Magic Quadrant for Managed Hosting, North America · 28/08/2013 Magic Quadrant for Managed Hosting,...

28/08/2013 Magic Quadrant for Managed Hosting, North America

www.gartner.com/technology/reprints.do?id=1-1EZYTZ5&ct=130410&st=sg 1/13

Magic Quadrant for Managed Hosting, NorthAmerica

9 April 2013 ID:G00247853

Analyst(s): Douglas Toombs, Lydia Leong, Bob Gill, Tiny Haynes, Gregor Petri

VIEW SUMMARY

Managed hosting solutions are offered on physical and virtualized infrastructures, including cloud

infrastructure as a service. This market is mature, but cloud capabilities are disruptive, so vendors

must be chosen with care.

Market Definition/Description

Managed hosting services are standardized, productized offerings that combine data center

facilities, provider-managed computing, network bandwidth and storage capacity. Their individual

components may be physical or virtual, and dedicated to a single customer or shared by many. At

minimum, the provider must supply server OS management services, including guest OSs if

virtualization is used. The provider may optionally supply other managed and professional

services relating to the deployment and operation of the infrastructure.

Managed hosting services offer limited customization and are sold on a stand-alone basis, with no

requirement to bundle them with other services (such as application development, application

maintenance and data center outsourcing [DCO] services).

This Magic Quadrant focuses on the enterprise-class, managed hosting market, independent of

the type of underlying infrastructure. Managed hosting services may be delivered on:

Physical servers. These are dedicated to a single customer and owned and hosted by the

service provider. At minimum, server OS management must be included.

Virtualized servers. Physical servers are dedicated to a single customer and owned and

hosted by the service provider; virtualization is used to provide virtual machines to the

customer. At minimum, guest OS management must be included.

Utility infrastructure. This provides customers with virtual machines from a shared,

multitenant environment owned and hosted by the service provider. At minimum, guest OS

management must be included.

Cloud infrastructure as a service (IaaS). This provides customers with self-service — via a

graphical user interface or an optional API — and compute, storage and network resources,

on demand and in near real time. These resources are owned and hosted by the service

provider. The offering may be multitenant ("public cloud") or single-tenant ("private cloud").

At minimum, server OS management must be included for nonvirtualized physical servers,

and guest OS management must be included for virtual machines.

Many customers will choose to use multiple types of infrastructure within their managed hosting

solution. When cloud IaaS is mixed with one or more of the other types of infrastructure, this is

often called "hybrid hosting." Some customers will also choose to mix provider-managed and self-

managed infrastructure.

Gartner separates the concept of a cloud infrastructure platform from the concept of services that

are delivered on top of that platform. Managed hosting is simply one of many services that can be

delivered on top of cloud IaaS, or more broadly, on an infrastructure created using a cloud

management platform.

In addition to server OS management, optional managed and professional services related to

infrastructure operations may be offered, such as:

Management of infrastructure software at the middleware or persistence layer, such as Web

server software, application servers and database servers

Management of storage, including backup and recovery

Management of security

Management of network devices, such as application delivery controllers

Professional services associated with hosting, such as architecture, capacity planning,

performance testing, security auditing and data center migration

Managed hosting services are typically sold on one-to-three-year contracts. Providers vary in the

degree to which they allow customers to change the amount of capacity they purchase during a

contract. Some allow only capacity increases, not decreases. Some require a contract addendum

and extension when capacity is changed. Others are more flexible, allowing capacity changes on a

monthly basis, or even a daily or hourly basis, without any contract alterations.

As noted above, managed hosting services are productized and standardized, but some providers

will customize services for customers with specific needs that cannot be met by standardized

offerings. Some customers choose a fully managed service in which the service provider manages

EVALUATION CRITERIA DEFINITIONS

Ability to Execute

Product/Service: Core goods and services

offered by the vendor that compete in and serve

the defined market. This includes current product

and service capabilities, quality, feature sets,

skills and so on, whether offered natively or

through OEM agreements and partnerships as

defined in the market definition and detailed in

the subcriteria.

Overall Viability (Business Unit, Financial,

Strategy, Organization): Viability includes an

assessment of the overall organization's financial

health, the financial and practical success of the

business unit, and the likelihood that the

individual business unit will continue investing in

the product, will continue offering the product,

and will advance the state of the art within the

organization's portfolio of products.

