Magic Quadrant for Managed Hosting, North America

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7/6/13 Magic Quadrant for Managed Hosting, North America www.gartner.com/technology/reprints.do?id=1-1EZXQCT&ct=130410&st=sg 1/13 Magic Quadrant for Managed Hosting, North America 9 April 2013 ID:G00247853 Analyst(s): Douglas Toombs, Lydia Leong, Bob Gill, Tiny Haynes, Gregor Petri VIEW SUMMARY Managed hosting solutions are offered on physical and virtualized infrastructures, including cloud infrastructure as a service. This market is mature, but cloud capabilities are disruptive, so vendors must be chosen with care. Market Definition/Description Managed hosting services are standardized, productized offerings that combine data center facilities, providermanaged computing, network bandwidth and storage capacity. Their individual components may be physical or virtual, and dedicated to a single customer or shared by many. At minimum, the provider must supply server OS management services, including guest OSs if virtualization is used. The provider may optionally supply other managed and professional services relating to the deployment and operation of the infrastructure. Managed hosting services offer limited customization and are sold on a standalone basis, with no requirement to bundle them with other services (such as application development, application maintenance and data center outsourcing [DCO] services). This Magic Quadrant focuses on the enterpriseclass, managed hosting market, independent of the type of underlying infrastructure. Managed hosting services may be delivered on: Physical servers. These are dedicated to a single customer and owned and hosted by the service provider. At minimum, server OS management must be included. Virtualized servers. Physical servers are dedicated to a single customer and owned and hosted by the service provider; virtualization is used to provide virtual machines to the customer. At minimum, guest OS management must be included. Utility infrastructure. This provides customers with virtual machines from a shared, multitenant environment owned and hosted by the service provider. At minimum, guest OS management must be included. Cloud infrastructure as a service (IaaS). This provides customers with selfservice — via a graphical user interface or an optional API — and compute, storage and network resources, on demand and in near real time. These resources are owned and hosted by the service provider. The offering may be multitenant ("public cloud") or singletenant ("private cloud"). At minimum, server OS management must be included for nonvirtualized physical servers, and guest OS management must be included for virtual machines. Many customers will choose to use multiple types of infrastructure within their managed hosting solution. When cloud IaaS is mixed with one or more of the other types of infrastructure, this is often called "hybrid hosting." Some customers will also choose to mix providermanaged and selfmanaged infrastructure. Gartner separates the concept of a cloud infrastructure platform from the concept of services that are delivered on top of that platform. Managed hosting is simply one of many services that can be delivered on top of cloud IaaS, or more broadly, on an infrastructure created using a cloud management platform. In addition to server OS management, optional managed and professional services related to infrastructure operations may be offered, such as: Management of infrastructure software at the middleware or persistence layer, such as Web server software, application servers and database servers Management of storage, including backup and recovery Management of security Management of network devices, such as application delivery controllers Professional services associated with hosting, such as architecture, capacity planning, performance testing, security auditing and data center migration Managed hosting services are typically sold on onetothreeyear contracts. Providers vary in the degree to which they allow customers to change the amount of capacity they purchase during a contract. Some allow only capacity increases, not decreases. Some require a contract addendum and extension when capacity is changed. Others are more flexible, allowing capacity changes on a monthly basis, or even a daily or hourly basis, without any contract alterations. EVALUATION CRITERIA DEFINITIONS Ability to Execute Product/Service: Core goods and services offered by the vendor that compete in and serve the defined market. This includes current product and service capabilities, quality, feature sets, skills and so on, whether offered natively or through OEM agreements and partnerships as defined in the market definition and detailed in the subcriteria. Overall Viability (Business Unit, Financial, Strategy, Organization): Viability includes an assessment of the overall organization's financial health, the financial and practical success of the business unit, and the likelihood that the individual business unit will continue investing in the product, will continue offering the product, and will advance the state of the art within the organization's portfolio of products. Sales Execution/Pricing: The vendor's capabilities in all presales activities and the structure that supports them. This includes deal management, pricing and negotiation, presales support, and the overall effectiveness of the sales channel. Market Responsiveness and Track Record: The vendor's ability to respond, change direction, be flexible and achieve competitive success as opportunities develop, competitors act, customers' needs evolve and market dynamics change. This criterion also considers the vendor's history of responsiveness. Marketing Execution: The clarity, quality, creativity and efficacy of programs designed to deliver the organization's message to influence the market, promote the brand and the business, increase awareness of products, and establish a positive identification with the product, brand and organization in the minds of buyers. This "mind share" can be driven by a combination of publicity, promotional initiatives, thought leadership, wordofmouth and sales activities. Customer Experience: Relationships, products, services and programs that enable clients to be successful with the products evaluated. Specifically, this includes the ways customers receive technical support or account support. This can also include ancillary tools, customer support programs (and the quality thereof), availability of user groups, SLAs and so on. Operations: The ability of the organization to meet its goals and commitments. Factors include the quality of the organizational structure, including skills, experiences, programs, systems and other vehicles that enable the organization to operate effectively and efficiently on an ongoing basis. Completeness of Vision Market Understanding: The vendor's ability to understand buyers' wants and needs and to translate those into products and services. Vendors that show the highest degree of vision listen and understand buyers' wants and needs, and can shape or enhance those wants and needs with their added vision. Marketing Strategy: A clear, differentiated set of messages consistently communicated throughout the organization and externalized through a website, advertising, customer programs and positioning statements. Sales Strategy: The strategy for selling products that uses an appropriate network of direct and indirect sales, marketing, service and communication affiliates that extend the scope and depth of market reach, skills, expertise, technologies, services and the customer base. Offering (Product) Strategy: The vendor's approach to product development and delivery that emphasizes

Transcript of Magic Quadrant for Managed Hosting, North America

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7/6/13 Magic Quadrant for Managed Hosting, North America

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Magic Quadrant for Managed Hosting, NorthAmerica9 April 2013 ID:G00247853

Analyst(s): Douglas Toombs, Lydia Leong, Bob Gill, Tiny Haynes, Gregor Petri

VIEW SUMMARY

Managed hosting solutions are offered on physical and virtualized infrastructures, including cloudinfrastructure as a service. This market is mature, but cloud capabilities are disruptive, so vendors mustbe chosen with care.

Market Definition/DescriptionManaged hosting services are standardized, productized offerings that combine data center facilities,provider­managed computing, network bandwidth and storage capacity. Their individual componentsmay be physical or virtual, and dedicated to a single customer or shared by many. At minimum, theprovider must supply server OS management services, including guest OSs if virtualization is used. Theprovider may optionally supply other managed and professional services relating to the deployment andoperation of the infrastructure.

