Our own Hartland Ross is joined by Phil Shih from Structure Research for expert insights into the latest industry trends for IT Service Providers.
Hartland: Welcome to today’s session everyone, and, have the pleasure of being joined today by Phil Shih. And, I’m going to let Phil introduce himself in a moment, but before I do, just a quick introduction on us, for those of you who are not familiar.
Hartland: My name is Hartland Ross, and I’m joined by Devin Rose here. eBridge Marketing, we are a digital marketing agency. We started about 20 years ago, focused on the IT services space, and then expanded into, the M&A space about 15 years or so ago, putting buyers and sellers together. And, we now operate two lines of business under the eBridge site for our marketing business, and The Host Broker and The MSP Broker, for our M&A practice. So, I’d like to introduce you to Phil Shih of structured research. Phil, thank you for joining us. It’s a pleasure having you, I’ve known Phil for many years and, for those of you who might not be familiar, Phil and his team are analysts covering the infrastructure space, globally and, publishes subscription-based content that, he can tell you a little bit more about. So Phil, I’ll let you introduce yourself and then we can kind of jump into a Q&A.
Phil: Yeah, thanks for having me happy new year, and thanks for the quick introduction. I’m Phil Shihan, I’m the founder of structure research, as Hartland mentioned, we’re a very focused, we’re a targeted research. We’d like to think of ourself as a boutique, focused on the infrastructure services ecosystem. And that includes everything from hosting companies, MSPs data center operators, following what’s going on in the public cloud, covering this space for 20 years, and, you know, got my start in this business, about the same time Hartland did about 20 years ago. And, you know, both of us have started just speaking with hosting companies, working with hosting companies, and have watched, the sector evolve over the years. And so here we are 20 years later, still kind of still add it, right, Hartland.
Hartland: We’re still here. We’re still alive and kicking. Absolutely. Excellent. Well, thanks for also, I’m just going to jump into some questions. We are going to structure this today as a &A, Devin and I have often had questions that, that we either, don’t know necessarily the answers to, or, perhaps are interested in hearing feedback from others who are in the space and not someone who’s just kind of got more they’re your ears to the ground. So, in Phil’s case, he’s able to draw on, you know, a large base globally for his data. And so, we have the pleasure, to be able to get his expertise and perspective.
Hartland: And so, one of the first questions that Devin and I, thought about was, sort of, in light of all the changes in the past that year as a result of COVID, how has that impacted the infrastructure space? And, I hate to sort of start off with a COVID question because I think we’re all over that, but at the same time, it’s certainly a relevant question. And, and so to, you know, to what degree, you see the space changing and, I’ll leave it sorta open-ended there, Phil,.
Phil: Yeah, no, I mean, it’s been, I mean, we just went through a pretty crazy year. You know, I think the infrastructure space, like, all facets of life was impacted by the pandemic. I would say that it’s been, you know, the infrastructure space, is probably, I like to describe it, it’s very resilient. It’s resilient to these kinds of large swings in the macroeconomic environment that have been endemic and, bring on. And I, I like to refer people back to, if you think about it, and this is kind of our thesis is that while we think that the sector has been resilient, there’s obviously been some good, there’s been some bad than that. And that’s kind of, our thesis has been that it’s a bit of an offsetting effect, and that’s allowed the space to in general, continue to push forward, and continue to grow, in a similar pattern and trajectory that it has in the past.
And I often refer people back to what happened in 0809. Many of us were in the business then, and, the financial crisis, also had a similar, similar in the sense that it had a very negative impact on the economy. But at that time, this industry was a little less, it was a little more in its infancy and actually, you know, pushed right through, that environment, without too much issue. In fact, at that time, I would argue that it was kind of lay the foundation for the rise of public cloud, because at the time, you know, so many decision-makers were, very curious, not curious, but you know, we’re very much interested in understanding how they could become more efficient and outsourcing their infrastructure using the cloud, moving their data centers into a co-location environment was a conversation. They may not have had it in some cases, a model they did not even understand fully, or they started to ask questions and then they started to move, and respond, and, you know, use outsourcing. And then shortly thereafter, not coincidentally, we saw the sector continue to grow. You fast forward another decade, I would argue that a similar thing is happening. I think the sector is obviously way more mature. The public cloud is a real thing now. But the kind of, the ecosystem, the entire kind of outsourced infrastructure ecosystem, has grown in that 10 years. And, it’s going to respond in a similar way, I think in the sense that, there is going to be a continued acceleration, in digital infrastructure services, and the value prop, the underlying value proposition of working, not just outsourcing, but working with a service provider, I think is extremely important.
And I think it just resonates, even more clearly, when you look at the backdrop and say, wow, look at all this as that’s happened. And you know, organizations that are running their businesses are everyday figure, well, what can, you know, how can I change? What can I do more efficiently? How can I take advantage of the internet, when they ask those questions? Those questions often are asked of service providers of consultants, people in the managed services space. And that’s exactly what I think is going to be a positive for the sector. Of course, the larger macroeconomic stuff will play itself out.
