Structure Research Analyst Notes
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FEBRUARY 11, 2016
  • We will publish only twice during the week of February 15, 2016 due to President's Day.  
  • We worked through Microsoft's numbers and built a model that estimates the size and growth rate of the Azure cloud. Please ask us if you want to see the model ( Clients only.  
  • Chicago data centre provider New Continuum revealed that it has signed managed services provider OnX as both a new customer and partner. OnX will deploy colocation capacity at New Continuum's 80k sqft data centre in west Chicago to support its managed cloud-based environments, data backup and disaster recovery. In addition, OnX could potentially tap into New Continuum's customer base of roughly 200 clients to provide managed services.
  • Amazon Web Services added another tier to its reserved instances portfolio: scheduled reserve instances. Scheduled reserved instances are infrastructure resources that can be accessed at predefined times on a (recurring) daily, weekly or monthly basis. The minimum term is one year. Essentially it is reserving ahead of time at a set time and getting a roughly 5-10% discount in return. The idea is to provide flexibility and cost efficiencies for workloads that tend to follow a 'routine schedule' like scheduled data crunches, batch processing or video rendering. Another example of Amazon's innovation and desire to address all scenarios. Flexibility is key.
  • Three interesting data points from Microsoft's earnings. First, customers that consume both Azure and Office 365 tend to purchase much larger quantities of Azure than a typical customer. In fact, it is claimed to be around 8x. Second, on Azure, compute usage nearly doubled on a y/y basis. The growth for SQL database usage on Azure was 5x. And third, 70% of the Fortune 500 is buying more than two different Microsoft cloud services. This is up 13% y/y.
  • Canadian Web Hosting rolled out its VMware-based private cloud infrastructure service to be hosted in Canadian data centres and priced in Canadian dollars. CWH is taking an agnostic approach and supporting multiple platforms, including OpenStack.
  • Endurance International completed its acquisition of Constant Contact. Our previous commentary is here
  • Digital Realty Trust named its new MD for the Asia-pacific region. Ted Higase will be based in Singapore and was previously president and CEO of KVH, which is now part of Colt.
  • Came across a provider called PayPerHost that is adding a twist to the shared hosting model. PayPerHost is charging customers only for the compute resources they end up using - avoiding paying for unused capacity. If they need to scale, they can do it and pay for as much as they use. The idea is to serve small business customers that might need something better than a shared hosting account but don't want or need to jump on a VPS or dedicated server. We have seen a few providers try the 'bill by consumption' approach but have yet to see it gain much traction. It would seem pretty difficult to pull off in the shared model given the amount of tenants ultimately residing on a single server and then having to scale. In cloud, this could be alleviated by moving resources across physical hosts.
  • Skype has put into preview an integration with Slack. Slack is a fast-growing collaboration platform that notably does not have integrated voice or video chat. The Skype integration will make it possible for Slack users to use Skype communications. The value-add addresses a huge want for Slack users and combines two tools that are commonly used by businesses, albeit on a separate standalone basis.
  • Cogent Communications deployed a PoP in LDeX’s data centre in Manchester, LDeX2, adding to its PoP in LDeX1 in London. LDeXs now provides connectivity to 11 carriers.
  • Oracle launched new infrastructure services - SaaS and IaaS - hosted at its Slough data centre, including database, dedicated compute and cloud infrastructure. The services add to SaaS and IaaS capabilities already provided to more than 500 UK and global customers at the facility, including 'several' UK government bodies. Separately, Oracle introduced a new four-tier Oracle PartnerNetwork (OPN) Cloud Program to provide technical and go-to-market support to Oracle Cloud partners.
  • UK-based colocation reseller and cloud services provider Hub Network Services (HNS) added two data centre locations outside of its original four UK locations. The first is in Amsterdam (AMS 5) with Telecity, and the second is at 60 Hudson St. in New York. HNS uses Telecity, Next Generation Data and Telehouse for its UK locations.
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TierPoint extends Geminare partnership across portfolio, clouds

