A while back Pingdom wrote an article that compared web hosting today vs. 10 years ago (also see ReadWriteWeb’s post) and found that not much has changed. Prices have gone down and resources have increased but most shared hosting providers still rely on single server configurations with commodity control panels.

However, some developments have happened in the last two years or so. MediaTemple launched their “Grid Service” and Mosso launched their “Cloud” hosting service. These services launched with much fan-fare but haven’t really seemed to live up to their promises. MediaTemple’s Grid Service which was billed as the last hosting plan you’ll ever need has been plagued by reliability problems and Mosso’s Cloud has suffered similar issues. Both of these companies are great companies really do care about their customers in my opinion but they can’t seem to tackle the technology behind their ambitions. MediaTemple is ditching the “Grid” for their new Cluster Server and Mosso has put in place a new Chief Uptime Officer to help alleviate customer concerns.

It seems the new shared hosting platforms of today are failing to match their older counterparts in terms of reliability. You would be much better off to go with a provider like MediaLayer, CartikaHosting or Rochen if you need a stable platform for your web site. I’m not saying that these Hosting 2.0 platforms won’t improve and it looks like there may be some new platforms that launch in the near future but until then you may want to stick with what has proven to work.

Dan, thank you for taking some time out and answering my questions as I know you are a traveling man.

1. Can you first tell us what your role is at Tier1, what you do and what your company does?

Tier 1 Research is an industry research and analysis firm, covering the Internet Infrastructure space. We concentrate on hosting, colocation, data center real estate, peering, content delivery networks, and data telecom issues. We provide daily, quarterly, and annual written research to our customer base, which include most major providers of Internet infrastructure services, as well as a large number of financial clients, many of whom own large stakes in those providers.

2. It seems that the big talk in the hosting industry is about Rackspace going public. Do you think their stock will pop or flop? Additionally, now that Rackspace will be a public company and have to answer to shareholders do you think they will be able to justify what are likely high staff costs that provide the “Fanatical Support” for which they are known?

Rackspace is an outstanding firm with very good numbers - they will, without doubt, have a successful IPO. The “pop” we normally see may not occur due to the Dutch Auction format of the IPO - the opening price should be the market price. This will maximize the IPO for Rackspace’s owners and investors. Rackspace was careful to talk about fanatical support as the differentiator when they filed their S1. While some shortsighted Wall Street analysts may have a problem with it, I don’t see Rackspace’s leadership moving on the issue - nor should they.

3. Now that Rackspace is going to be a public company do you see it as a possible acquisition target, specifically by a company like Akamai who shares so many customers with them?

An IPO is also a prospectus for acquisition. Akamai is an extremely unlikely M&A partner for Rackspace - a private equity firm would be the best candidate. That being said, I think they will end up going public rather than being acquired.

4. When we talked a while back you thought for sure that Microsoft would acquire Yahoo. How surprised are you that Microsoft walked away and why do you think they didn’t go hostile?

I think Yahoo has made a terrible mistake. Their executives put their own self-interest ahead of their investors. Microsoft offered a fair price and was rebuffed, in a move that hurts Yahoo’s stockholders. Expect numerous stockholder lawsuits now. Hostile takeovers are very difficult these days due to the numerous “defenses” available. Thats why they are so rare. They are also costly.

5. We are seeing a lot of products flow into the market place that offer utility computing or cloud hosting (I’m not really sure on the difference between the two). We now have Amazon (EC2), Servepath (Gogrid), XCalibre (Flexiscale), Sun (Network) and IBM’s announced Blue Cloud. Do you see this trend continuing and do you think this Utility computing/cloud hosting will eventually replace dedicated servers?

Tier 1’s forthcoming report on Cloud Computing will help explain that difference, Ross. I think there is a real possibility that cloud computing will replace dedicated servers at some point in the future. We certainly are not there yet - its at least 3 years out. Cloud storage is far hotter, at least right now. I think we’ll see more cloud storage offerings like Amazon’s S3, Nirvanix SDN, and Rackspace CloudFS in the next few months. One of the key reasons that the server side is not quite ready to go is that licensing has not quite caught up yet, especially on the Windows side. I think that is going to change in the next 6 months.

6. Do you think enterprise customers will be open to using these new hosting solutions or new storage solutions like Amazon S3/Nirvanix? We know Mozy saw some success with their GE deal and VMWare has been gaining a lot of ground in the enterprise market both of which have traditionally untouched by major players.

Mozy is really EMC, so enterprise success should not be a surprise. Nirvanix just won a Fortune 10 deal. I think we’ll see more enterprises embracing storage-as-a-service, because storage demands are increasing so rapidly. Software developers are rapidly adopting these services as well, which will help them grow very rapidly.