Hartland: So, do you see that COVID has been a bit of an impetus for people to move more into the cloud? Because of the fact that they’re not at the office and they can’t babysit the server so to speak. And so now, hey, wait a second, you know, it used to work fine when we had somebody in the office all the time, but, you know, if there was, advice previously to move to the cloud and a reluctance to do so, you know, has this been a kind of a kick in the pants that, some people might’ve needed to make that move?
Devin: I’m sorry, do you mind if I just interject for a sec Hartland, if you press F11, it should make it full screen.
Devin: Sorry, Phil.
Phil: Yeah, no worries. I definitely think that there’s, you know, that’s had an impact. I think that, just the fact that in a pandemic environment, it becomes very clear that just moving around, and entering facilities is, can be pretty challenging. And in certain cases, can create unsafe conditions, that people want to avoid, especially when it comes to, just employee safety. So, yeah, I think that it’s really opened people’s eyes up to the importance of, remote management tools, the importance of other types of, cloud-based, infrastructure services that you can literally just point and click and log on to, as well as the fact that you may need a helping hand, your organization, may need somebody who’s already set up the kind of tools and the infrastructure to handle a distributor or a remote workforce, offsite based infrastructure, having the help of a service provider take care of that is extremely important. So yeah. Kicking the seat of the pants is, it’s not the, it’s pretty accurate, I think. And I think that’s a good thing for the sector.
Hartland: Yeah. Interesting. That’s the sort of, what was our sense, but more sort of anecdotally than anything else. Excellent. Do you see, so the next question is, do you see an appetite for the North American equivalent of GDPR coming down the road? I mean, we’ve seen privacy policies put in place and data protection, in various jurisdictions, with the GDPR in Europe, but, of course, Kenya, Canada, and California have their own rules. What are your thoughts in terms of trying to sort of standardize this process and where do you see North America fitting in? Can Canada and the US have some kind of an overarching policy on this, do you think?
Phil: Yeah, not a lawyer. And, so I don’t know, you know, I’m not overly familiar with the nuances of GDPR, but I would say that I think we’re, I think most jurisdictions in the world are headed in this direction. I think for now the most important kind of line in North America anyways, between of course, the 49th parallel between Canada and the US, I think there was, it’s going to be that demarcation will be much more clear. I think organizations, are, have already kind of moved to make sure that, you know, that there are, there are Canadian organization, that they’re going to be running if they’re going to be running on AWS or Azure or with a hosting company that, that hosting company, is, has a data center, in Canada, and that they can control and manage and have transparency into how that data is handled.
So, you know, in terms of, that moving along the provincial or state level, in the future, you mentioned California. I mean, I think that’s probably inevitable. I think that it’ll probably take some time to play out, but I think, for now, at least the near term, national borders will matter the most. And then we’ll see, as it plays out in the future. But you know, this, this I think is just a natural byproduct of the fact that so much more of our lives, business, personal, is moving online, and that dictates, a closer look at how that data is managed and who has access to it and how it’s used.
Hartland: Yeah. It’s a, certainly an evolving space and, recent changes with WhatsApp sharing of data and whatnot.
Hartland: I think, it’s going to be interesting to see how all this plays out and I, maybe that sort of ties into to some degree, the next question, which is, you know, with Biden having been sworn in yesterday. So, with the new administration, what changes do you anticipate for IT service providers, what might be on his, kind of, as of his mandate to address that might impact on. Do you think, or that, you know?
Phil: Yeah, I mean, it’s interesting, we’re going to be making these comments, in Canada, North of the border. And certainly, you know, it’s been an interesting year on the political front, but yeah, I mean, I don’t know if there’s going to be massive changes in the landscape in the next year. I think the focus of the new administration is clearly on the pandemic environment. But I think you’re seeing some interest, you know, just what happened this month, actually with certain content platforms, major ones, deleting certain users or preventing certain users or, flagging certain users, and then other sites being completely taken off public cloud infrastructure. I think that’s probably, I think that the big issue that we’re going to expect to see more of a conversation about in 2021, is to what extent, can you let regulate content and that’s a big issue, I think, and I think it does not just apply to the large social media platforms, the public clouds, I think MSPs, hosters, service providers, independent ones, are all involved in this ecosystem. And I think they will be sort of dragged along in that conversation in the sense that, this is a tightly integrated ecosystem, that’s built on a number of different building blocks, carriers, data center operators, network providers, and they will have to, they tend to. I think the history shows, almost not separate self-regulate, but there’s a certain amount of consistency in the direction that they go. So, yeah, I think you’d expect to see that what’s happened, even in just the last few weeks, is probably going to continue to play out. And I think you’ll see more attention paid to it when it comes to terms of service accessible, you use policies. Yeah, I think that that will be, you know, probably something that, gets more attention maybe, as we move this environment, then after we get into hopefully post endemic environment,
Devin: I was going to say, it’s interesting. I was thinking about similar things recently, and there’s a concept from outside of it that I think applies nicely here, which is the social license, the community allows you to do business within it essentially. And, we’re seeing that extended more to IT service providers where activists are reaching out for parlor, would probably be the most prominent example, right. AWS took it down. So that you could argue that in the tech ecosystem, they didn’t really have the social license to operate, I don’t know if that’s a good thing or a bad thing yet. Certainly, an interesting topic though.