Summary: TierPoint expanded its partnership with Geminare, that began with the recently acquired Cosentry operations, to extend DRaaS offerings across its expanded portfolio.
  • Details: Cosentry, which was just recently acquired by TierPoint, began the relationship with Geminare about a year ago. It introduced a DRaaS service that was built on top of the Google cloud using Geminare's cloud management platform. This has now been extended into TierPoint along with the Windstream assets acquired in 4Q15 and made available to all customers. The service will support replication of data to TierPoint data centres - hosted on physical or virtualized infrastructure - along with public clouds. Google's cloud is already supported but AWS and Azure is on the roadmap and is supported by the Geminare platform. TierPoint also pointed to building out of teams to support these services.
  • Angle: This was not a service built out separately at TierPoint before the Cosentry acquisition. TierPoint essentially took the Cosentry-Geminare relationship and extended it into TierPoint - turning on features that Geminare supports to fit with TierPoint's expanded portfolio. It is a good example of how TierPoint wants to use Cosentry to help it move down the path of supporting third party cloud services (a perhaps overlooked angle to the acquisition). The fit with DRaaS makes perfect sense given the economies of scale massive-scale cloud can provide. DR has historically been passed on due to significant costs. An automated platform and lower commodity storage costs is a way to knock down that barrier to entry.
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DATA4 invests in Qarnot Computing, HPC resources

Summary: Paris-headquartered colocation provider DATA4 paid a reported €2.5m to become Qarnot Computing’s first and majority corporate shareholder.
  • Quarnot: Founded in 2010 and also based in Paris, Qarnot developed the Q.rad high performance computing (HPC) radiator, whose heat source consists of computing microprocessors embedded within the heater. The microprocessors provide computing power, which Qarnot sells as a cloud-based service to research centres and companies such as banks, animation studios and car manufacturers. The heat generated by the radiators allows offices and houses to be heated for free. The centralised IT platform and decentralised cloud computing resource are managed using the proprietary Q.ware software platform. French bank BNP Paribas is a named Qarnot customer and Qarnot radiators heat more than 100 homes in France.
  • Rationale: The investment will help Qarnot reach more customers, enabling it to grow in France and expand internationally. DATA4 operates 13 data centres in France, Italy and Luxembourg, and Qarnot will initially target those markets before expanding further into Europe and beyond. Qarnot will be able to offer network and storage services using DATA4’s data centres, and use computing platforms hosted in the facilities to take on more workloads and handle peak computing loads. DATA4 customers will be able to easily access Qarnot’s HPC resources. Crucially, DATA4 will use the Q.ware software to integrate a software layer into its hosting services to increase automation and flexibility.
  • Angle: For Qarnot the deal is not so much about the monetary investment, but the ability to use DATA4’s data centres to expand its geographic reach, capacity and product offering. For DATA4, the investment hinges around Qarnot’s expertise in managing distributed applications through its Q.ware software, which it will use to improve its services. The green angle is also important to DATA4 because Qarnot reduces carbon emissions. DATA4 is looking to improve its green credentials through innovative means; it is working on a project that will heat agricultural greenhouses with waste heat from its Paris data centre campus.
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Philbert Shih
Hosting, Cloud, NA, Asia-pacific

Jabez Tan
Data Centres, NA, Asia-pacific

Candice Rodriguez
Sophie Große Ostendorf
SMB Hosting, Germany, Europe

Sacha Kavanagh
Data Centres, UK, Europe

Karin Kelley
DaaS, Infrastructure Software

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February 24-25, 2016
St. Francis Yacht Club
San Francisco, CA

March 15-17, 2016
Europa Park
Rust, Germany

May 10-12, 2016
Hyatt Regency Bellevue
Bellevue, WA

May 18-19, 2016
Hong Kong Convention and Exhibition Centre
Hong Kong
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DISCLAIMER: The opinions, forecasts and recommendations contained in this report are those of the analyst preparing the report and are based upon the information available to them as of the date of the report. The analysts are basing their opinions upon information they have received from sources they believe to be accurate and reliable. The completeness and/or accuracy is neither implied nor guaranteed. The opinions and recommendations are subject to change without notice. The report is provided to clients of Structure Research for informational purposes only and is not an offer or a solicitation for the purchase or sale of any financial instrument. No part of this material may be (i) copied, photocopied or duplicated in any form by any means or (ii) redistributed without Structure Research’s prior written consent.
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