Managed hosting services offer limited customization and are sold on a stand­alone basis, with norequirement to bundle them with other services (such as application development, applicationmaintenance and data center outsourcing [DCO] services).

This Magic Quadrant focuses on the enterprise­class, managed hosting market, independent of the typeof underlying infrastructure. Managed hosting services may be delivered on:

Physical servers. These are dedicated to a single customer and owned and hosted by the serviceprovider. At minimum, server OS management must be included.

Virtualized servers. Physical servers are dedicated to a single customer and owned and hostedby the service provider; virtualization is used to provide virtual machines to the customer. Atminimum, guest OS management must be included.

Utility infrastructure. This provides customers with virtual machines from a shared, multitenantenvironment owned and hosted by the service provider. At minimum, guest OS managementmust be included.

Cloud infrastructure as a service (IaaS). This provides customers with self­service — via agraphical user interface or an optional API — and compute, storage and network resources, ondemand and in near real time. These resources are owned and hosted by the service provider. Theoffering may be multitenant ("public cloud") or single­tenant ("private cloud"). At minimum,server OS management must be included for nonvirtualized physical servers, and guest OSmanagement must be included for virtual machines.

Many customers will choose to use multiple types of infrastructure within their managed hostingsolution. When cloud IaaS is mixed with one or more of the other types of infrastructure, this is oftencalled "hybrid hosting." Some customers will also choose to mix provider­managed and self­managedinfrastructure.

Gartner separates the concept of a cloud infrastructure platform from the concept of services that aredelivered on top of that platform. Managed hosting is simply one of many services that can be deliveredon top of cloud IaaS, or more broadly, on an infrastructure created using a cloud managementplatform.

In addition to server OS management, optional managed and professional services related toinfrastructure operations may be offered, such as:

Management of infrastructure software at the middleware or persistence layer, such as Webserver software, application servers and database servers

Management of storage, including backup and recovery

Management of security

Management of network devices, such as application delivery controllers

Professional services associated with hosting, such as architecture, capacity planning, performancetesting, security auditing and data center migration

Managed hosting services are typically sold on one­to­three­year contracts. Providers vary in the degreeto which they allow customers to change the amount of capacity they purchase during a contract.Some allow only capacity increases, not decreases. Some require a contract addendum and extensionwhen capacity is changed. Others are more flexible, allowing capacity changes on a monthly basis, oreven a daily or hourly basis, without any contract alterations.

EVALUATION CRITERIA DEFINITIONS

Ability to ExecuteProduct/Service: Core goods and services offered bythe vendor that compete in and serve the definedmarket. This includes current product and servicecapabilities, quality, feature sets, skills and so on,whether offered natively or through OEM agreementsand partnerships as defined in the market definitionand detailed in the subcriteria.

Overall Viability (Business Unit, Financial,Strategy, Organization): Viability includes anassessment of the overall organization's financialhealth, the financial and practical success of thebusiness unit, and the likelihood that the individualbusiness unit will continue investing in the product, willcontinue offering the product, and will advance thestate of the art within the organization's portfolio ofproducts.

Sales Execution/Pricing: The vendor's capabilities inall presales activities and the structure that supportsthem. This includes deal management, pricing andnegotiation, presales support, and the overalleffectiveness of the sales channel.

Market Responsiveness and Track Record: Thevendor's ability to respond, change direction, beflexible and achieve competitive success asopportunities develop, competitors act, customers'needs evolve and market dynamics change. Thiscriterion also considers the vendor's history ofresponsiveness.

Marketing Execution: The clarity, quality, creativityand efficacy of programs designed to deliver theorganization's message to influence the market,promote the brand and the business, increaseawareness of products, and establish a positiveidentification with the product, brand and organizationin the minds of buyers. This "mind share" can bedriven by a combination of publicity, promotionalinitiatives, thought leadership, word­of­mouth andsales activities.

Customer Experience: Relationships, products,services and programs that enable clients to besuccessful with the products evaluated. Specifically,this includes the ways customers receive technicalsupport or account support. This can also includeancillary tools, customer support programs (and thequality thereof), availability of user groups, SLAs andso on.

Operations: The ability of the organization to meetits goals and commitments. Factors include the qualityof the organizational structure, including skills,experiences, programs, systems and other vehiclesthat enable the organization to operate effectively andefficiently on an ongoing basis.

Completeness of VisionMarket Understanding: The vendor's ability tounderstand buyers' wants and needs and to translatethose into products and services. Vendors that showthe highest degree of vision listen and understandbuyers' wants and needs, and can shape or enhancethose wants and needs with their added vision.

Marketing Strategy: A clear, differentiated set ofmessages consistently communicated throughout theorganization and externalized through a website,advertising, customer programs and positioningstatements.

Sales Strategy: The strategy for selling products thatuses an appropriate network of direct and indirectsales, marketing, service and communication affiliatesthat extend the scope and depth of market reach,skills, expertise, technologies, services and thecustomer base.

Offering (Product) Strategy: The vendor's approachto product development and delivery that emphasizes

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As noted above, managed hosting services are productized and standardized, but some providers willcustomize services for customers with specific needs that cannot be met by standardized offerings.Some customers choose a fully managed service in which the service provider manages the systeminfrastructure (computing, storage and network facilities) and application infrastructure (middleware),but not the application. Other customers prefer to select from a menu of management services; some,for instance, need only database administration services, while others want junior­level systemadministration tasks, such as patch management, handled for them, but to do all the complex workthemselves.

Use Cases Covered by This Evaluation

This Magic Quadrant focuses on the following common use cases, independent of the type or types ofinfrastructure used to serve these workloads:

E­business hosting. Managed hosting for e­marketing sites, e­commerce sites, software as aservice (SaaS) applications and similar modern websites and Web­based applications. Theseworkloads are often complex, and are associated with a high rate of change in systems andapplication infrastructure.

Web­based business application hosting. Managed hosting for corporate intranets and Web­based applications delivered to users primarily within the enterprise. The applications may becommercial software or in­house­developed applications; workloads are often relatively light, anddo not have a high rate of change.

Enterprise application hosting. Managed hosting for the infrastructure underlying largecommercial software applications, such as those of Oracle, SAP and Lawson. These workloads areoften complex and require specialized knowledge to operate optimally, but do not have a high rateof change.

All three use cases are typically tactical sourcing decisions that involve one application, a single group ofclosely related applications (such as everything associated with an enterprise's video portal) or a singledivision (such as the e­commerce business unit of a retailer). They are typically best served by a best­of­breed provider that has strong operational expertise with similar solutions. However, manycustomers expand their use of managed hosting over time, and the choice of a provider may become astrategic decision for a customer.

