The Future of Hosting
It’s currently mid 2016 and we have 3.5 years to close out the decade. Those next 3 years will be the future of hosting discussed in this piece.
We will cover 4 powerful trends that will shape the industry for the next several years.
This piece will not alter or shift anyone’s outlook if they have a standing belief that today’s actions will still work next year.
If you read this with a desire to look around the corner from today, the content will make more sense.
This article was written for those fascinated about what is to come, and how to gain an edge from it.
Having said that, we will briefly cover what theses powerful trends are and how they will impact both the web hosts and their customers.
Let’s just say that customers will easily have the better end of this “shake-out”.
TREND 1: AUTOMATION and ARTIFICIAL INTELLIGENCE
So…when looking at the trends that are most powerfully affecting other businesses, automation is standing out as a key area of growth.
Your business’s manual processes are slowly going away year after year. Automation is making anything that be measured as a task, “machine-able”.
Moreover, automation is being “hyper-speeded” by Artificial Intelligence. (Yes, I make up words on-the-fly)
If you are looking for an area to save on costs, automation is one area that will soon migrate human management into artificial intelligence.
Running server malware scans or looking at code to make sure that the racks area operating as they should?
In the future of hosting, automation will soon take on those managerial tasks.
How so, we might ask?
Well, Google Deep Mind is already pioneering tasks that are 10x more complex and difficult than basic management of hosting servers.
Come on, now.
They conquered the self-driving car years ago and are now testing to prove the naysayers and regulators that a self driving car is not only safer, but 10x safer than the average driver.
Massive leaps in productivity are coming. They may just not be obvious to the average “hosting industry insider”.
Look for Hosting Operations Management to soon get folded into automation by a startup.
This startup is currently working on code in some random basement in the Midwest.
They will soon get office space in Silicon Valley.
You will probably ignore it until they have a foot in the door.
Fortunately, this is just how it goes.
The question that needs to be asked is: When will your organization notice the future of hosting trends and jump aboard?
Think it’s still too early? Google AI now sells 1000 instances of Artificial Intelligence for $0.60.
Currently, you can ask Google’s AI how many blue shoes are in 1000 pictures…
If Google’s Deep Mind can figure out how many blue shoes are in 1000 pictures within a second, it can surely make sure the server racks are clean, safe and free of malware.
Curious about the future of hosting and Artificial Intelligence? Here is the Google AI Page
As we can see, the technology is here. It’s is just starting to get implemented with the early adopters.
Where will your organization be in relation to the automation and AI revolution of the next 3 years?
With Automation and Artificial Intelligence, come the lowering of costs and democratization of technology needed to start a web hosting company.
Those of us in business know what lowering the threshold of entry to the hosting industry will inevitably do…
TREND 2: COMMODITIZATION OF HOSTING
Commoditization of web hosting services has been a trend for the last 7-8 years. Moving forward, it will only accelerate once automation and lower labor costs equal the playing field for start-up hosts.
The future of hosting looks like:
Equipment and Hardware costing less going forward.
Networks will increase bandwidth.
Marketing will continuously shift into cheaper clicks on the web.
Automation will decrease the cost of operating a hosting operation.
Artificial Intelligence will decrease the management costs of the data center.
All of these microtrends will lead to the further commoditization of hosting services.
TREND 3: PRICE EROSION
Coincidentally, the commoditization of web hosting will bring an accelerated price degradation to our industry. Price erosion has been happening since the first hosts popped up on the web back in 1994.
What is surprising is not so much that price point degradation is taking place, but that the rate of the degradation is about to severely increase due to the automation revolution.
With the catalyst of automation and AI, price plans erosion will only accelerate at a rate that will soon see the vanguard of introductory pricing at $2-3 for beginner plans.
The big hosting companies are already at sub-$5 price points to compete with the other players advertising $3 monthly plans.
The future only holds the $2 and $1 price point as “what’s left” as ammunition in the “lower pricing” competitive strategy hosting companies choose to lead with.
Beyond the next 3-5 year window of price degradation, lies only one solution for on-boarding customers with a competitive edge.
FREE or FREEMIUM.
FREEMIUM in an old marketing play that has yielded other tech companies some monster market share.
FREEMIUM is what Gmail used to conquer about 50% of the email market once email was established for 20 years.
FREEMIUM is what Pandora used to corner the streaming music market after networks added the capability to stream over cellular networks.
Once price erosion starts to impact bottom lines, reactive web hosts will scramble to innovate methods for on-boarding customers.
TREND 4: ON-BOARDING INNOVATION
All the big web companies are operating in the same “safe” marketing pool.
They mostly have pretty websites with “competitive pricing” and “world-class” customer service.
Although, effective now, this “inside-the-box” thinking may not continue to work as well with eroding price points.
What big web hosts may not be seeing is the eventual “end-of-the-line” in the pricing strategy they are currently implementing.
What happens when the vanguard of pricing packages is at $2 – or worse yet, $1 per month hosting plans?
How to do you maintain a margin and compete with a bloated sales organization, corporate structure and increased competitors who are nimble?
Answer: With an innovative way to on-board customers.
The companies that are projecting for their success in the next 3-5 years already see this eventuality and are preparing for it by spending resources exploring innovative ways to on-board customers.
The companies that aren’t exploring innovative on-boarding look like Blockbuster video in 2000-2001.
IE: Still dominant but slowly bleeding out to new competition that is consistently getting stronger with a better model to take over the video delivery space.
Get on-board, or get left off the bus.
The AI driver will not wait.