15.398 Entrepreneurs in the Next
Economy
Howard Anderson
Class One
What we will accomplish
• 1. Demystify the Internet
• 2. Understand the Business Models
• 3. Use Critical Judgment of what will/will
not succeed in the future
Today: February 7th
6:00 – 6:20
6:20 – 7:00
7:00 – 7:30
7:30 – 8:00
8:00 – 8:30
H. Anderson/T.Dagres
Ellen Hancock/Exodus
Student Interview
Ellen Hancock asks
Case: FairMarket
Ellen Hancock
Howard Anderson
Hosting
• Subset of Outsourcing
• Fortune 500:
• Applications Center, Development
Center, Data Center
• 1988: Kodak Effect:
– 8 of 10 Fortune 500 companies Outsource
– (Xerox, Continental Bank, AT&T, etc.)
1998: Hosting Becomes Its Own
Subset
• 1. Fortune 500 begin to build “shadow
businesses” next to real businesses
• 2. Need for specialized set of services
• 3. New Economy firms had no installed
base of technology – and a need for “best
practices”
• 4. Exodus emerges as industry leader.
Hosting is…
• High priced real estate
• Data Center
• Communications Center
• Management Perspective: This requires a
new approach.
Attackers, Defenders, Arms
Merchants, Customers
• 1. Dot Com’s were the first market.
• Amateur Night. Needed Help
Everywhere. Hosting, Managed Services,
Handholding.
• 2. Fortune 500 Companies: ignored the
problem(Denial), got agitated ( Anger),
tried to respond(Grudging Acceptance),
then capitulated (Giddiness).
Fortune 500:Became Counter
Attackers
• 1. Adopt some of the tools of the
Attackers ( Hosting).
• 2. Exodus becomes an Arms Merchant
• 3. Fortune 500 changes its strategic
alliances:
• Was: IBM
• Became: Sun, EMC, Cisco, Oracle.
Business Evolves: 1998 - 2001
• Was: Electricity, LAN Connections
• Became: Security and consulting
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–
–
–
–
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Tape backup
Fire walling
Professional services
Caching
NT support
Unix Support
Danger:Commodization
• Base Business:Easy to Replicate.
• Lots of Excess Data Centers with raised floors.
• Solution: Build a Layer of Enhanced Services:
International; Communications.Security
• Potential Competition: EDS, Big Six, EDS,
Scient/Viant/Cambridge
Technology/Sapient/Diamond
Technology/Andersen/EMC/Storability
Important: Deciding What Not to
do.
•
•
•
•
•
Not an E commerce Company
Not a Data Base Company
Not an Aps Company
Everyone’s Second Best Friend:
Sun/Compaq/Microsoft
OK. Questions:
• 1. Explain the Exodus Business Model.
• (Isn’t it a real estate deal with a very high up
front cost?)
• 2. What exactly are you selling besides rack
space and bandwidth?
• 3. How many hosting centers do you have
today? How long does it take to make one
profitable? How many do you plan to build and
how many are you fully funded for?
More Q’s.
• 4. How will you compete with Akamai?What is
the Mirror Image Relationship? Will Mirror
Image go against Akamai and its Reseller
Strategy?
• 5. Some say that the hosting market and data
center business is overbuilt. If so, how will you
be able to increase prices?
Q’s.
• 6. What do you really mean by Managed
Services? Do you really consider “cable
Management” a managed service?
• 7. What will the next generation of hosting
companies look like? Loudcloud? Those who
will offer truly managed applications with
guaranteed uptime and meaningful SLA’s?
More and more…
• 8. What is the average revenue per
customer? What percentage of that is
space/bandwidth vs. services? Trend?
• 9. Many of the largest e commerce web
sites live at your hosting facilities: what
are you doing about security and Denial
of Services attacks which recently hit
Microsoft?
Questions for Miss Ellie…
• 10. Given Moore’s Law, allowing you to
continually gain a greater and greater
amount of processing power into a seven
foot rack…who do you keep the hosting
centers with 99.999 of power and
cooling? How has the California energy
crisis hurt your business? Caused you to
reevaluate your roll out strategy?
Q’s.
• Global Center:
Global Center..
• 11. With the hosting space rapidly consolidating,
you pulled the trigger on the deal. Why? To get
customers and foot print? Any other strategic
value?
• 12. One of your largest expenses is bandwidth:
Do/did you consider owning your own
nationwide network? Or do you think that
being a “buyer” will give you increasingly
lower costs?
Global…
• 13. Can’t Hosting + Network threaten
you?Example: Digex + Worldcom?
• 14. What about Content Delivery? You
own 15% of Mirror Image; you decided
not to resell Akamai like all the other
hosting providers. Why?
Q’s.
• How has the dot.com slowdown affected
you? Is there a real slowdown in Fortune
500 spending?
• Storage: In the past few weeks you sold
your in-house storage capability and
made a deal with both Sun and Storage
Networks. Why?
Final Question:
• 15. Streaming seems like a natural
service for Exodus… which could drive
collocation and bandwidth. Aren’t
distributed network providers like iBeam
and Akamai better positioned to offer
streaming?