtualization based platforms, while others are using more "hybrid" configurations such as CloudLinux. These are the same virtualization technologies now driving "the cloud" so not much has changed there, and this industry is familiar with changes like these.

Almost all businesses in the technology sector, and all the well-run companies, are able to grow and evolve, to move with the shifting technologies. To most of these companies, even if they aren't involved in "cloud" platforms it is a period of excitement for them. As new technologies come out, the new "bleeding edge" companies get to try them out, but those will eventually trickle down to the market as a whole. While these companies are still defined as a "shared hosting," "VPS," or "Dedicated server" company, they will be taking advantage of and possibly using many of the tools the "cloud" movement brings along, just as the shared hosting industry has already grown and changed. Most of these infrastructure "cloud" services are based on or around the latest virtualization platforms, such as VMWare or Xen, so the tools being made to build "the cloud" are going to also help the VPS hosts already built around these platforms making the transitions even easier this time around.

Simply put, it is all going to be an organic natural change as a part of the general growth of a technology company; it is not a game changer. Just like the growth of virtualization technologies we've already been going through over the past decade, new companies will come and go and existing companies are going to grow and change. This change isn't tremendous, and with this change comes opportunity for new companies to grow and old companies to fail, but that is always the case in the ever changing world of technology. This is why the great Warren Buffett refuses to invest in technology companies, having had an early chance to invest in Intel, and I can't really blame him, running a technology company means you're always changing. What "the cloud" will do is lead more people to store more data in data centers and make more information available in more places, but that is the direction everything was going anyway, the term "the cloud" is just putting a name on it. Yes, I am saying "cloud" is a meaningless buzz word, which is why I've been putting it in quotes, as it is nothing different than what people in this industry has been doing for years and is part of a natural evolution.

So is "the cloud" for everyone?

Unlike most cloud providers, we'll tell you outright that the "cloud" isn't for everyone, even though many will say it is. Our Cloud Platform is a significant upgrade for shared hosting or VPS customers, and since we're offering our cloud services at a similar price point is why we dropped our VPS and shared hosting services, as it provides much more reliability and scalability, since you aren't tied to a single piece of hardware. At this stage, the issue is that it is simply more expensive if you need a lot of resources, as you're paying for the flexibility and scalability while you aren't getting the "bulk discounts" you'd get with dedicated servers or colocation. For our dedicated server and colocation customers, cloud solutions can be significantly more expensive. We've had many customers, such as Tynt, move to our dedicated and colocation services off of cloud services, such as Amazon EC2 for significant cost savings (of around 60%). Of course, we expect these prices to be driven down at some point with the decreasing costs of technology, but at least for now these options are very important.

What is Steadfast's solution to this problem?

Our focus is on flexibility, so what we want people to do is get a "hybrid cloud" solution. This is a solution that allows our customers to use the Steadfast Cloud Platform (SCP) for the things the cloud is perfect for, developers, start-ups with constantly changing needs, or companies which don't need their own dedicated hardware clusters (a cluster would be needed to match the redundancy). Then, when those companies grow and stabilize or for larger companies that already have stable needs, they can easily use (with an easy transition) to our dedicated hosting or colocation platforms. In addition, you can use all of these services together utilizing common VLANs (sharing firewalls, networks, VPNs, bandwidth commitments, etc.) and our high-speed internal network. This brings the flexibility and scalability of the cloud to the enterprise, where you can use your existing dedicated infrastructure, which will be much less expensive long term, while still having the ability to turn-up SCP instances almost instantly for the immediate flexibility and scalability.

As an example, we've already had a colocation customer contact us frantically saying they needed to have 12 servers up before the end of the month, a couple weeks away. They didn't have the capital expenditure approved internally yet and their vendor was saying it would be at least a 2 week lead time; there was no way they could get that done in time. We offered them the ability to setup these systems immediately on the SCP, allowing them to meet their deadline using their existing network infrastructure, and still allowing them to easily transition the project to their existing colocation configuration down the road. What we're offering is overall flexibility, simplifying your overall IT infrastructure needs, by providing a full array of services and backing them with an array of managed services and 24/7 phone and email support.

Conclusion

The "cloud" is useful, but not a game changer, that is moving more data and software to central data centers away from the desktop. This can serve as a great problem to IT managers, CIOs, and to owners of companies, as many can't afford their own IT management. You don't want to fall behind, you want to take advantage of these new applications, but you don't have the capital to expand your IT staff or build out new data center facilities of your own. Here at Steadfast this is exactly the type of problem we help to solve, the IT infrastructure problems you hate are the core to our business. Contact us and we'll help you develop a "hybrid cloud." Instead of making you figure everything out yourself, like Amazon or many other cloud providers will do, we have 24/7 phone and email support, always ready and happy to help you figure everything out. We will fit you with the solution that fits you, as we offer the full array if managed IT infrastructure services not just "the cloud" and be able to help you technically on the support side with our full array of managed services and managed colocation.

We're prepared for the future of IT infrastructure. If you're not, don't panic. We're here to help.

Karl Zimmerman
President - Steadfast Networks