Hartland: Yeah. And I think, the other interesting part here is, the political persuasions behind, whether it’s the media or the companies themselves, and how that if, if at all is impacting their terms of service. So, all of a sudden, it’s controlled. A set of users is controlled by the political preferences. So, it’s going to be interesting to have to follow no doubt.
Devin: Do you think that it would be that, you know, would the manage service providers in the future perhaps be pressured from activist groups to stop doing business? I mean, I haven’t really heard that for managed service providers in particular. It’s been more of the infrastructure providers, or the social media companies, but I wonder if it might get a little bit more, you know, going after smaller companies in the future too. I could see that.
Phil: Yeah. I mean, I think, you know, I made a jump in, I think, you know, obviously it’d be because of the size of those companies, they’ve tended to avoid that kind of attention. But I think if there’s kind of momentum flowing from the top, from some of the large platforms that, you know, there’ll be a certain amount of, peer pressure almost like on other companies to, to kind of work within the framework. maybe it’s not an official framework or, but one, that has certain elements that, and pressure points that people will probably feel they need to comply with. So, yeah, I mean, I think that’s right now, it looks like that’s the direction we’re headed. It’ll be fascinating to see how it plays out. It certainly wouldn’t be easy for us to separate kind of, there’ll be kind of called rogue providers here or there, or who, you know, who don’t feel they need to comply or want to run out on their own, but it would be, you know, as this ecosystem is built, I mean, it’d be extremely difficult, you would think, for a separate ecosystem, to emerge. So, yeah.
Hartland: Yeah. Interesting. Okay, good. Well, look, another question that Devin and I were sort of pondering was this question about, I asked these and the kind of proliferation I guess, of ISVs, and ISVs of course, on the hosting and infrastructure side, which I don’t know, Phil your perspective. I think there’s been consolidation there already. And I would say that the growth of those, serving infrastructure and hosting space has been a little less, in recent years, I suppose, than it was at one point, where we’re seeing a lot is ISVs, serving in the managed services space and this managed service providers and kind of, a lot of up and coming providers that are trying to align themselves with various distributors. And, and then, you know, there may be a channel player. They may be tools for service providers to use themselves. I don’t know, you know, to what degree this is something that you spend a lot of time following, as the, you know, sort of, on the periphery, I suppose, of the industry, but, serving these, the provider. So, what are your thoughts with respect to kind of where that’s going consolidation and, and anything else in terms of trends there?
Phil: Yeah, I mean, it’s definitely, I think the, you know, there’s some great technology companies out there, that supply the tools and the technology that service providers aggregate and use, to deliver the services that they provide to customers. I think that these organizations obviously are I think, you know, provide a valuable service, continue to innovate. I think that they are one of the things I’ve noticed is I think that they are looking at how the ecosystem is evolving and kind of trying to, expand kind of their capabilities to other types of service providers. So, whereas, you know, you may have seen, a certain type of vendor focus just on, holsters or just, on communication service providers, telcos, you’re starting to see those lines blur a bit. I think, and that, I think reflects kind of the overlap that you’re seeing between, you know, companies that were focused on hosting, MSPs that were focused a bit, maybe less on hosting and a bit more on on-premise infrastructure and remote services. And those are more on the communication services side. So, I see, I think you’re seeing, some of that, I think, you know, if you ask about consolidation, I would say it’s probably, you know, more of the same, I’ve never thought of this space as being one that consolidates, you know, quickly and steadily, like the hosting space has over the last decade and a half. But you know, where there are things that make sense and, that, you know, you should expect that to happen. So, but? yeah, I mean, I don’t know if I’d see any acceleration of that happening. I think it just it’ll happen strategically and where it makes sense. Yeah.
Hartland: Yea, And I think, your point, it’s an interesting one. They talk about, some of these providers, moving into telco or telco to, you know, manage service providers or whatnot. I think, you know, from my experience, anyway, some of that is as a result of product market fit, right. They might not, they might have just been, not been able to get traction with one of those groups and change gears. I know one company, in particular, was struggling in the hosting space to get traction and then, seem to get a ton of traction, with managed service providers. So, that may be a piece of it as well.
Phil: Yeah. And just the fact, and I would add just, just the fact that so many, service providers of all shapes and sizes and from different parts of the market all seem increasingly to have some sort of hosting cloud-based infrastructure service that they’re all within, that they’re offering within their larger portfolio. And so, yeah, they’re going to be consuming some of the tools that you need, to provide those services.
Hartland: Right, right. Yeah. Yeah. It’s true. True. It’s yeah. Another angle of that question.