7. On the topic of Nirvanix and Amazon S3 do you still think Nirvanix continues to offer a better solution to companies that need a storage service? Is there anything Amazon can do to show that they are a better company for the job in your mind?

Amazon needs to hire a general manager for AWS from the hosting industry. Nirvanix is full of people who understand that a solution like S3 is not just “cool technology”, but its also something that must be operated reliably and supported. I don’t think Amazon totally gets the importance of support and reliability yet - they charge 20% extra for support of uncertain quality. They just introduced a dashboard to allow folks to see the status of the service, which is great, but shouldn’t that have been available on day 1? Amazon has made a lot of technology and positioning promises that have been misleading or simply hype, coasting on their name.

8. Layeretech recently announced they are buying Fastservers. These two companies serve two entirely different markets with Layeredtech offering cheap unmanaged solutions and Fastservers going after more of the small managed hosting customers. Do you think this is a good buy for Layeretech and what do you think they need to do to make sure it is successful?

Consolidation is a fact of life in this industry. LT wants to do managed hosting and Fastserver’s founders wanted an exit and monetization - the deal works for everyone. Most mergers and acquisitions are not successful, and the hosting industry has had their share of disasters. Slow but steady integration by a team of experienced managers is usually the key. I have great faith that the team at LT can make this one work.

9. The CDN wars continue to rage on with rumors of Level 3 going as low as $.08/GB, do you think they can beat the competition on pricing alone? Who do you think is best positioned in this space? Can you share your thoughts on the Limelight and Akamai patent dispute which Akamai recently won?

The LLNW/AKAM patent dispute is far from over and will keep going in the appeals courts, possibly for years. As far as Level3 - I don’t think they can win on price alone. Features and reliability are hugely important in the CDN market. One thing to keep in mind is that, while 8 cents is low, its not like the bottom dropped out. Two years ago, you could get 11 cents on the largest deals. Now, the deals are larger and the standard 10% decay in telecom pricing has led us to 8 cent deals. Thats not disruptive pricing so much as the continuation of a trend. There is not CDN price war - there is a very competitive market that existed long before Level3 purchased any CDN assets.

10. With the current market downturn I can see two things happening. Either companies reduce their IT spending which could hurt a lot of managed hosting companies or companies will turn to managed hosting companies to outsource their infrastructure. Which do you think will happen and why?

The evidence so far is the latter. We don’t see any shortage of managed hosting deals - most folks are doing just fine. IT spend and managed hosting do not seem to be tightly correlated. Colocation, on the other hand, seems to be benefiting from the bad economic times, with enterprises canceling builds in favor of doing business with third-party datacenter firms offering colo and datacenter real estate.

11. If the latter happens what hosting company do you think is best positioned to gain customers who want to outsource their IT infrastructure and why?

Too early to say. Its really a factor of whomever has the marketing agility to recast their message on the fly, while continuing to offer the same services mix.

12. What company in the hosting space do you think is most exciting right now?

Thats a tough one - there are so many great companies in the hosting space that are executing very well in a tough business climate. When you have multiple firms delivering 30%+ year/year revenue increases while doing M&A and introducing new products, its tough to pick a single winner.

13. Where do you see the hosting industry 5 years from now? Who will be the dominant players in dedicated servers, CDN and managed hosting? Who do you see buying whom?

We’ll certainly see more consolidation and a much larger (in terms of revenue) industry. The credit crunch will have eased, so we’ll have more datacenter builds, which will increase competitiveness in colocation.

14. When you aren’t busy being the god of research for the web hosting industry what do you like to do? Any major hobbies? What are your favorite blogs to read?

I like to spend time with my family, attend technical conferences to stay informed, read, play video games (I need to buy GTA4), and read various political blogs, not to mention DIGG. In other words, I’m a geek.

15. When you go into your meetings with Microsoft do you take your Macbook and iPhone or do you leave those at home?

Always! I have never gotten a really negative comment, just some good natured kidding - the hosting team at Microsoft is incredibly laid back and very cool. The fact that I have a licensed copy of Windows and Office installed doesn’t hurt. Most folks don’t realize that Microsoft’s revenue from selling software to Apple users is considerably higher than that of most stand-alone software firms. Its not like sending a FedEx shipment to UPS. On the other hand, walking in to the Zune development building with an iPod or the Xbox product area with a PSP might be hazardous to your health.

16. Random thoughts or comments?

Keep up the great work.

We all know that outages can cost companies thousands to millions of dollars for every minute their website is down. This is of course different on whether you rely on the internet for sales or just have a web presence. For example Amazon is going to lose a lot more money if their website goes down than say a company like Exxon as the internet is Amazon’s primary sales channel.

