If you’re not winning, try to change the game
Tue 15 Apr 2014
While the major cloud providers fight for market share on price, some smaller providers are thinking differently about how they charge and how they support customers writes Paul Miller
Amazon, Google and Microsoft have attracted a lot of the cloud attention of late, largely because of the sweeping price cuts they’ve all announced. For smaller players, matching the prices of their bigger competitors was never likely to be a sustainable strategy. Rackspace and Elastichosts are two of those smaller players attempting to attract attention, customers and revenue by changing the terms of the conversation.
UK-based Elastichosts has been around since 2008, delivering Infrastructure as a Service (IaaS) to customers around the world using essentially the same virtual machine-renting approach as most of their competitors. Earlier this month, the company unveiled a new offering, technically interesting because it’s based on light-weight Linux containers and commercially interesting because customers are billed for the computing resources they actually consume and not the virtual machine capacity they choose to reserve ahead of time.
Although not a direct replacement for the flexibility and general utility of the virtual machines IT systems have depended upon for years, there’s growing interest in the role of lightweight software containers. San Francisco’s Docker is the focus for much of the attention here, but smaller companies like Bristol-based HybridCluster are also telling believable stories about the advantages containers offer them in cost-effectively deploying and scaling self-contained sets of applications.
Elastichosts’ new focus on containers is an interesting piece of differentiation, although it remains to be seen how a market wedded to virtual machines responds to this different method of computing. The pricing model for this new offering is also interesting, and may have far wider applicability. With most cloud providers, customers must decide in advance that their workload will need a virtual machine with 4GB of RAM, 40GB of storage and a particular class of CPU. They are then billed for all of that capacity whenever the virtual machine is running, even if their application is actually only consuming half of the resources available to it.
Under Elastichosts’ model, customers specify a maximum machine capacity (placing a ceiling on expenditure), but are then billed for what they actually use. In theory, at least, customers should end up with bills that more closely reflect usage. The trick for Elastichosts (and those who emulate the pricing model) is to ensure that the prices do not look too dissimilar to those customers expect from dealing with AWS and gang.
Larger and better-known than Elastichosts, Rackspace is also striking out on its own and clearly stating that it will not go head-to-head with AWS, Microsoft and Google on price. The company has always had a reputation for the quality of the support it offers customers of its managed hosting and cloud products, and now it’s doubling down on that story as a way to counter a cost-based message with which it cannot continue to compete.
‘Fanatical Support’ for servers, network switches and firewalls is increasingly being augmented by deeper expertise in the applications that customers want to run on their infrastructure. 2012’s acquisition of SharePoint911 gave the company access to a pool of SharePoint expertise, and 2013’s purchase of ObjectRocket delivered similar depth around the popular MongoDB database. These and other acquisitions are, the company hopes, giving it a broad and deep pool of expertise that positions it to partner with customers in building, delivering and maintaining richly interconnected sets of business-critical applications.
Here, at least, the other big IaaS players have little interest in competing, and Rackspace may have an opportunity to carve out a revenue-generating and defensible niche for itself. Whether or not enough customers see value in the end-to-end support proposition remains to be seen, but it’s an interesting response to a market in which cheapness has come to dominate the conversation.