Hartland: All right, well, let’s switch gears a little bit, web hosting trends. So, you know, this is a question you’ve probably had, Phil a hundred times or more, over the years, and I certainly had it, the question is, is web hosting dead. And, and I guess, you know, we’re not talking about application hosting. We’re not talking about infrastructure, but we’re really talking about, hosting, focused on the kind of, small and mid market, groups and the GoDaddy type models. And, we’ve had the site builder groups come in and pick up some of that market, the web.com as far as spaces, Wix is, those types of players. But what are your thoughts with respect to, sort of the lower end of the market? And a lot of times it’s going to be WordPress, kind of comfortable.
Phi: Well, I appreciate the provocative, title and question. And yes, you know, it’s a question as an analyst. I think I’ve had numerous times, dating back, you know, and, and interestingly, and updating back like a decade. So, which I think says something that, that question keeps getting asked. But I think it’s, it’s, I would, you know, I would look at it this way. I don’t think web hosting is dead, but I definitely think it’s changed. Right. And so, and that’s why you’ve seen even the terminology has shifted, right? Like web hosting is just, the term is used a bit less than it was, you know, 10, 15 years ago. So, in that sense, I don’t think web hosting went away. It just changed in the way that it’s delivered. It’s changed in the business model. So, you mentioned the site builders, right. They’ve, taken, you know, showed that a freemium approach, is a way that you can expand the scope of a customer base and then monetize through freemium, by giving something away and then monetizing the services on top. So, that’s one way, one significant way it’s changed. And hosting has started to become packaged in with other services. So, it’s not necessarily even thought of as kind of standalone pure web hosting, packages with some other type of service. So, yeah, I mean, I don’t think it’s dead, you know, there’s still, obviously a need for web presence. It’s just, it may not be what it once was.
It’s not as standalone. It was, it doesn’t live on its own island, as it used to. Now, it’s more about being kind of a centralized, personalized identity and web presence. That’s a central kind of almost management point for what you do online. That could be how it extends to social media, to your, to wherever you’re selling online and to what tools you’re using. So, it’s very much change, in that sense, I think of hosting now is just kind of the core foundation of additional layers of value add, and I think Hartland, that’s what you do. It’s what you help with your clients is you, you help them build, and market and sell, the value add, that they need, to provide value for customers.
So, yeah, I mean, I, you know, it’s going to hosting has come a long way. There’s certainly stuff out there and providers out there that continue to have viable businesses, maybe not growing 20, 30%, but still growing, and looking a little more like they did before. But I think you’ll see that gradually fade away. And I think, we’re, we’ve been in a decade long process in the hosting web hosting space of reinventing ourselves and, looking for different areas to drive value, different areas, to do different ways to deliver the service. The underlying technology and infrastructure is still the same, but, you know, some of the end-user experiences off as we change. And I think providers need to be cognizant of that, and not get caught, waking up one day and finding that, everybody evolved in and changed. And you didn’t, so, yeah.
Hartland: Yeah. And you know, we had another question that’s very much tied to this one, and it’s just, you know, the future. So, I don’t know if there’s anything more you want to add, but sort of where, like we talked about, you said you had that question 10 years ago. And I remember that question and people were saying, well, it’s going to be dead in five years. And as you said, here we are 10 years later, proxy prep didn’t work. And so, you know, we’re cast our mindset, back here to that question. Well, if we were to do the same in another 10 years, do you see there’d be any sort of incremental changes that the week like we’ve seen, or is there going to be some fundamental shift to how these services are provided and provisioned and, types of vendors that are going to be supporting that space?
Phil: Yeah, I mean, I think with as much with infrastructure and, you know, it’s probably going to be in the middle of those more extreme, kind of scenarios. I think the sector has always kind of evolved and change incrementally. There’s still, there’s always the new, but there’s a lot of the old that’s still viable. And then guys who’ve kind of taken one or two steps in some direction, and continue to be, to see viable, have a viable business. So I, I think you see, you know, more of that kind of just gradual change, because you know, the core when you, you know, we do market share, data analysis. And when we look at the sector, there’s always that there’s always no matter how much change is happening, there’s always that core foundation that kind of just continues every month, customers pay their bills, churn rates in the sector have historically been low. They, probably a little higher these days than they were 10 years ago. But they’re still in general, in big picture, if you look at the market, on an aggregate basis, they’re still relatively. So, in that foundation, doesn’t, you know, it’ll probably peel off over time, but it takes time, which is the message. And while that’s happening in kind of these more established, shared MPS markets say Western Europe, North America, you know, there is a lot more, there are a lot more markets around the world, that are probably, you know, where we were years ago, in some of the more mature markets. And so those markets, obviously they’re not going to evolve the same way, the services they will deliver, not going to look the same that they did, the way this, you know, the Sheraton MPS category grew up. But they’ll essentially be delivering those kinds of services in a similar kind of month-to-month recurring model and a base infrastructure, a little bit of services, you’ll see that in developing markets around the world. And so, if you look at the market on a global basis, I think it’s, you know, it’s fair to think that this market will just continue to push along.