In the managed hosting market, it is difficult to find a provider that excels in all areas — providers maybe leaders in some areas but lag behind in others. As a result, it is important to match your use casewith a vendor that excels in meeting your particular needs. Smaller providers may do one thingextraordinarily well, but may not have a comprehensive set of services that enables them to address abroad array of use cases. It is also crucial to note that a Magic Quadrant shows the overall position of avendor in the managed hosting market, and thus examines a broad array of business factors; thequality of service delivered — although a critical element — comprises only about one­third of therating. A vendor's position in the Magic Quadrant should not be used to determine the relative quality ofdifferent services for a given use case. It is crucial to look beyond the Magic Quadrant Leaders whenselecting a vendor, especially if you have an unusual need. The perfect vendor for your needs might, forexample, be a Niche Player.

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Magic Quadrant

Figure 1. Magic Quadrant for Managed Hosting, North America

Source: Gartner (April 2013)

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Vendor Strengths and CautionsAT&T

differentiation, functionality, methodology and featuresets as they map to current and future requirements.

Business Model: The soundness and logic of thevendor's underlying business proposition.

Vertical/Industry Strategy: The vendor's strategyto direct resources, skills and offerings to meet thespecific needs of individual market segments, includingvertical markets.

Innovation: Direct, related, complementary andsynergistic layouts of resources, expertise or capitalfor investment, consolidation, defensive or pre­emptive purposes.

Geographic Strategy: The vendor's strategy to directresources, skills and offerings to meet the specificneeds of geographies outside its "home" or nativegeography, either directly or through partners,channels and subsidiaries, as appropriate for thatgeography and market.

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AT&T is a global communications service provider, headquartered in Dallas, Texas, with a long history ofleadership in the managed hosting market. It offers managed hosting on dedicated infrastructure andpublic and private IaaS, and colocation and application management services, from 23 data centers inNorth America, as well as from facilities in Europe and Asia.

Strengths

AT&T has a long history of providing managed hosting services. It can manage highly complex e­business infrastructures, and has particular expertise in e­commerce and enterprise applicationsolutions. It can also manage complex enterprise application hosting, in synergy with itsapplication management business.

AT&T is able to use its network as a differentiator for use cases where network access is a heavilyweighted criterion, or where end­to­end service management with SLAs is required.

Cautions

Gartner customers frequently express frustration with AT&T's billing processes. Although AT&Tprovides customers with documentation on these processes, it is exceptionally long and therelevant details are hard to find, which can lead to confusion.

AT&T's operations processes are heavyweight in nature. This level of operational rigor can bebeneficial from the perspective of the long­term stability of environments and the management ofthe complexities of change and risk, but it quickly becomes burdensome when customers want tobe more agile and to move more quickly.

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Carpathia HostingCarpathia Hosting is a midsize private Web hosting provider, headquartered in Sterling, Virginia, thatfocuses on delivering complex, compliant hosting and cloud solutions for midmarket enterprises andgovernment customers. The company offers managed hosting on dedicated servers and private orpublic cloud IaaS, and can integrate with Amazon Web Services. It operates from data centers on bothcoasts of the U.S., in Canada, in Europe and in Asia/Pacific. It can also offer high­compliance colocationspace.

Strengths

As of October 2012, Carpathia was one of only five providers serving the U.S. federal governmentmarket to have received Authority to Operate status for virtual machines for moderate (or lower)Federal Information Security Management Act (FISMA) workloads via a General ServicesAdministration (GSA) blanket purchase agreement.

Carpathia is one of the few providers that can work with customers that need or want to useAmazon Web Services as a part of a larger overall hosting, cloud and colocation solution viaAmazon Web Services' Direct Connect service.

Cautions

Carpathia's strong marketing focus on compliance use cases can put off customers looking formore general­purpose solutions.

Carpathia's InstantOn cloud solution is currently deployed only in its U.S. facilities.

Carpathia's network­level SLA lags behind most of its peers in the industry, at 99.9%.

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CSCCSC is large IT integrator and outsourcing company, headquartered in Falls Church, Virginia, that offersa broad array of IT outsourcing services, including managed hosting and cloud IaaS, as well ascolocation services. It offers managed hosting services from multiple data centers in the U.S., andmanaged cloud services from its U.S. and international data centers.

Strengths

CSC focuses its managed hosting business on its cloud platform, which is one of a handful certifiedby VMware as a vCloud Datacenter Service, and which incorporates a variety of other IToperations management tools as well.

CSC has a well­designed unified portal for its cloud and hosting offerings, which also integratesdetailed chargeback and billing data, as well as provisioning workflows with approval checkpoints.

CSC supports a particularly broad variety of infrastructure, middleware and database choices,including non­x86­based environments such as AIX, HP­UX and IBM's iSeries (AS/400).

Cautions

CSC does not offer traditional dedicated­server managed hosting or managed hosting forapplications outside North America. Its managed cloud hosting, however, is available in all of CSC'sgeographic regions.

CSC's sales and engagement processes for hosting and cloud are still maturing, with some Gartnerclients reporting frustrations in the time it took to advance from the initial engagement to anoperational state.

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DatapipeDatapipe is a rapidly growing, midsize private hosting provider, headquartered in Jersey City, NewJersey, which focuses on delivering high­touch services to midmarket and enterprise customers. Thecompany offers managed hosting on dedicated servers and on its Stratosphere public and private IaaS

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platform, as well as on top of Amazon Web Services. It operates from data centers on both coasts of theU.S., as well as from Europe and Asia. It can also offer colocation services.

Strengths

Datapipe is one of the few providers that can engage with customers looking to move workloads toAmazon's cloud but that may not want to do this on their own, or that may need additionalofferings not provided by Amazon Web Services, such as dedicated servers and colocation.

Datapipe aims to deliver predictability in month­to­month billing for customers by not charging fortime and materials for routine move, add and change requests that do not require new equipment— even to the point of performing a complete OS upgrade for a hosted server.

Datapipe takes an environmentally focused approach to its domestic infrastructure needs, andpurchases renewable energy offset credits for all its utility power consumed in the U.S. It alsoutilizes geothermal and hydroelectric power at its data center in Iceland.

Cautions

Organizations requiring mostly commodity services might find it harder to get Datapipe's attentionas it shifts its focus to customers for which its high­touch service levels are a competitivedifferentiator.

Because of Datapipe's focus on higher­touch levels of service, its prices tend to be higher thanthose of similarly sized competitors.