Not only do outages hurt the sites that go down it can also greatly affect the companies hosting them. One of the things that separates a typical unmanaged host and a managed host is their SLA (Service Level Agreement). This document does what it says and defines the level or service that is expected and credits if those levels aren’t met. With a standard dedicated server you typically get %x off of your bill if you hit x amount of downtime.

However if you are a big enough player (think someone like Pepsi) and go with a managed host you can typically get a custom SLA written that could end costing the host hundreds of thousands or millions if your website goes down to a fault of the hosts. Of course one of the reasons you pay a premium for managed hosting is so you get these types of SLAs that can end up costing the host a lot of money if you go down which gives them a huge incentive to make sure you have great uptime.

This has never been more apparent then with the recent case of Internap who actually had to restate their numbers by $1.8 million because of customer credits from outages. Internap is not alone in this as SAVVIS took deep hits in the last quarter as well due to SLA credits and Rackspace had to issue some credits when it had its’ power outage.

Outages can greatly affect a managed hosting providers numbers and with that erode wall street confidence. Not only does it affect the bottom line numbers but outages can also quickly detroy a providers reputation.

Mosso, a provider of clustered hosting services, recently re-launched themselves. They are now calling their system “The Cloud“, which refers to cloud hosting. It seems they are jumping off the “Grid Hosting” bandwagon and using a slightly more realistic term.

Let me say I absolutely love the idea of Mosso and believe they are a true innovator of the industry. They have a platform here that allows you to do windows/linux all in one that is clustered/load balanced and easily scalable for the end user, this is absolutely amazing. Mosso also designed “The Cloud” to be reseller friendly. This takes all the administration work out of running a website or a web hosting business, you just point and click to add clients or websites.

I am not saying their platform is perfect, there have been many bumps and bruises along the way but there always are when you are the innovator. Some features still need to be added like ssh access, more reliable stats, backups that can be downloaded, etc. Overall it seems like they are pushing forward with their system and listening to their user community on features.

With the recent re-launch Mosso pared down their plans from 80 GB Space, 2000 GB Transfer to 50 GB Space, 500 GB Transfer. I think this is a bit more realistic and needed to be done to actually make a profit on customers. I would actually say they probably need to lower to the space to 20 GB and offer packages to upgrade easily.

Now comes the big mistake in my mind, they also put in a request limit to their plans which was 3 million requests (a request is each file pulled from a webpage, in a single page you can have 20-200 requests on average). I can’t stress how just absolutely amazed I was that a company on the right track could take such a huge u-turn. The problem here is that requests are not a true measure of server resource usage.

I can have a website that does extensive database queries that uses up massive resources but only uses 10 requests. Then I can have a static website that uses practically no resources generate 200 requests per page. You are unfairly punishing people just because they may have a lot of images/css/etc. files on their website. Yes, you can re-code your site (you shouldn’t have to) but if you are using Mosso as a reseller platform you can’t tell your client they need to re-code their website to your standards. These points were all fought out on the Mosso forums by myself and many other customers.

Instead of going by hits I suggested that Mosso go by actual resource usage like MediaTemple goes with their GPUs. This is an actual server resource usage metric which is fair to everyone. This was rebuffed by Jonathan at Mosso as too difficult for clients to understand. I don’t really buy this explanation as MediaTemple has tens of thousands of customers that are just fine with this measurement and understand it just fine. My guess is Mosso’s management saw this as a difficult task and is just trying to go the easy route without the understanding of what this actually does. RackSpace could have also played a part in this decision so that clients would see it as cost effective to get a server rather than keep paying to upgrade the amount of requests you get.

In the end Mosso is still not changing their stance on measuring requests; instead they have raised the plan allowance to 10 million with additional requests at costing $.03/thousand. This is a sad time for Mosso as I truly believed they were going to change the industry; however with this idiotic metric they will begin to slowly bleed their client base.

Finding good web hosting for developers can be a daunting task depending on what you want to do. With all the new frameworks/applications out there it is hard for web hosts to do a one size fits all approach. Hosts are moving to meet the needs of customers who want to embrace Ruby on Rails ( RoR ), Django, Mongrel, Plone, Drupal, Svn, Trac, Turbogears, etc. We will go over the different hosting options and some hosts who may be able to fit your needs.

