OVH Cloud Pushes for US Penetration

At VMworld 2018 I had the opportunity to sit down with the OVH Cloud US team. While Amazon AWS, Google GCP, Microsoft Azure, Alicloud, Tencent, Baidu, and IBM clouds are all household names, OVH is less so. At VMworld 2018 the company was on a mission to show off its cloud business, and declare that it was more than ready to make an expansion push into the US cloud hosting provider market.

Why the Cloud Business is Hard

Launching a cloud service provider, at its face, seems easy. Pick your cloud management and billing platform. Start deploying servers. Undercut AWS and you are done. Many people have this idea simply because AWS is far from inexpensive. An example we saw last year with DeepLearning11: 10x NVIDIA GTX 1080 Ti Single Root Deep Learning Server (Part 1) was a 3-month payback versus leasing a server with AWS, and we included everything to keep the server up and running.

Here is the catch: it is not that simple. Setting up a cloud service provider means constantly adding more hardware. Perhaps the biggest trick in the cloud platforms is actually the financing. A firm needs to be able to invest enough to allow for burst capacity and stay through periods of lower utilization. At the same time, there always needs to be some reserve capacity for those who want to onboard next. If you have too much spare capacity because you expect hockey stick growth that never arrives, you over-invest and run out of money. If you under-invest, then the next customer who tries to onboard may run into a situation where they do not have enough capacity.

Managing this, and having the right financing to take advantage of capacity needs is not easy. Remember, the big cloud players get far better pricing than a startup cloud. If you think you can undercut a major cloud player simply because of a back of the envelope calculation shows that AWS is 2-3x what your costs are, remember many businesses have failed in similar undertakings.

The big cloud players are very big indeed which is what makes OVH cloud intriguing. OVH is already buying hardware at scale, building its own servers, and has a large hosting provider customer base. In many ways, OVH has already been operating like a large cloud hosting provider and has had to solve the financing gauntlet.

The OVH “In” for the Cloud Market

Every company thinking about treading into cloud hosting needs, at a minimum, an “in.” With OVH, the answer is quite interesting. OVH is a company that has a mission to provide low-cost hosting for years. That genesis leads the company to invest heavily in automation. Like major hyper-scalers such as Facebook, Google, and Baidu, the company is making its own servers. Being distinguished as one of the largest VPS and dedicated server providers means that OVH was providing the basic services that Amazon Web Services was providing, just earlier and under a different name.

Being an early and large hosting provider is not enough of an “in” for many would-be cloud providers. Many tried to make the jump based on this advantage alone and fell short. OVH instead made the big move that took it from an aspirer to a player: it bought VMware’s vCloud Air business. In one fell swoop, it gained a customer base and a platform that appealed to large enterprises. These are the same large enterprises looking to transition their on-prem workloads running on VMware into the cloud.

Between the existing platform and the newly acquired VMware business, OVH had a platform and a competitive advantage that made it an intriguing player in the market.

At VMworld 2018, OVH had a massive presence. The goal was clear and simple, to show that it had the original VMware cloud platform, not AWS, IBM, or other newer entrants. It went to the biggest show, to proclaim to the VMware community that if you want to extend your VMware cloud capabilities beyond your own data centers, OVH is the partner to work with.  Meeting with the company, the messaging is clear, OVH is ready and has the experience and scale to help customers tackle the cloud.

Final Words

We frankly do not see OVH as being a 25% cloud hosting market share company in the next three years by revenue. On the other hand, OVH is a company that has learned to scale in a similar market. The company now has a partner program. It is offering public and private cloud offerings in many availability zones, including the US. If you are a VMware shop looking for an easy on-ramp to the cloud, OVH may be an option. Since STH has many managed service provider readers, the company mentioned that it has an expanded partner program for its cloud offering. That may be worth exploring if you want to help your clients move to an alternative cloud.