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Dimension DataDimension Data is a large, global system integrator and value­added reseller headquartered inJohannesburg, South Africa, and a subsidiary of NTT in Japan. In 2011 the company acquired SantaClara, California­based OpSource, which became the foundation for Dimension Data's global cloudbusiness unit. The company offers managed hosting on dedicated servers, as well as public and privatecloud IaaS from data centers on both coasts of the U.S., as well as in Europe, Asia, Australia and SouthAfrica.

Strengths

The former OpSource was successful with independent software vendors (ISVs) needing a serviceprovider to host SaaS versions of their applications. It achieved this by acquiring and buildingcapabilities specific to the needs of ISVs.

Dimension Data has extended the OpSource platform to a larger global footprint, and hasimproved its software to enable customers to deploy their own on­premises private instances ofthe managed cloud platform.

Dimension Data has some of the highest SLAs of any provider, and will even offer high SLAs forselected enterprise applications — provided they meet certain architectural requirements for fullyredundant components, clustering and so on.

Cautions

Dimension Data's managed hosting offering on dedicated infrastructure is supported from adifferent portal than its cloud platform, which can make management more cumbersome forcustomers needing to use both.

Dimension Data offers neither programmatic provisioning of "bare metal" infrastructure nor autility hosting platform.

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HostingHosting (also known as Hosting.com) is a midsize, private Web hosting provider, headquartered inDenver, Colorado, that focuses on midsize enterprise customers. The company offers managed hostingon dedicated servers, as well as on private and public IaaS platforms. It operates from six data centerlocations throughout the U.S., and can also offer colocation services.

Strengths

Hosting continues to bring new business continuity and disaster recovery services to the market.

Hosting takes a highly methodical and quantitative approach to measuring customer satisfactionacross the entire service experience, in order to spot areas with room for improvement and directinternal investments strategically.

Hosting continues to improve its portal's capabilities and information. Improvements include theaddition of an ability to add managed services to already­provisioned unmanaged infrastructure,granular levels of OS patch control and scheduling, improved monitoring of applicationperformance, and visibility into virtual machine storage input/output operations per second(IOPS).

Cautions

Hosting lacks any international capacity, unlike many of its peers in markets of similar size. Thislimits its ability to serve U.S.­based multinational corporations that would like a local provider butthat also need a global reach.

Hosting is still in the process of sorting out its messaging and branding, as a result of itsacquisitions during the past few years. Although this typically does not impair the quality of itsservice delivery, customers may see inconsistencies in messaging or operational processes fromtime to time.

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IBMIBM is a highly diversified global technology company, headquartered in Armonk, New York. It offers abroad array of IT outsourcing services, including managed hosting and cloud IaaS. IBM offers managedhosting on dedicated or shared servers, as well as on private and public IaaS platforms, from nine datacenters in North America and locations throughout Europe, Asia and Latin America.

Strengths

IBM's SmartCloud Enterprise+ platform, which serves as the foundation for the evolution of its e­business hosting and Applications on Demand businesses, is used in multiple service offeringsbeyond managed hosting. This makes it a strategic investment for the company.

IBM is one of the few managed hosting providers that can offer infrastructure capabilities outsidethe x86 sector, namely for AIX/pSeries systems.

IBM is able to deliver enterprise applications like those of SAP on its cloud platform, with someterm commitments for certain deployments being as short as one month.

Cautions

Although IBM's SmartCloud Enterprise+ platform has promising capabilities, it has been on themarket for less than one year and falls under Gartner's definition of a utility hosting platform, notcloud IaaS.

With a 99.9% SLA, IBM's SmartCloud Enterprise+ platform is on the low side, compared withother hosting offerings, and below the 99.95% typically seen in most IaaS platforms.

IBM measures SLAs at the start of a calendar month, not immediately upon provisioning a virtualmachine.

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Layered TechLayered Tech is a midsize, private managed hosting and cloud provider headquartered in Plano, Texas.It is refocusing on customers with complex, compliant hosting and security needs, particularly in thehealthcare and government sectors and the payment card industry. The company offers managedhosting on dedicated servers and private or public cloud IaaS, as well as colocation services from threeprimary data centers in the U.S. It also has secondary data centers in Canada, Europe and Asia.

Strengths

Layered Tech is investing in service delivery automation capabilities that can automaticallyexecute and track some change operations within customer environments entirely via scriptedoperations and that are tied into the company's ITIL­based change management framework.

Layered Tech is increasing its focus on, and services for, use cases with security and complianceneeds. It backs up its offerings with guarantees that customers will pass any audit from properlysanctioned regulatory entities.

Following its acquisition of New World Apps in 2012, Layered Tech is better suited to addressgovernmental computing needs that fall under FISMA compliance requirements.

Cautions

Layered Tech has primary data center locations in the U.S. only, which limits its capabilities forcustomers needing a larger international infrastructure footprint.

A significant shift in Layered Tech's messaging toward compliance might cause potentialcustomers with more general­purpose needs to overlook it.

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NaviSiteNaviSite is a midsize Web hosting provider, headquartered in Andover, Massachusetts, that wasacquired by Time Warner Cable in 2011. It offers managed hosting on dedicated servers and private orpublic cloud IaaS, as well as colocation and application management services, from six data centersthroughout the U.S. and three data centers in Europe.

Strengths

Although NaviSite offers a variety of infrastructure options, it encourages customers to useNaviCloud, its cloud IaaS platform, which is well­engineered for midmarket and enterprise needs.

NaviSite is a strong performer in the field of hosting and cloud services for complex applicationmanagement. It provides hosting solutions for applications from vendors such as Microsoft(Exchange and Dynamics) and Oracle (including PeopleSoft and Hyperion).

NaviSite is bringing desktop­as­a­service offerings to customers through a partnership withDesktone, one of the few managed hosting providers that has been willing to enter this relativelynew market.

Cautions

NaviSite is rationalizing its product portfolio in light of current market needs, which might lead toshifts in product focus.

NaviSite is typically one of the more expensive providers in the managed hosting market, as itoften bundles managed hosting as part of a more comprehensive suite of services.

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NTT Communications

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NTT Communications is a wholly owned subsidiary of NTT, with headquarters in Tokyo, Japan. Thecompany offers managed hosting on dedicated servers and private or public cloud IaaS via its Verio andNTT America business units, from data centers on both U.S. coasts, as well as from data centers inEurope and Asia. It also offers colocation services from its data centers, and owns its own globalInternet Protocol (IP) network.

Strengths

NTT Communications' global network can be a differentiator for use cases where global networkaccess is a heavily weighted criterion.

NTT Communications has a solid understanding of business practices, networking and security inboth Eastern and Western societies. This helps it provide additional benefits to customersexpecting their hosting needs to reach into the Asia/Pacific region.

Cautions

The service offerings of NTT America and Verio are still disconnected solutions, requiring differentportals and logins, among other things.