Hartland: So, it’s like your, we talked about some of the questions about your, kind of, leading into the next question this time Phil. So it, the next one I had is what part of the world is this hosting still growing? You know, from our perspective, essentially, and this might be a little bit, simplistic, but, you know, our experience has generally been that if a customer, if a, I’m sorry, a customer of ours, but if a service provider is acquiring a customer today, there’s a reasonably good chance that they’re taking it from another provider that’s, and they’re just, so they’re leaving next to that provider and moving over. And of course, there’s new business and new businesses are starting. And so, there’s customers who are, starting with a new need entirely. But, there’s also, you know, a lot of, kind of, stealing from your competitors, if you like. So, I know that that’s not happening in all parts of the world. So, I guess my question is what, where do you see hosting, still growing more and more quickly, right. And we talked about 20 or 30% a moment ago, and those were numbers that were usually possible 10, 15 years ago. And I’m sure are still happening in some markets. Have you, is it, are we talking about brick countries? Are they still growing at those kinds of numbers? What’s, what’s your experience?
Phil: Yeah, I mean, I think the, you know, there are definitely regions around the world where the growth is faster, where there’s still more upside where, you know, there’s still people just starting to come online. Obviously, the people, you know, not all of them are going to head for hosting. I think that’s one thing to keep in mind, right. There, there are different, options, right. They may end up at, at, something like a site builder. They may go directly to social media and not really, you know, come years later back to having kind of that standardized web presence side I spoke of. But yeah, I mean, absolutely, you know, Latin America, Brazil, I mean, these are, you know, fast growing internet markets. If you look at, the middle east Africa, still developing, and then if you move to the Asia region, you know, there’s two places I think, where you’re going to still see a lot of growth. One of them is, is obviously India, right? Just a massive growth potential. And another one is, is Indonesia, which is actually, some people tend to forget is the fourth most populous country in the world. And actually has, you know, is just in the earlier stages of its development of internet technology and use of internet technology at the same time, of course are massive mobile users, and it’s just kind of the web presence. And that element is still, you know, in relative infancy. So, if you kind of look at those parts of the world, and understand, you know, the potential, and the fact that many people are just starting to get online and you know, just revolve more of the lives around technology, you know, you see the growth potential. Yeah.
Devin: I was going to say for Indonesia, it’s an interesting example because I’ve know, I’ve read that for people in Indonesia, they’re in their experience online to a large degree is confined to Facebook. You know, like they don’t really even have like a, a conceptual difference between the broader internet and Facebook, it’s the Facebook is the portal. So, I wonder if that would, you know, maybe if as that market matures, maybe more stores would move from Facebook stores to, you know, having their actual website for e-commerce and all that. So, I speculate, but I’m just, I just wonder.
Phil: Yeah. And it’s not necessarily even move it’s extended integrate. Right. So, there’s nothing, you know, what’s great about these social platforms is obviously the reach and the connections, to, to people network and potential customers if you’re doing business. But, but yeah, integrating and connecting, with kind of personalized and centralized web presence is something they may actually come back to later. I think it’s a viable theory, and it could apply in many markets around the world.
Devin: And I guess the takeaway from a marketing perspective is, you know, if you’re marketing into a region where, you know, the internet is viewed as Facebook, then Facebook advertising is probably more appealing than it would be otherwise.
Phil: Yeah, Good point.
Hartland: Yeah. And Phil, I like your interesting point about Indonesia and I sort of lost sight of, and I’ve been there. But, I lost sight of the size of the country. And one of the things that I’m privy to, we’re looking at, acquisition opportunities is to look at the distribution of the customer base. And, if it’s, you know, WHMCS or something doing a report on distribution by country, I’m going to take a little bit closer, look to see Indonesia. It certainly hasn’t been on my radar, and it hasn’t stood out as a, as a country that’s, made up, you know, were close to a significant number of, of a customer portion of a customer base, I guess. And so that, that’s interesting. So, yeah, thanks for bringing that one up.
Hartland: So, just moving on here a little bit, talking about vendors, we’ve, we’ve all heard the kind of grumblings, now for, I don’t know what it would be a year and a half or something. I can’t remember when cPanel, first raised their prices, but, there’s, I guess there’ve been impacts, right. I know for firsthand, from a number of groups who have indicated that they’re moving away from cPanel, or, and, or passing the pricing, increases along to their customer base, running on other panels in parallel, looking for alternative options. I just wondered, you know, what you’ve seen, what you’ve heard. and, and I guess the, you know, the strategy, I suppose, behind seat panels, increase in price and what your, you know, what your thoughts are, is that smart. Obviously they were acquired and, and then a lot of these changes took place. So, what, what are your thoughts on that?