Sales Execution/Pricing: The vendor's capabilities

in all presales activities and the structure that

supports them. This includes deal management,

pricing and negotiation, presales support, and the

overall effectiveness of the sales channel.

Market Responsiveness and Track Record: The

vendor's ability to respond, change direction, be

flexible and achieve competitive success as

opportunities develop, competitors act,

customers' needs evolve and market dynamics

change. This criterion also considers the vendor's

history of responsiveness.

Marketing Execution: The clarity, quality,

creativity and efficacy of programs designed to

deliver the organization's message to influence

the market, promote the brand and the business,

increase awareness of products, and establish a

positive identification with the product, brand and

organization in the minds of buyers. This "mind

share" can be driven by a combination of

publicity, promotional initiatives, thought

leadership, word-of-mouth and sales activities.

Customer Experience: Relationships, products,

services and programs that enable clients to be

successful with the products evaluated.

Specifically, this includes the ways customers

receive technical support or account support. This

can also include ancillary tools, customer support

programs (and the quality thereof), availability of

user groups, SLAs and so on.

Operations: The ability of the organization to

meet its goals and commitments. Factors include

the quality of the organizational structure,

including skills, experiences, programs, systems

and other vehicles that enable the organization to

operate effectively and efficiently on an ongoing

basis.

Completeness of Vision

Market Understanding: The vendor's ability to

understand buyers' wants and needs and to

translate those into products and services.

Vendors that show the highest degree of vision

listen and understand buyers' wants and needs,

and can shape or enhance those wants and

needs with their added vision.

Marketing Strategy: A clear, differentiated set of

messages consistently communicated throughout

the organization and externalized through a

website, advertising, customer programs and

positioning statements.

Sales Strategy: The strategy for selling products

that uses an appropriate network of direct and

indirect sales, marketing, service and

communication affiliates that extend the scope

and depth of market reach, skills, expertise,

technologies, services and the customer base.

Offering (Product) Strategy: The vendor's

approach to product development and delivery

that emphasizes differentiation, functionality,

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the system infrastructure (computing, storage and network facilities) and application

infrastructure (middleware), but not the application. Other customers prefer to select from a menu

of management services; some, for instance, need only database administration services, while

others want junior-level system administration tasks, such as patch management, handled for

them, but to do all the complex work themselves.

Use Cases Covered by This Evaluation

This Magic Quadrant focuses on the following common use cases, independent of the type or

types of infrastructure used to serve these workloads:

E-business hosting. Managed hosting for e-marketing sites, e-commerce sites, software as a

service (SaaS) applications and similar modern websites and Web-based applications. These

workloads are often complex, and are associated with a high rate of change in systems and

application infrastructure.

Web-based business application hosting. Managed hosting for corporate intranets and

Web-based applications delivered to users primarily within the enterprise. The applications

may be commercial software or in-house-developed applications; workloads are often

relatively light, and do not have a high rate of change.

Enterprise application hosting. Managed hosting for the infrastructure underlying large

commercial software applications, such as those of Oracle, SAP and Lawson. These

workloads are often complex and require specialized knowledge to operate optimally, but do

not have a high rate of change.

All three use cases are typically tactical sourcing decisions that involve one application, a single

group of closely related applications (such as everything associated with an enterprise's video

portal) or a single division (such as the e-commerce business unit of a retailer). They are typically

best served by a best-of-breed provider that has strong operational expertise with similar

solutions. However, many customers expand their use of managed hosting over time, and the

choice of a provider may become a strategic decision for a customer.

In the managed hosting market, it is difficult to find a provider that excels in all areas — providers

may be leaders in some areas but lag behind in others. As a result, it is important to match your

use case with a vendor that excels in meeting your particular needs. Smaller providers may do

one thing extraordinarily well, but may not have a comprehensive set of services that enables

them to address a broad array of use cases. It is also crucial to note that a Magic Quadrant

shows the overall position of a vendor in the managed hosting market, and thus examines a

broad array of business factors; the quality of service delivered — although a critical element —

comprises only about one-third of the rating. A vendor's position in the Magic Quadrant should not

be used to determine the relative quality of different services for a given use case. It is crucial to

look beyond the Magic Quadrant Leaders when selecting a vendor, especially if you have an

unusual need. The perfect vendor for your needs might, for example, be a Niche Player.