In North America, NTT Communications lags behind its peers in terms of technical innovation andexpansion of services. Innovations are slow to move from the broader global NTT portfolio to itsNorth American operations.

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Peer 1 HostingPeer 1 Hosting is a midsize Web hosting provider, headquartered in Vancouver, British Columbia, whichwas acquired by Cogeco Cable in January 2013. The company offers managed hosting on dedicatedservers and private or public cloud IaaS, as well as colocation services, from 12 data center locationsthroughout North America and four in Europe. Peer 1 acquired the U.K. provider NetBenefit in 2012.

Strengths

Customers that use multiple data centers from Peer 1 do not pay transit costs across its backbonenetwork. This may provide significant cost savings for some application and workload scenarios.

Peer 1 has created the customer­focused position of "customer advocate," a role not tied to salesquotas or support metrics but dedicated to ensuring general customer satisfaction.

Cautions

Although Peer 1 has a good track record for customer service, acquisitions can have unknowneffects on the parties involved as organizations work to rationalize their portfolios, sales activities,billing systems, support models and so on. Although Peer 1 indicates that nothing should changewith its business strategy, customers should be especially thorough when reviewing contractualterms and conditions.

With the sole exception of Microsoft Exchange, Peer 1 does not provide support for modernenterprise applications.

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RackspaceRackspace is a large, publicly traded managed hosting and cloud IaaS provider, headquartered in SanAntonio, Texas, with over $1 billion in revenue. The company offers managed hosting on dedicatedservers, public IaaS based on OpenStack and XenServer, and private cloud solutions based on VMware,as well as hosted Microsoft Exchange and SharePoint, cloud storage and hosted virtual desktop services.It provides these services from five data centers in the central and eastern U.S., as well as Europe andAsia.

Strengths

Rackspace is the market share leader in pure­play managed hosting, and historically has grownsignificantly above the market average.

Rackspace has a strong cultural focus on providing superior, high­touch customer service. It istypically an exceptionally responsive provider in both the sales process and day­to­day operations.

Rackspace has made significant improvements in the past two years to target enterprisecustomers, including a new enterprise­focused sales force and an expansion of its professionalservices capabilities.

Rackspace is an extremely cost­efficient provider, with prices that are often significantly belowthose of comparable offerings. However, these prices depend on standardization — Rackspace'sservice portfolio is narrower than those of other competitors that target the midmarket andenterprises.

Cautions

Although Rackspace founded the OpenStack project for an open­source cloud managementplatform, and launched an OpenStack­based public cloud IaaS offering in August 2012, most of itsmanaged hosting customers still use dedicated servers, sometimes with VMware­basedvirtualization. Rackspace does not have a utility hosting offering, nor does it offer the full extent ofits managed services portfolio on its cloud IaaS platform.

Rackspace does not have data center infrastructure further west in the U.S. than Texas.Customers looking to build Web applications should consider latency to West Coast users beforedeploying.

Rackspace's enterprise sales force efforts are a relatively new focus for the company. It will likelytake time for the company to execute on a par with some of its more enterprise­focused peers.

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SavvisSavvis, a CenturyLink company, is a large colocation, managed hosting and cloud IaaS provider. Thecompany offers managed hosting on dedicated servers and private or public cloud IaaS, as well ascolocation services. It operates data centers in 20 metropolitan markets throughout North America, aswell as locations in Europe and Asia, many of which are near major financial exchanges.

Strengths

Savvis can handle extremely complex deals, including large­scale e­commerce and enterpriseapplication hosting needs. It has a very broad portfolio of supported infrastructure, middlewarestacks and application environments.

Through its acquisition of the IT outsourcing business of Ciber in July 2012, Savvis gained abroader set of enterprise application support skills and can start bringing new application­centricservices to customers.

Savvis has consistently had one of the best end­user portals, which generally covers every productthat Savvis sells, including hosting, network, cloud and colocation offerings. Resourcemanagement and utilization views across multiple hosting and cloud services help customersidentify where they may have overprovisioned their infrastructure and could potentially savemoney.

Through its Consumer Brand Solutions, Savvis can provide complete online presence managementfor e­commerce and consumer packaged goods companies, including Web life cycle management,brand protection, social media engagement and more.

Cautions

Gartner clients have noted a dilution of focus and support quality within the business following thespate of acquisitions during the past two years that have led to the company's currentorganizational structure.

Savvis has multiple hosting and cloud IaaS offerings among its suite of services, which can leavecustomers unsure which line of service is best for their needs.

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SunGard Availability ServicesSunGard Availability Services is a large IT availability and business continuity provider headquartered inWayne, Pennsylvania. It offers managed hosting on dedicated servers and a virtualized utility hostingplatform, as well as colocation services from over 30 data centers throughout North America andmultiple locations in Europe.

Strengths

SunGard is strong in recovery and availability services, as it can design highly available platformsto meet customers' needs, even incorporating legacy systems into plans.

SunGard is overhauling its business from the top down and sharpening its focus on servicecapabilities, delivery and the more customized needs of complex accounts.

Cautions

SunGard's solution engineering is improving, but its standard managed hosting SLA is still basedon a rolling three­month period in which targets must be missed in two of the three months forthe customer to qualify for a credit — a significantly weaker guarantee than is typical in thisindustry.

Although SunGard supports standardized application use cases, by moving toward customizedworkloads it may find it challenging to generate cost synergies from standardization andautomation.

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Verizon TerremarkVerizon Terremark is the hosting and cloud business unit of Verizon. It was formed from the merger ofVerizon's own hosting, colocation and cloud offerings with the assets of Terremark, a company itacquired in 2011. Verizon Terremark offers managed hosting on dedicated servers and private or publiccloud IaaS, as well as colocation services, from 25 data centers throughout North America, andlocations in Europe, Asia and Latin America.

Strengths

Verizon and Terremark both have long and successful histories in the managed hosting business.Customer service for historical Terremark customers has improved significantly since Verizonacquired Terremark.

Verizon Terremark is one of the few North American providers with strong Latin Americancapabilities, largely due to the company's NAP of the Americas peering hub in Florida, a keylanding point for fiber routes from South America.

Verizon is able to use its network as a differentiator for use cases where network access is aheavily weighted criterion, and where end­to­end service management with SLAs is required.

Verizon Terremark's Enterprise Cloud Managed Edition offers customers the ability to provisiondedicated physical servers as well as virtual servers, with billing available in daily increments.

Cautions

Although the integration of legacy services has been completed, Verizon Terremark has yet toconsolidate all its service offerings in a single portal. This means users have to sign into different

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portals to manage different infrastructure stacks.

