Amazon, HP and the data centre hosting channel

 Cloud computing offers low cost commodity hosting services and services from suppliers such as Amazon are dramatically impacting the price-point for hosting services. For organisations wishing to make use of these low cost services there is a problem, however, which is that Amazon does not offer managed services.

Amazon's services are designed to be as self-service as possible with pricing models, SLAs and payment methods provided online. Although there have been rumours in the UK market that Amazon has started to provide custom SLAs with large enterprises, Iain Gavin, UK & Ireland Country Manager for AWS says this is not true: he believes the rumours began following the deal with Channel 4 when some phrases in the standard SLA had to be reworked to satisfy the Channel 4 legal department. He confirmed that there is no tiered level of service or commitment to prioritise loads available from AWS because the sheer volume of business precludes such an approach. Within the standard SLA Amazon does not provide 5x9 guaranteed reliability levels because the company’s view is that uptime is correlated with management of the application stack and that is not within the control of AWS.

Essentially Amazon is making the poor cousin of hosting - co-location services - fabulously fashionable. The challenge is that most organisations require some form of management of those services. In the past that was fine - co-lo services were managed by the in-house IT team. To some extent that is still true, but as soon as the technology infrastructure cost of hosting IT drops, it emphasises internal labour costs associated with IT management. While some of this year's cost reduction might be absorbed by a migration to Amazon, next year's cost reduction will probably focus on staff management costs in the IT department. And then the task will be to find lower-cost outsourced managed services.

At the moment in the market there is already a scramble to find managed service providers with experience in working with Amazon. This situation will only get worse as the market demand for services such as EC2 and AWS increases because of its very low hosting charges. However, this demand creates enormous pressures for managed service providers servicing sub-enterprise customers. This is because Amazon does not provide custom SLAs, as they are irrelevant to its business model. This means that monitoring and management services will need to be sourced to another provider where in-house resourcing is an issue. Managed service providers are interested in the business opportunity Amazon is generating but anxious about the level of risk they may have to undertake on behalf of clients, where they will need to cover for the minimal SLAs supported by Amazon. In particular there are increasing concerns about the cost of back-up and storage for clients running sizeable loads, especially where that back-up and storage may need to be made on the service providers' own SAN to meet SLA requirements.

HP announced the opening of its Billingham facility in the UK which is wind-cooled and has a Power Usage Effectiveness (PUE) of 1.2. Billingham data centre has been developed to support the growth in HP's own managed service capability and will not, initially at least, be available for co-location provision even to partners or channel. In terms of competing with Amazon (which all hosting providers will be over the next few years) this decision is interesting. Clearly new data centres have plenty of capacity, and vendors such as HP have an ebullient channel serving the mid-market which is also at the sharper end of competing with Amazon for hosting today. HP has recently launched an initiative to take DC consulting services to its channel, which is a useful and timely initiative. But, perhaps, the ability to resell state-of-the-art capacity might also form part of HP's efforts to woo resellers as they work out how to coexist with Amazon.