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Magic Quadrant

Figure 1. Magic Quadrant for Managed Hosting, North America

Source: Gartner (April 2013)

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methodology and feature sets as they map to

current and future requirements.

Business Model: The soundness and logic of the

vendor's underlying business proposition.

Vertical/Industry Strategy: The vendor's

strategy to direct resources, skills and offerings to

meet the specific needs of individual market

segments, including vertical markets.

Innovation: Direct, related, complementary and

synergistic layouts of resources, expertise or

capital for investment, consolidation, defensive or

pre-emptive purposes.

Geographic Strategy: The vendor's strategy to

direct resources, skills and offerings to meet the

specific needs of geographies outside its "home"

or native geography, either directly or through

partners, channels and subsidiaries, as

appropriate for that geography and market.



Vendor Strengths and Cautions

AT&T

AT&T is a global communications service provider, headquartered in Dallas, Texas, with a long

history of leadership in the managed hosting market. It offers managed hosting on dedicated

infrastructure and public and private IaaS, and colocation and application management services,

from 23 data centers in North America, as well as from facilities in Europe and Asia.

Strengths

AT&T has a long history of providing managed hosting services. It can manage highly

complex e-business infrastructures, and has particular expertise in e-commerce and

enterprise application solutions. It can also manage complex enterprise application hosting,

in synergy with its application management business.

AT&T is able to use its network as a differentiator for use cases where network access is a

heavily weighted criterion, or where end-to-end service management with SLAs is required.

Cautions

Gartner customers frequently express frustration with AT&T's billing processes. Although

AT&T provides customers with documentation on these processes, it is exceptionally long

and the relevant details are hard to find, which can lead to confusion.

AT&T's operations processes are heavyweight in nature. This level of operational rigor can

be beneficial from the perspective of the long-term stability of environments and the

management of the complexities of change and risk, but it quickly becomes burdensome

when customers want to be more agile and to move more quickly.

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Carpathia Hosting

Carpathia Hosting is a midsize private Web hosting provider, headquartered in Sterling, Virginia,

that focuses on delivering complex, compliant hosting and cloud solutions for midmarket

enterprises and government customers. The company offers managed hosting on dedicated

servers and private or public cloud IaaS, and can integrate with Amazon Web Services. It

operates from data centers on both coasts of the U.S., in Canada, in Europe and in Asia/Pacific. It

can also offer high-compliance colocation space.

Strengths

As of October 2012, Carpathia was one of only five providers serving the U.S. federal

government market to have received Authority to Operate status for virtual machines for

moderate (or lower) Federal Information Security Management Act (FISMA) workloads via a

General Services Administration (GSA) blanket purchase agreement.

Carpathia is one of the few providers that can work with customers that need or want to

use Amazon Web Services as a part of a larger overall hosting, cloud and colocation solution

via Amazon Web Services' Direct Connect service.

Cautions

Carpathia's strong marketing focus on compliance use cases can put off customers looking

for more general-purpose solutions.

Carpathia's InstantOn cloud solution is currently deployed only in its U.S. facilities.

Carpathia's network-level SLA lags behind most of its peers in the industry, at 99.9%.

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CSC

CSC is large IT integrator and outsourcing company, headquartered in Falls Church, Virginia, that

offers a broad array of IT outsourcing services, including managed hosting and cloud IaaS, as well

as colocation services. It offers managed hosting services from multiple data centers in the U.S.,

and managed cloud services from its U.S. and international data centers.

Strengths

CSC focuses its managed hosting business on its cloud platform, which is one of a handful

certified by VMware as a vCloud Datacenter Service, and which incorporates a variety of

other IT operations management tools as well.

CSC has a well-designed unified portal for its cloud and hosting offerings, which also

integrates detailed chargeback and billing data, as well as provisioning workflows with

approval checkpoints.

CSC supports a particularly broad variety of infrastructure, middleware and database

choices, including non-x86-based environments such as AIX, HP-UX and IBM's iSeries

(AS/400).