Although Verizon Terremark is rewriting its SLA for high­availability managed hosting solutions, itscurrent 99.5% availability SLA is below that of its peers.

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Vendors Added or DroppedWe review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets change.As a result of these adjustments, the mix of vendors in any Magic Quadrant or MarketScope maychange over time. A vendor's appearance in a Magic Quadrant or MarketScope one year and not thenext does not necessarily indicate that we have changed our opinion of that vendor. It may be areflection of a change in the market and, therefore, of changed evaluation criteria, or of a change offocus by the vendor.

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AddedNone

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DroppedNone

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Inclusion and Exclusion CriteriaThe inclusion criteria are used to determine which vendors will be covered in this Magic Quadrant. To beincluded, vendors had to meet the following criteria:

They must sell managed hosting as a stand­alone service, without the requirement to bundle itwith application development, application maintenance or other IT outsourcing and DCO.

They must have managed hosting offerings that can be delivered on demand, with flexiblecontracts that allow infrastructure capacity to be changed monthly (or more often).

This service must be enterprise­class, offering 24/7 customer support (including phone support)and SLAs.

They must have a geographic footprint within North America of at least three differentmetropolitan markets, or global presence that includes at least two North American metropolitanmarkets, with enterprise­class data centers suitable for large­scale managed hosting.

They must be among the top 15 North American providers according to Gartner's estimatedmarket shares for managed hosting.

Products and Services Excluded From This Evaluation

This Magic Quadrant is for managed hosting only. That means the following adjacent services areexplicitly excluded from evaluation:

Colocation: Although many managed hosting providers also offer colocation, the quality ofcolocation offerings is not evaluated in this Magic Quadrant. This Magic Quadrant should not beused to select colocation vendors.

Self­managed cloud IaaS: Many businesses want a self­provisioned, self­managed dynamicallyprovisioned infrastructure; they want to take advantage of the cost­efficiencies of a provider'sscale and automation tools, but do not want to relinquish control. If your interest is primarily inself­managed cloud infrastructure, consult "Magic Quadrant for Cloud Infrastructure as a Service."

DCO and remote infrastructure management (RIM): Although many DCO providers maymanage the infrastructure for Web applications as part of a DCO contract, this Magic Quadrantevaluates only managed hosting that is sold as a stand­alone service within provider­owned datacenter facilities. It explicitly excludes hosting that may be part of a more general DCO or RIMcontract. DCO providers are covered by "Magic Quadrant for Data Center Outsourcing andInfrastructure Utility Services, North America" and "Magic Quadrant for Data Center Outsourcingand Infrastructure Utility Services, Europe."

Application management services: While some managed hosting providers may have someexpertise in understanding how best to run the infrastructure underlying specific applications, weconsider that managed hosting services stop below the application layer. Application layer servicesare part of the application management market, for which see "Magic Quadrant for OracleApplication Management Service Providers, Worldwide" and "Magic Quadrant for SAP ApplicationManagement Service Providers, Worldwide."

Cloud management platforms: Cloud­building hardware and software — software such as BMCCloud Lifecycle Management, Citrix CloudPlatform and OpenStack, and turnkey solutions such asHP CloudSystem Matrix — are not evaluated in this Magic Quadrant, which is restricted solely toservices.

Vendors Considered but Not Included

For this Magic Quadrant we evaluated a significant number of managed hosting providers operatingwithin North America, but were unable to include them all. Some did not qualify for this Magic Quadranton the basis of their market shares in North America or because they failed to meet other inclusioncriteria.

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The following providers were considered but excluded:

Hostway, headquartered in Chicago, Illinois, provides managed hosting, cloud IaaS, colocationand shared hosting services from data centers in North America, Europe and Asia. Its cloudsolutions are built on Microsoft's Hyper­V hypervisor, which enables it to bring Hyper­V replicasolutions to customers using Windows Server 2012.

ViaWest is a hosting, colocation and cloud services provider based in Denver, Colorado. It has anexpansive 450,000 square feet of data center capacity throughout the western U.S. Thecompany's private and public cloud IaaS solutions are built on VMware.

Windstream is a communications service provider, headquartered in Little Rock, Arkansas, thatentered the managed hosting and cloud market via its acquisition of Hosted Solutions in 2010.The company has facilities throughout the eastern U.S.

Latisys is a hosting, colocation and cloud services provider, based in Denver, Colorado, thatoperates from data centers in four metropolitan markets in the U.S. Its cloud offerings are basedon HP's CloudSystem Matrix platform, which can support both VMware and Microsoft Hyper­Vhypervisors.

Connectria is a hosting, colocation and cloud services provider based in St. Louis, Missouri thathas data centers in three metropolitan markets in the U.S. It has had success meeting the needsof healthcare organizations that fall under Health Insurance Portability and Accountability Act(HIPAA) compliance, and in addition to traditional x86­based hosting and cloud solutions, thecompany can provide services for AIX, HP­UX, Solaris and IBM iSeries needs.

There are thousands of service providers around the world that offer managed hosting services of sometype, and hundreds that focus primarily on this market or derive a significant amount of revenue fromit. Many small providers can provide an excellent level of service, so do not let lack of inclusion in thisMagic Quadrant deter you from evaluating such providers since we do not consider service quality whendetermining inclusion. Insufficient revenue and geographic presence alone could disqualify otherwiseexcellent providers.

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Evaluation CriteriaAbility to ExecuteThe most heavily weighted criteria for a managed hoster's ability to execute are their service offeringsand service excellence, as reflected in customers' experiences with sales, support and operations.Overall business viability, as reflected in the provider's ability to serve a customer successfully over athree­year period without significant disruption, and the provider's track record, also contribute to thisrating. Here, Gartner emphasizes immediate capabilities for the use cases we see most often.

Table 1 shows weightings for our specific evaluation criteria.

Table 1. Ability to Execute Evaluation Criteria

Evaluation Criteria Weighting

Product/Service High

Overall Viability (Business Unit, Financial, Strategy, Organization) Standard

Sales Execution/Pricing Standard

Market Responsiveness and Track Record Standard

Marketing Execution Low

Customer Experience High

Operations Standard

Source: Gartner (March 2013)

Completeness of VisionThe market for managed hosting is evolving rapidly, so it is vital that service providers have a vision forthe future needs of customers and for how they will adapt their offerings to meet those needs. The fullcontext of a provider's vision is important, as cloud computing continues to alter the marketdramatically. We also evaluate a provider's approach to growing its business, including its strategy formarketing and sales, international expansion and vertically focused market solutions.

Table 2 shows weightings for our specific evaluation criteria.