Phil: Yeah, probably haven’t followed this as closely as I should have, but I think that you know, the feedback that I’ve heard on the, you know, on the ground, is similar to how you described. and I, and I don’t necessarily think, you know, that it’s, I don’t necessarily think it’s a bad thing that, you know, the values of the, you know, the value of these technologies and the services that they help produce, is reinforced or increased. You know, this industry has always kind of had that battle against commoditization and pricing pressure, and everybody, you know, the early days of the sector, everybody was trying to do themselves on price because, you know, they felt that was, you know, the only way they could differentiate them, you know, that changed as the industry matured, people realized, you know, that you can do other things, to drive value add. And so, yeah, I mean, who knows, it, it obviously, you know, it’s an operating expense for a lot of providers out there, and it certainly has impact don’t want to, you know, discount that, you know, but I think there could be, you know, it’s always good for the industry to reinforce, to value and to hold the line and say, Hey, let’s, we’re delivering, an important service to building blocks. You know, it requires, you know, resources and money to develop this technology, to innovate, and then to deliver that to the customer. I think it’s up to the sector, to, you know, if it requires passing that cost down to the customer, then it’s up to the sector to, and providers to build value, and to demonstrate it and show that to the customer. And they’ll, if they do, they’ll continue to be successful, because if you have something valuable, people, people are going to pay for it, you know, as long as it’s not completely out of whack, there’s nothing wrong, nothing wrong with stepping away from previous year’s expectations and trying to set new ones. I think it’s entirely possible to demonstrate value.
Hartland: Yeah. Well, I think there’s certainly value there, and the customer is like cPanel from what I gather is a lot of, sort of preference on the customer side. But, at some point it’s just not going to make economic sense, but I think if this were happening 10, 15 years ago, a lot of providers would go and make their own panel. Right. nowadays there’s more of a reluctance to do that and, and more, interest in sort of buying something off the shelf. So look up, we’ve, we’ve talked a little bit here about, we talked about infrastructure. We talked briefly about, you know, the changes there. We talked about managed service providers, but we have a lot of MSPs, who either are, we’re working with, from a marketing perspective or who are subscribers to our mailing list for opportunities of companies, first ID companies for sale.
Hartland: And so, to kind of move into a little bit more of their territory, what should MSPs be looking for in an infrastructure provider? Some MSPs is a very broad term and there’s a lot of different services that are provided, although, you know, many of them are fairly sort of core to the offering around backup and security solutions and whatnot. And some, but some will go further down the road around supporting infrastructure. It may be in the cloud with a hyperscaler. it may be with a, you know, more of a private cloud. And then of course there’s still those customers that are in the back closet that are being supported. So, you know, if MSPs want to align themselves with a, with an infrastructure provider and are trying to evaluate, should it be a hyperscaler, and in other words, you know, Google, AWS, Azure, et cetera, or, should they align themselves with, you know, a smaller operator who may be local to them, for instance, you know, how might they go about this? And what opportunities exist for MSPs?
Phil: Yeah, I mean, I think the key question for MSPs and service providers, the key question for them to ask themselves is, you know, is to first look at their own business. You know, what, where, you know, what is it, what is my value proposition? What do customers look to my service, for? Is it a great user experience, my handling of customers, then that’s where I should be investing. And if that’s where I’m investing, then I should be looking perhaps for, you know, the type of info underlying infrastructure scenario that make, that makes sense, my soul, oh, sorry, sorry guys. A little bit here. so, you know, so for an organization that, you know, is really great at managing customers, that they want an underlying infrastructure, extra service that’s affordable, efficient, scalable and easy to use. If they, you know, if it’s like a WordPress hosting organizations, you know, their value proposition is around handling WordPress, optimizing it, and they might want to look for a service that makes sense for them. So, you know, recently you made flywheel a company that was acquired by WP engine day. You know, they never reconciled their own servers or procure data centers. They started on digital ocean, but they moved and said, you know what, I think they, they decided to go with Google cloud. And that was because, they weren’t, they used a container, you know, they made their decision based on the fact that they want to use containers and they’re heavy users of internets to manage all that. So, yeah, I mean, there’s, it’s, it’s, there’s no, you know, I, I think it’s to understand your business, understand the, how the underlying technology fits with that. And I think that’s how, you know, how you go about it. You know, there’s no right or wrong. I think it’s, it’s a matter of finding the right fit.
Hartland: So, I mean, how would you describe then, the different options that are available? I mean, if you were to put these into kind of more simplistic buckets in terms of what’s available to them, how, how would you, how would you sort of, for MSPs that, that might not be offering this or, are feeling like they don’t have a very compelling offering? How should they think about this question in terms of their options?
Phil: So, you mean in terms of how, like, should I go completely asset like, should I get rid of my data centers or?
Hartland: Yeah. Like, yeah. Right. And so, what are the options available to them? We’ve got the, we got the hyperscalers, we’ve got, you know, local providers, what’s, you know, almost a bit like a, is there a decision tree that they could use? You know, are you doing this? Yes or no. Okay. Go this way. Are you, you know, does the customer want Y yes or no and fall in, and those are some, some kind of easy way for, for MSPs to try to navigate this space.
