Fasthosts Brings Cloud Computing ‘Data Centre On Demand’ To SMBs Through Channel Partners

Fasthosts Highlights

• Launched its new brand Rise on March 31st 2010 to bring IaaS through channels to SMBs
• As part of United Internet’s subsidiaries it already has a market leading position in the UK Web Services market for hosting and domain registrations
• Will focus in future more on B2B business
• Understands the security and legal concerns of UK businesses in moving to the Cloud
• Is offering ‘Data Centre on Demand’ service based on Microsoft Dynamic Data Center through VARs and SIs to SMBs
• Looks to take a leading role in redefining Cloud Computing as a pragmatic and attainable solution for SMB’s through channel partners based on their philosophy of ‘Partnership as a Service’

Fasthosts Is A Well-Known Brand For Web Services, Hosting And Domain Name Registration In the UK

Fasthosts is well known in the UK for registering domain names and hosting Web sites. Its customers are currently a mixture of small businesses, consumers and Web developers. It is part of the United Internet group – a German-based company with €1.7 billion in annual revenues to the end of September 2009.
I recently travelled to London to talk with Andy Burton, CEO of Fasthosts Internet division, about the company’s direction in relation to Cloud Computing and brand development. He has some particularly interesting things to say about addressing Small and Medium Businesses (SMBs) through indirect channels – something he refers to as ‘Partnership as a Service’ and its Data Centre on Demand (DCoD) offerings. I think it’s an excellent time to look at Fasthosts in relation to the UK ITC market and the development of new styles of business.

United Internet Brands Address Consumers, SOHO, Advertisers And All Sizes Of Business

Fasthosts was acquired by United Internet for £61.5 million in May 2006, giving the parent company the number one position in the UK Internet hosting market, adding the business from its subsidiary 1&1. At a worldwide level the company competes for world leadership of the hosting market with Go Daddy, which is clearly more American in its outlook. In total United Internet claims to have had 9.1 million contracts in 2009.
The parent company continues to modify its strategy through acquisitions, having sold off its twenty4help outsourcing subsidiary at the beginning of 2007 and buying freenet’s DSL business in May 2009.

United Internet’s business is mostly direct online sales principally in Germany but with growing operations across Europe and the USA. Fasthosts further adds to the international perspective with UK and US operations and has a focus on SMB’s and indirect routes to market. For a view of its major brands please see Figure 2.

Fasthosts Will Focus On B2B IT And Web Services

Currently Fasthosts holds around 1 million domain registrations, has around 400k customers and is responsible for the delivery of around 40 million emails a day. It employs 160 of Untied Internet’s 4,300 staff and has two data centres in the UK and one in the USA.
Andy indicated that the division will focus more on a business-to-business (B2B) approach in coming years, resulting in shifts in product.
Currently Fasthosts offers a number of hosted solutions delivered as self-service offerings and through indirect channels. These include dedicated physical and virtual servers, shared Web hosting, hosted Microsoft Exchange business email services, as well as both broadband and reseller solutions. The company has around 6k resellers in the UK currently, of which Andy counts approximately 400 as true partners with ‘shared aspirations’.
The company is not just paying lip-service to the development and commercial value of Cloud Computing, having become a founder member of the Cloud Industry Forum, which is in the process of establishing an industry-wide Code of Practice for service providers. That said, Andy has practical issue with the naming convention of ‘Cloud’ which he sees as an emotional barrier to adoption for many due to the level of hype and the multiple definitions of what Cloud means thus creating ambiguity around the true and tangible benefits.

Fasthosts Sees A Shift In The Software And IT Supply Model

Andy sees the development of Cloud Services as a major challenge to traditional supply models. In particular:

1. Technical Enablement – virtualisation has dramatically helped the development of Cloud Computing, as has faster and affordable Internet connectivity and the more recent attention being paid to industry-wide interoperability and security issues initiatives.
2. Software Delivery – Independent Software Vendors (ISVs) are moving from supporting only ‘on-premise’ software to making online and mobile solutions available to their customers; Choice of SaaS solutions for end users has considerably increased in recent years, although it raises essential questions about federation and control of data across multiple silo’d databases and associated Service Level Agreements (SLAs)
3. End-User Acceptance – business users have been familiarising themselves with Cloud Computing concepts for years with the advance of pop mail, web hosting and SaaS. More recently, ‘horizontal’ or back office applications such as back-up and Storage have been adopted; it is becoming a financial necessity as the access to capital becomes more restricted and IT skills become harder to recruit and retain; while many seek ‘affordable agility’ from their IT solutions, some are seeking codes of practice to help avoid the pitfalls of early adoption
4. Route to Market – IT, Telco and traditional Hosting markets are converging. For SMB’s the role of a channel partner as their ‘trusted advisor’ has never been greater to assist them in navigating the right balance between on-premise and online solutions. Fasthosts recognise that many resellers in the traditional channels cannot invest in their own data centres and do not want to cede control of their valuable customer relationships to direct relationships with SaaS vendors as this not only undermines their business but provides a fragmented approach for their customers. Fasthosts will therefore enable their partners to stay focused on their current successful business models but also enable them to compete in the rapidly emerging hosted solution market offering a future proofed business model.