Table 2. Completeness of VisionEvaluation Criteria

Evaluation Criteria Weighting

Market Understanding High

Marketing Strategy Standard

Sales Strategy Standard

Offering (Product) Strategy High

Business Model Low

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Vertical/Industry Strategy Low

Innovation High

Geographic Strategy Low

Source: Gartner (March 2013)

Quadrant DescriptionsLeadersLeaders have proved they have staying power in this market, can frequently innovate on their existingproducts, and can be relied on for enterprise­class needs. They have proved their technical competenceand ability to deliver services to a wide range of customers. They address multiple use cases with stand­alone or integrated solutions.

New managed hosting customers should sign two­year contracts with these companies, whereas largerenterprise application hosting customers should aim for longer contracts of three to five years. Satisfiedcustomers renewing a contract with one of these firms should sign a three­year deal. Cloud IaaScustomers should buy these services on demand when the pricing structure makes sense to do so, or incontracts lasting one year or less.

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ChallengersChallengers have a track record of delivering good service capabilities but are trailing the market'sevolution. They are typically companies that have solid traditional managed hosting services but havenot exploited technology and market demand to build cloud services.

New managed hosting customers should sign two­year contracts with these companies, whereas largerenterprise application hosting customers should aim for longer contracts of three to five years. Satisfiedcustomers renewing a contract with one of these firms should sign a three­year deal. Cloud IaaScustomers should buy these services on demand when the pricing structure makes sense to do so, or incontracts lasting one year or less; they should exercise caution as these vendors are likely still provingtheir cloud services.

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VisionariesVisionaries have an innovative and disruptive approach to the market, but their services may be newand unproven, and they frequently have limited service portfolios. Visionaries have an early­moveradvantage in providing cloud services, as well as road maps that may turn them into Leaders in thefuture.

Because the business of Visionaries can change radically in a short period, we recommend thatcustomers buy these services from them on demand, or in contracts lasting one year or less.

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Niche PlayersNiche Players are typically specialists with more focused product portfolios, or are emerging vendors.They may serve one use case particularly well — better than a more generalized vendor.

New and renewing customers of stable, narrowly focused Niche Players should sign two­ or three­yearcontracts. New and renewing customers of emerging Niche Players whose businesses are still rapidlyevolving should buy services on demand, or in contracts lasting one year or less. If you are usingmanaged services, be wary of making short­term, tactical choices, as it can be inconvenient andexpensive to change provider.

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ContextDespite being in the media shadow of cloud computing, managed hosting remains the most appropriatesolution for many organizations that want to outsource the infrastructure and IT operationsmanagement associated with an application or website. Most organizations prefer to source thisinfrastructure on a flexible, pay­as­you­go basis, where capacity can be adjusted to meet demand.Consequently, in addition to offering dedicated servers, managed hosting providers frequently also offershared and virtualized utility infrastructure platforms, or cloud IaaS. Indeed, some managed hostingproviders are primarily or solely focused on delivering their solutions on cloud IaaS.

Most solutions for complex needs are hybrid, mixing different types of infrastructure to achieve cost­effectiveness and to meet the customer's availability, performance, security and IT operationsrequirements. Customers may, for instance, need test and staging servers hosted on an IaaS platform,their front­end Web and application servers on utility infrastructure, and their database on dedicatedphysical servers. This has spurred providers to develop and productize hybrid hosting services thatconnect colocation, traditional hosting environments and cloud IaaS within unified networking andsecurity contexts.

Managed hosting is typically sold on a one­to­three­year contract via a consultative sales process.Buyers should expect to interact at length with the solution architects of prospective providers toachieve a solution that meets their needs. Every provider's solution will be subtly different, and serviceand support quality vary tremendously across the industry. Consequently, managed hosting providersshould be chosen with care.

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Market OverviewThe market for managed hosting is mature, but the introduction of cloud IaaS has driven significantevolution during the past five years, with stronger emphasis on automation, flexible contracts andcapacity on demand. This Magic Quadrant covers only solutions that include managed services,emphasizing complex implementations that require significant human labor on the part of the serviceprovider, regardless of whether the underlying infrastructure platform comprises physical servers,virtualized servers, cloud IaaS or a hybrid combination. For self­managed cloud IaaS, or cloud IaaS withan emphasis on highly automated management (rather than humans performing managed services),see "Magic Quadrant for Cloud Infrastructure as a Service."

Buyers of managed hosting service should be aware of the key aspects of the market described below.

The Infrastructure Platform Is a Means to an End

Increasingly, prospective managed hosting customers approach sourcing a solution with an attitude of"I want to be in the cloud." However, for many customer needs, cloud IaaS is not the ideal solutionfrom a technical or cost perspective. Instead, you should consider the goals you are trying to achieve.Each component of your application needs a particular level of availability, performance and security,which results in different demands on the underlying infrastructure.

You may also have scaling­related business needs, such as the ability to scale up and down quickly inresponse to unpredictable spikes in demand, the ability to handle seasonal needs without overbuyingcapacity at other times, or the ability to add extra capacity rapidly (for the launch of a new initiative orthe signing of a new customer, for instance). Some scaling needs must be addressed technically — forinstance, if you need to add large amounts of capacity at five minutes' notice, virtual machines are amust — but some needs, especially seasonal ones, can often be met by flexible contracting.

Managed hosters may offer both nonvirtualized physical servers, as well as virtualized servers.Virtualized servers may be single­tenant (not shared with other customers), or multitenant (sharedwith other customers). There may be self­service provisioning for some or all of these resources. Theuse of virtualization or the existence of self­service do not by themselves make a service a "cloud"service. Because the word "cloud" is used inconsistently within the industry, you should simply ignorethe labels used by providers. Instead, look at the technical characteristics of the service, as well as thecontract language, and ensure they meet your technical needs and business goals.

The more complex your needs, the more likely it is that your best solution will be a hybrid of differentinfrastructure approaches.

Cloud IaaS Is Often Not a Well­Integrated Solution

Broadly, many managed hosting providers initially architected their cloud IaaS platforms primarily witha self­service model in mind — as environments the customer would self­provision and self­manage.Consequently, they did not pay sufficient attention to integration issues with their other offerings, andwere unsure how to offer managed services on these platforms. As a result, many providers do notseamlessly integrate their cloud IaaS solutions with the rest of their environments. Specifically, thefollowing are common:

The cloud IaaS solution tends to be on its own segregated technology infrastructure and LAN. Itmay not be located in the same data centers, or all the data centers, in which the provider offersother managed hosting services.

The provider may not have integrated customer support across all its offerings. A different andlower level of support might be provided for its cloud IaaS.