Phil: Yeah. I mean, I think it’s something like that, right? Because again, every business is different. So, you know, as, as an example, if you wanted to, if you’re going for, if you’re trying to decide between like a digital ocean and a public cloud platform, and you felt that you needed more global footprint or the potential to serve customers around the world, you might want to go with one of the larger platforms out there. So, so that would make sense, you know, cost is obviously, something that, you know, matters. And so you could, you know, that would be another along your, another factor to consider, the tool sets, you know, your internal expertise, you know, which, you know, which KPI do, you know, are we familiar with, or like working with what are the types of tools on that platform, that mattered to our business, all of that, I think, you know, plays a role. And so, yeah, I mean, I think, you know, in describing the landscape, I think right now there, I would probably think of it like this. They’re still proprietary, obviously. You can do things yourself, you can go to the public cloud. And then there’s that second tier that, you know, digital ocean, you know, previous to that people, a lot of people were, were running off something like soft layer, you know, Lidone, is something you can do. So that’s kind of in, in the second tier, and then there’s, you know, certain people, certain organizations who will probably, double up bit, or depending on, again, what servers on some people are running data centers and are using, the cloud for, just to help customer using it, to enable a backup service that they’re offering. Right. So, they’re still running private clouds and dedicated servers and things like that. But they’re like, yeah, this makes sense, you know, cheap underlying infrastructure. I’ll just use some third party software and I’ll create a new backup service. So, kind of a more strategic approach, putting that into your portfolio. I think that makes sense, too. So, yeah.
Hartland: So you talked, you mentioned price, and I’m wondering, is there a simple answer to the question of what is the more inexpensive option, whether it’s public cloud or we’re looking at, as you said, like one of the, you know, data center operators or infrastructure providers, because, you know, my anecdotal experiences as being that there are groups who are doing both, but that, the public cloud, pricing models can get out of hand if you’re not managing it. And that’s a little less likely to be the case with some of the infrastructure providers, you know, the private, the smaller private infrastructure providers, and also, that, there’s a question of where the company’s at in terms of its I guess, growth in demand, that although you get the scalability, with the public cloud, that the pricing can, can also kind of skyrocket and can get away from you quickly. And so in the earlier days, it seems attractive, but as time goes on, it becomes more expensive than alternative options. Do you have any comments around that?
Phil: Yeah, I mean, I, I think, I think the thing to add in terms of costs is to not think of it as a, you know, as to take a kind of larger picture view of costs because it’s not just the underlying cost of the compute and storage infrastructure, it’s also the network cost. And then of course the human resources are required internally to manage that. So, yeah, I don’t think there’s any easy formula or apples to apples, oranges to oranges comparison. I think it’s a matter of matching it up with the business requirements, with your customers and what they need and the products they consume and the price points they’re willing to pay you. So, yeah, I think, I think that’s, that’s how we were approaching.
Hartland: Yeah, that makes sense. So, for those who aren’t familiar, Phil has had, I guess, what fell a couple of times now you’ve, in May, puts on a, infrastructure summit and, and that takes place in has, or has taken place anyway in Toronto. And this was prior to COVID. So, the last time, I think if I’m not mistaken that you ran, it was 2018, so it was 2018 and 2019. Phil if my memory serves me correctly and that, unfortunately last year, 2020, it had to be canceled. And then, this year, I think you’re looking to do something virtual, but in, at least one of those years of not both, there was a fairly heavy kind of components and topics around edge computing.
Hartland: And I, you know, I’m not, it seemed to be the talk of the town, if you like, at one point, and I’m not seeing quite as much, and maybe it’s just the exposure that I have to those discussions. But, I guess I’m just sort of curious, like, where’s the, where’s the opportunity for MSPs around edge computing and, and other, kind of channel partners like, where’s that going? What might they consider getting involved with, where do you see that kind of the next big thing, that, that managed service providers who have the feet on the ground that are in communication with these businesses and, where could they, take advantage of some additional, you know, potential revenue, streams and growth, here going forward?