Cautions

CSC does not offer traditional dedicated-server managed hosting or managed hosting for

applications outside North America. Its managed cloud hosting, however, is available in all of

CSC's geographic regions.

CSC's sales and engagement processes for hosting and cloud are still maturing, with some

Gartner clients reporting frustrations in the time it took to advance from the initial

engagement to an operational state.

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Datapipe

Datapipe is a rapidly growing, midsize private hosting provider, headquartered in Jersey City, New



Jersey, which focuses on delivering high-touch services to midmarket and enterprise customers.

The company offers managed hosting on dedicated servers and on its Stratosphere public and

private IaaS platform, as well as on top of Amazon Web Services. It operates from data centers

on both coasts of the U.S., as well as from Europe and Asia. It can also offer colocation services.

Strengths

Datapipe is one of the few providers that can engage with customers looking to move

workloads to Amazon's cloud but that may not want to do this on their own, or that may

need additional offerings not provided by Amazon Web Services, such as dedicated servers

and colocation.

Datapipe aims to deliver predictability in month-to-month billing for customers by not

charging for time and materials for routine move, add and change requests that do not

require new equipment — even to the point of performing a complete OS upgrade for a

hosted server.

Datapipe takes an environmentally focused approach to its domestic infrastructure needs,

and purchases renewable energy offset credits for all its utility power consumed in the U.S.

It also utilizes geothermal and hydroelectric power at its data center in Iceland.

Cautions

Organizations requiring mostly commodity services might find it harder to get Datapipe's

attention as it shifts its focus to customers for which its high-touch service levels are a

competitive differentiator.

Because of Datapipe's focus on higher-touch levels of service, its prices tend to be higher

than those of similarly sized competitors.

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Dimension Data

Dimension Data is a large, global system integrator and value-added reseller headquartered in

Johannesburg, South Africa, and a subsidiary of NTT in Japan. In 2011 the company acquired

Santa Clara, California-based OpSource, which became the foundation for Dimension Data's global

cloud business unit. The company offers managed hosting on dedicated servers, as well as public

and private cloud IaaS from data centers on both coasts of the U.S., as well as in Europe, Asia,

Australia and South Africa.

Strengths

The former OpSource was successful with independent software vendors (ISVs) needing a

service provider to host SaaS versions of their applications. It achieved this by acquiring and

building capabilities specific to the needs of ISVs.

Dimension Data has extended the OpSource platform to a larger global footprint, and has

improved its software to enable customers to deploy their own on-premises private

instances of the managed cloud platform.

Dimension Data has some of the highest SLAs of any provider, and will even offer high SLAs

for selected enterprise applications — provided they meet certain architectural requirements

for fully redundant components, clustering and so on.

Cautions

Dimension Data's managed hosting offering on dedicated infrastructure is supported from a

different portal than its cloud platform, which can make management more cumbersome for

customers needing to use both.

Dimension Data offers neither programmatic provisioning of "bare metal" infrastructure nor a

utility hosting platform.

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Hosting

Hosting (also known as Hosting.com) is a midsize, private Web hosting provider, headquartered

in Denver, Colorado, that focuses on midsize enterprise customers. The company offers managed

hosting on dedicated servers, as well as on private and public IaaS platforms. It operates from six

data center locations throughout the U.S., and can also offer colocation services.

Strengths

Hosting continues to bring new business continuity and disaster recovery services to the

market.

Hosting takes a highly methodical and quantitative approach to measuring customer

satisfaction across the entire service experience, in order to spot areas with room for

improvement and direct internal investments strategically.

Hosting continues to improve its portal's capabilities and information. Improvements include

the addition of an ability to add managed services to already-provisioned unmanaged

infrastructure, granular levels of OS patch control and scheduling, improved monitoring of

application performance, and visibility into virtual machine storage input/output operations

per second (IOPS).

Cautions

Hosting lacks any international capacity, unlike many of its peers in markets of similar size.

This limits its ability to serve U.S.-based multinational corporations that would like a local

provider but that also need a global reach.

Hosting is still in the process of sorting out its messaging and branding, as a result of its

acquisitions during the past few years. Although this typically does not impair the quality of

its service delivery, customers may see inconsistencies in messaging or operational

processes from time to time.