The provider may not offer the same managed services on cloud IaaS that it offers on dedicatedservers or utility hosting; it might price and provide those services differently, or those servicesmight not be available.

The portal for cloud IaaS may be segregated from the provider's main customer service portal, andfeatures that are included for dedicated servers or utility hosting, such as systems monitoring,may not be included or available with cloud IaaS.

Additional costs may be associated with a hybrid cloud solution, such as a requirement that thecustomer use a load balancer or firewall to bridge cloud and noncloud environments.

Before adopting a hybrid solution that includes cloud IaaS, you must carefully investigate how theprovider's service differs across the infrastructure platforms in use.

Cloud IaaS Is Evolving Rapidly

The cloud IaaS market as a whole is growing rapidly, and new providers are flooding in, often withincomplete offerings and strategies that revolve around "not being Amazon Web Services." Thisapproach characterizes many offerings that have been launched by managed hosting providers, datacenter outsourcers and others that have entered this space from a related business model.

Furthermore, rapid market evolution, along with the rapid evolution of technology through the stackfrom hardware to applications, is driving a rate and a level of change that present significantmanagement challenges for service providers. This evolution is making it difficult for customers todecide which solutions to adopt, because providers may release new features several times a quarterand are evolving their service models.

In some cases, service providers have ended up building multiple cloud IaaS offerings, or multipleversions of the same core service, as technology has evolved and the providers have learned hardlessons about the technology and cloud IaaS business. Providers that have grown through mergers andacquisitions may have multiple cloud IaaS platforms.

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The multiple infrastructure platforms used by managed hosting providers are a reflection of market andtechnology immaturity. The cloud IaaS platforms are usually cutting­edge implementations unburdenedby the provider's legacy managed hosting systems; as a result, they may lack the functionality providedby those systems.

Gartner expects that, within the next five years, successful service providers will fully converge theirinfrastructure platforms and provide the following capabilities:

The ability to provision both physical servers and virtual machines from a shared pool of capacitythat allows hardware components to be dedicated to a customer on an as­needed basis, or sharedamong customers

The ability to offer multiple infrastructure tiers, with differing levels of cost, availability,performance and security

The use of a unified management portal that can manage a physical and virtual infrastructure,with views for the provider, the customer and third parties such as resellers

A unified approach to support and manage service options across all infrastructure options

Few providers offer fully converged infrastructure platforms. Even those that are well on the path toconvergence frequently still support and sell a legacy managed hosting platform, along with theircurrent infrastructure solution.

All Infrastructure Requires Management

All types of infrastructure require management. Prospective customers often assume that cloud IaaSrequires less management — they think that because they are in the cloud, IT operations managementfunctions such as patch management, backups and disaster recovery are taken care of automatically.Broadly, this is not true, although providers may bundle managed services with cloud IaaS, and arestarting to automate these aspects.

Providers' approaches to managed services vary enormously. However, they can be classified broadlyinto "OS and below" and "everything excluding the application." We refer to these as simple managedhosting and complex managed hosting, respectively:

Simple managed hosting customers typically want to handle most operations themselves, butwould like the provider to handle routine issues on a 24/7 basis, and to perform routine IToperations management tasks like patch management and backups.

Complex managed hosting customers typically want the provider to take ownership andresponsibility for the infrastructure, so that they only need to deal with their application. Thecustomer may choose to retain certain responsibilities — for instance, doing databaseadministration itself — but the provider essentially functions as the customer's IT operations teamfor this infrastructure.

Whichever solution you choose, you will need to decide what responsibilities you will retain and whatwill be the provider's responsibilities. You may also have some equipment that you decide to provideand manage yourself; most managed hosting providers offer a colocation option for this purpose.

Standardization Brings Benefits

Many managed hosting providers will extensively customize a customer's environment. However, themore your environment deviates from the provider's norm and blueprints, the more you pay, and theless consistent your service is likely to be. If you deviate from the standard, you don't gain the benefitof as much of the provider's automation and tools; therefore, it's more costly for the provider to serveyou, and more things will be done manually, increasing the chance of error.

Standardization becomes particularly important when you consider using a provider's utility hosting orcloud IaaS platforms. These environments are highly standardized, so you can only use them if you canaccept the standard way they are architected.

If you need a lot of customization in your managed hosting environment, ask the provider what thecost difference is between its standard approach and the custom approach you desire. Ask yourself ifthe customizations you need generate business value or are just to suit the tastes of your IT personnel.For instance, a custom file system layout that places packages in a different place from the provider'sstandard generates no business value, and might mean that you cannot use the provider's standardpatch management approach. Even some customizations done for cost reasons may turn out to be abad idea; for instance, a particular set of parameters for performance­tuning a server may result inmore of a cost penalty for deviating from the standard configuration than you save by getting moreefficiency from the server.

Customer Service Is the Key Differentiator

Most established managed hosters have very high levels of operational reliability and excellent reactivesupport when customers have issues. However, providers vary significantly in their ability to respondpromptly to customer requests that aren't directly related to an outage or other immediate operationalemergency. Many providers are weak in responding when the customer's request is complex, or when itcrosses multiple groups within the company — for instance, when a customer has a persistent problemwith network performance, engineers that support network elements may point the finger at systemengineers and vice versa, with no one taking responsibility for solving the problems.

Proactive support is even more of a differentiator. Some providers excel in anticipating customers'needs, and in partnering with customers to achieve their operational goals. Providers also differ widelyin their ability to manage complex projects.

When evaluating your needs, consider the complexity of your environment, the frequency of changesin your environment and the scope of those changes. If you have frequent application or infrastructurechanges (not content changes), you will need to work closely with your provider on a daily basis. If you

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have large­scale project work, such as new deployments, you will want to be sure your provider has theappropriate project management resources available. When choosing a provider, ensure you arecomfortable with its implementation process, change management and project management.

More than anything else, the provider's service organization is likely to determine your satisfaction withthe managed hosting experience in the long term. Evaluate your prospective account team carefully.

The Vendor Landscape Is Dynamic

This is a time of great opportunity and great risk for service providers in this market. New entrants arealtering the landscape, and hosters that previously had lagged behind have made bold investments inan attempt to catch or overtake other, more established competitors. Most providers are aggressivelyinvesting in innovative solutions that exploit the proliferation of technology capabilities in this market.

Mergers and acquisitions have become common as vendors seek to decrease their time to market,obtain engineering expertise with new technologies, and build market share. We expect mergers andacquisitions to continue on a global basis.

Because the vendor landscape is highly dynamic, buyers of managed hosting are subject to greatersourcing risk. It is difficult to predict which vendors will be good long­term bets; neither small vendorsnor large ones can be considered safe. In general, short­term contracts of one or two years areadvisable.

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