Phil: Yeah. And thanks for mentioning. Yeah, it was pretty, definitely our event, where we talk about kind of what’s going on in the infrastructure services sector has definitely picked up the conversation on edge. We feel it’s a just, I think, big picture. I think it’s the base, you know, I think it’s going to drive how the industry kind of evolves over the next decade. So, I think the decade that we just went through, was very much about centralized public cloud infrastructure build out. And of course the ecosystem kind of is dragged along with it. And then what you’ll see in the next decade is a decentralization, moving from kind of centralized, large, clusters of infrastructure to smaller increments, dispersed all across different geographies, in, you know, in a geography, sorry, different locations in a geography, and then even further, as it tries to, you know, within, you know, even within cities. I think at the end of the day, it’s about getting compute high performance or increasingly high performance compute, closer to end-users. And so, yeah, the, so that is where kind of that next wave of, you know, we would argue, of infrastructure, development and expansion is going to happen. The hyperscale and what I think makes it unique, different from is that, it’s, you know, this major public cloud centralized public health build-out involved, less pieces of kind of the rest of the ecosystem, independent service providers, MSPs. Whereas I think, and what’s, I think interesting about the edge build-out is it may not play out that same way, right? The public clouds we’re able to, take advantage of economies of scale, but in an edge scenario, it’s a bit trickier. And the build-out will not necessarily involve, the, you know, the level of scale, you know, will not be able to exert the advantage of scale as obviously, they’re going to be involved, they already are. They’re building out different types of products. But I think at the end of the day as, as because it’s new because it’s, it’s, I’m sorry it’s a more nascent and developing area. When those kinds of, when those pockets emerge in a sector, I think it creates opportunity for service providers. And, you know, that means addressing that next-gen, you know, there’s going to be a new generation of workloads, that is being developed now and are going to mature and flourish in the next decade. So, trying to look ahead to that, the, you know, our message to MSPs has been thinking about, that this opportunity is going to open up to kind of your addressable market. A lot of service providers have, you know, served, kind of a tighter or smaller subset of customers. And the once the edge builds out, there’s, there’s going to be a new generation of workloads, different types of customers, that’ll kind of present infrastructure opportunities, for, and you know, that ecosystem will just be an extension of everything else that’s happening there and in an outsourced infrastructure. Yeah, I think it’s obviously very early stages. But I think there’s going to be some very interesting and new companies, and some of the companies that are already involved quite frankly, come from a hosting, a data center background. A lot of those guys are familiar names, that grew up in this, you know, the hosting space, for the last, you know, 20 years, and are applying the same still skill sets because it’s still, the same building blocks, the same underlying infrastructure. They’re just doing it in a different way, deploying it, a different rate, creating a different supply chain, different user experience, different, you know, different business model, or similar, I should say. So yeah, that’s what I think is, what’s exciting about it. And I, I think, you know, MSPs should be thinking about that, especially as their customers ask them, about expansion, not just, you know, give me more capacity, give me more storage, give me, you know, can you give me more service, but can you take me to a second location, a third location? Can you get me out to the edge as my, customer base expands? And my performance requirements, become more complex and enhanced over time.
Hartland: Are there any particular industries, I mean, MSPs in some cases, they specialize, they might specialize, in terms of, well, I mean, they’re geographically specific and in a lot of cases, certainly not all. And they’re specific in terms of like the services that they provide, but aligned with that is, is in some cases, specialization with industry, right? The legal industry, manufacturing space, they support the government, healthcare education, whatever it is, or a few of those, is there any opportunity to think in particular around edge computing with any industries that MSPs might want to, kind of consider as part of their targeting by industry, knowing that there’s going to be a growing opportunity around edge computing in some of those areas. And one for instance that comes to mind is the home services and, how do you say it, even for businesses like HVAC companies and whatnot that are out in the field, they’ve got, they’ve got technicians out in the field, servicing equipment, servicing home servicing businesses, and who need to, to have, you know, tools, kind of at their fingerprints, fingertips rather than like, I don’t know. Are there any that kind of come to mind in particular?
Phil: Yeah, I mean, I think healthcare and like telehealth, I think was what we’re calling it. I think that’s an interesting one that because, you know, there are MSPs that serve various different types of healthcare organizations. And with this pandemic kind of, you know, your healthcare provider, a lot of healthcare, is starting to happen, in an online meet through an online medium. And, you know, people are everywhere right there. And, it’s a service that’s critical, that’s going to require, a good performance, consistent and, you know, good performance level expectations. So that one could be interesting. I think, you know, and of course everything around, you know, IOT devices, I know everybody talks about autonomous vehicles. I think we’re probably still a ways away from that. But yeah, serving yeah, devices that are going to be in homes, and homes are everywhere, of course, out into, you know, second tier locations. I think those are interesting opportunities that kind of relates to what I think you were getting at in terms of kind of, you know, construction workers, you know, people doing work and they’re doing work on homes or facilities. And, and those can be sometimes further out there, where we’re performance kind of degrades or where there’s less infrastructure. So yeah, I think those kinds of just, just the tipping point, of what we could see going forward.
Hartland: Right? Yeah. Construction, an interesting one too. Yeah. good. Look, Phil. thank you so much for this. This has been a really interesting and fantastic opportunity to chat with you. We are coming up literally right to the, the kind of top of the hour, and this was a perfect timing. So, if anybody has any questions, please feel free to reach out, you have our contact details [email protected] or eBbridge marketing solutions. Phil, can be reached at [email protected], right. Or, Phil Shih, on LinkedIn and, Shih, is SHIH. And is there any other way that people might want to, reach out to your fellow?
Phil: All good options, yep.
Hartland: Excellent. Well look, thank you again for your time. really appreciate it. And, we will wrap up there.
Phil: Yeah. Thanks for having me. Thanks.