Fasthosts Will Uses Its ‘New Channel’ Branding To Seize Opportunities In SMB Applications Beyond Web Services And Through Channels

Andy believes that Fasthosts and other traditional Web services competitors have focused on only about 10% of the total addressable SMB IT market – the rapid take-up of hosted physical and virtual servers in particular shows a strong demand for other types of application. He also sees the SMB sector – although fragmented – as the largest for IT spending. He believes that the consultancy and Systems Integration (SI) channels account for the majority of sales in the SMB sector, where ‘people buy from people’. However there are a number of barriers to adopting Cloud Computing, especially in addressing the legal and security concerns which Andy believes partnership with Fasthosts can resolve.
Fasthosts’ opportunities are also related to its own expanding resources; for instance it is increasing its geographic coverage, launching B2B solutions in the US and mainland Europe through the infrastructure it can access through United Internet. It also has strong technical expertise and a wide customer-base.

Fasthosts Will Target Three Sub-Markets With ‘Data Centre on Demand’ Service

The company’s first Cloud Computing hosted offerings are an Infrastructure-as-a-Service portfolio that are to be marketed as ‘Data Centre on Demand’ and will include a number of physical benefits over on premise solutions such as the availability of physical and virtual servers, V-LAN capabilities, high-end ‘carrier grade’ components (CPU, NIC, RAM, etc.), resilience, physical security, 24 x 7 x 365 operations and on-site engineers. Andy cites the business benefits as reduced risk, cost predictability, reduced management costs and enhanced agility. The company is planning for three generic types of customer for these DCoD services. In particular:

• VARs and SIs addressing SMBs – these are the main focus of the business plan and are companies who are in the IT, Web or Telecoms sectors; the target will be those companies who do not want to operate hosting activities themselves, have an excellent relationship with their customers and the ability to add value to Fasthosts’ offerings through providing software, service and/or on-premise infrastructure. Fasthosts will shortly be announcing a new 100% indirect business unit to focus on the channel partner community.
• B2B Self-Service – these services are for companies who want to run their own infrastructure, but without capital investment, have some technical skills and want to purchase and manage their solution directly with the supplier. Customers can acquire these solutions through the self service portal of Fasthosts.co.uk.
• ISVs – these are companies wanting to expand their business from on-premise to online, but without the desire to build their own facilities; these companies will become ‘Infrastructure as a Service’ (IaaS), or ‘Platform as a Service’ (PaaS) partners

Its really the opportunity with SMBs through resellers that Fasthosts is excited about – the business Andy describes as ‘Partnership as a Service’. In order to pursue its new B2B directions the company is launching a new brand at the end of March 2010, which will be complementary to the Fasthosts self-service brand but 100% dedicated to working with the partner community.

Some Conclusions – Fasthosts Will Offer ‘Partnership As A Service’ With Its New Channel focused Brand

I believe Fasthosts is well positioned to move beyond its current Web services business model to address these new opportunities, although it is more likely to succeed at the lower end of the market at first. Over the last year I’ve profiled a number of players in the UK SMB Cloud Computing services space, such as Datascape Online, Storage Online and FNZ: Fasthosts is the largest of those entrant I’ve seen so far. It has a deep understanding of the needs of Web site developers and the technical skills needed to support an online presence. I was encouraged to hear Andy’s understanding of the barriers to Cloud Computing adoption for SMBs – of the security concerns and the overly American approaches of his competitors.
Although it lacks the extensive resources of Telecoms suppliers (NTT, BT, Deutsche Telecom), the largest systems suppliers (IBM, HP, Fujitsu, Oracle) and big Cloud Computing vendors (Amazon, Google), its parent United Internet is a market leader. It will be fascinating to see how it establishes its new Channel brand and the extent to which it builds revenues quickly in the SMB space – an area I have already identified as the fastest growing sector for the adoption of profitable Cloud Computing. While it is currently well know among those of us who use it to host our own Web sites, it looks set to extend its business through offering new services to SMBs in this developing area.

Do you use Fasthosts today? Do you think they will succeed as a Cloud Computing supplier? Let me know by commenting on this article.