Shared Hosts:
Webfaction ( http://www.webfaction.com )
TextDrive / Joyent ( http://www.textdrive.com )
MediaTemple ( http://www.mediatemple.net )
Segpub ( http://www.segpub.com )
ASmallOrange ( http://www.asmallorange.com )
Dreamhost ( http://www.dreamhost.com )

VPS / Managed VPS:
Slicehost ( http://www.slicehost.com )
Engineyard ( http://www.engineyard.com )
VPSlink ( http://www.vpslink.com )

Shared Hosts

Many developers are not system administrators so a shared host that can fit their needs definitely has its advantages. It also allows the developer to focus on their website/application rather than having to worry about administrative tasks. Cost savings can also be significant for people with tight budgets working on smaller projects.

Webfaction is a web host who is really trying to work with developers. They offer many applications/frameworks right out of the box with their own custom control panel. While I do recommend WebFaction to everyone I worry about their new plans which oversell like crazy and could hurt performance in the future. Overall if you are a developer and need hosting I would go with these guys.

TextDrive was started with seed capital from customers by selling lifetime accounts and has grown to be a decent sized host. One of their key selling points is their connector which allows for better team collaboration. I have been following them for a while and my recommendation is to stay away. As I type right now the Joyent website is down and this is basically how their service goes. If you do a Google search or look on their forums you’ll notice major outages on servers, clients not being responded to in tickets and planned outages not being communicated.

MediaTemple launched their GS ( Grid Server ) hosting packages to much press and praises, since then it has been all down hill. They continue to have major outages and slow downs which is sending many of their customers to other hosts. I do have to say MediaTemple has been very up front about this and has communicated very well with their customer base. They are also planning a new service called CS ( Cluster Server ) which they say will bring much better performance/reliability to their customers. As of right now I can’t recommend MediaTemple but I hope in the future they fix the issues they are facing.

Segpub is a web host out of Australia that uses servers at Rackspace to host their clients. They are a smaller host and are quite expensive. However I have never seen a negative review of their services and all their clients boast about their reliability.

ASmallOrange is a pretty popular host that is know for their excellent customer service. I wouldn’t really say they are geared towards developers although they offer Ruby on Rails in their packages.

Dreamhost is one of the largest hosts on the planet but that doesn’t mean they do a good job. People typically flock to this host for cheap prices. They continue to have wide spread outages, slow servers and blacklisting issues. If you want your site to be up and speedy I would stay away from these guys.

Some other hosts in this arena that I don’t have a great knowledge of but you may want to look at include:
Avlux ( http://avlux.net )
PlanetArgon ( http://www.planetargon.com )
Rails Playground ( http://www.railsplayground.com )
Apis Networks ( http://apisnetworks.com )
Hosting Rails ( http://www.hostingrails.com )

Slice / VPS / Managed VPS

When your application/website outgrows shared hosting you will need to upgrade to something that can handle the load. This usually means either going with a VPS, Dedicated Server or just a company that specializes in application hosting. Many of the shared hosts above offer vps/dedicated server plans but here we are going to try and list some companies that offer these services specifically.

Slicehost has been getting much well deserved fan fare because of their hosting platform. They offer XEN vps’s with an easy to use control panel which allows you to create “slices”, backup/restore, and manage dns. This type of hosting may not be for novices as it will require you to configure your own server and install your own application. However, Slicehost does have an extensive knowledge base and community to help you in all your endeavors. I fully recommend Slicehost and even use them myself for hosting some projects!

EngineYard is one of the more well known rails hosts out there and they just closed a $3.5 million round of funding. They have a number of bigger web 2.0 clients using their service and all seem very pleased with what they get. At EngineYard you buy slices depending on your applications needs.

VPSlink developed a specific vps instance just for RoR developers which may make it easier for developers to get up and running. I tested them not to long ago and I feel indifferent towards them. Their control panel was a bit clunky and their support was just okay.

Some other slice/vps/managed service providers in this area that you may want to look at includes:
BlueBoxGrid ( http://www.blueboxgrid.com )
Thoughtbot ( http://www.thoughtbot.com )
Brightbox ( http://www.brightbox.co.uk )
Rails Machine ( http://railsmachine.com )

Dedicated / Managed

If you are a developer or have a team of people and know what you are doing you just may want a dedicated server / managed server solution. I just wanted to throw out some companies that can probably fit your needs whether you need a dedicated server or a true managed hosting provider:
Gigenet ( http://www.gigenet.com )
Voxel ( http://www.voxel.net )
Softlayer ( http://www.softlayer.com )
Handynetworks ( http://www.handynetworks.com )
Rackspace ( http://www.rackspace.com )
Servepath ( http://www.servepath.com )
Logicworks ( http://www.logicworks.com )

Conclusion

Whether you are just a small one person operation or if you are a team of people working on the next big web 2.0 site you have plenty of options. Many of these companies specialize in hosting developers and can grow with you so you can become the next Twitter, Digg, Facebook, whatever site that is popular on TechCrunch this month.