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IBM

IBM is a highly diversified global technology company, headquartered in Armonk, New York. It

offers a broad array of IT outsourcing services, including managed hosting and cloud IaaS. IBM

offers managed hosting on dedicated or shared servers, as well as on private and public IaaS

platforms, from nine data centers in North America and locations throughout Europe, Asia and

Latin America.

Strengths

IBM's SmartCloud Enterprise+ platform, which serves as the foundation for the evolution of

its e-business hosting and Applications on Demand businesses, is used in multiple service

offerings beyond managed hosting. This makes it a strategic investment for the company.

IBM is one of the few managed hosting providers that can offer infrastructure capabilities

outside the x86 sector, namely for AIX/pSeries systems.

IBM is able to deliver enterprise applications like those of SAP on its cloud platform, with

some term commitments for certain deployments being as short as one month.

Cautions

Although IBM's SmartCloud Enterprise+ platform has promising capabilities, it has been on

the market for less than one year and falls under Gartner's definition of a utility hosting

platform, not cloud IaaS.

With a 99.9% SLA, IBM's SmartCloud Enterprise+ platform is on the low side, compared with

other hosting offerings, and below the 99.95% typically seen in most IaaS platforms.

IBM measures SLAs at the start of a calendar month, not immediately upon provisioning a

virtual machine.

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Layered Tech

Layered Tech is a midsize, private managed hosting and cloud provider headquartered in Plano,

Texas. It is refocusing on customers with complex, compliant hosting and security needs,

particularly in the healthcare and government sectors and the payment card industry. The

company offers managed hosting on dedicated servers and private or public cloud IaaS, as well

as colocation services from three primary data centers in the U.S. It also has secondary data

centers in Canada, Europe and Asia.

Strengths

Layered Tech is investing in service delivery automation capabilities that can automatically

execute and track some change operations within customer environments entirely via

scripted operations and that are tied into the company's ITIL-based change management

framework.

Layered Tech is increasing its focus on, and services for, use cases with security and

compliance needs. It backs up its offerings with guarantees that customers will pass any

audit from properly sanctioned regulatory entities.

Following its acquisition of New World Apps in 2012, Layered Tech is better suited to address

governmental computing needs that fall under FISMA compliance requirements.

Cautions

Layered Tech has primary data center locations in the U.S. only, which limits its capabilities

for customers needing a larger international infrastructure footprint.

A significant shift in Layered Tech's messaging toward compliance might cause potential

customers with more general-purpose needs to overlook it.

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NaviSite

NaviSite is a midsize Web hosting provider, headquartered in Andover, Massachusetts, that was

acquired by Time Warner Cable in 2011. It offers managed hosting on dedicated servers and

private or public cloud IaaS, as well as colocation and application management services, from six

data centers throughout the U.S. and three data centers in Europe.

Strengths

Although NaviSite offers a variety of infrastructure options, it encourages customers to use

NaviCloud, its cloud IaaS platform, which is well-engineered for midmarket and enterprise

needs.

NaviSite is a strong performer in the field of hosting and cloud services for complex

application management. It provides hosting solutions for applications from vendors such as

Microsoft (Exchange and Dynamics) and Oracle (including PeopleSoft and Hyperion).

NaviSite is bringing desktop-as-a-service offerings to customers through a partnership with

Desktone, one of the few managed hosting providers that has been willing to enter this

relatively new market.

Cautions

NaviSite is rationalizing its product portfolio in light of current market needs, which might

lead to shifts in product focus.

NaviSite is typically one of the more expensive providers in the managed hosting market, as

it often bundles managed hosting as part of a more comprehensive suite of services.

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NTT Communications

NTT Communications is a wholly owned subsidiary of NTT, with headquarters in Tokyo, Japan. The

company offers managed hosting on dedicated servers and private or public cloud IaaS via its

Verio and NTT America business units, from data centers on both U.S. coasts, as well as from data

centers in Europe and Asia. It also offers colocation services from its data centers, and owns its

own global Internet Protocol (IP) network.

Strengths

NTT Communications' global network can be a differentiator for use cases where global

network access is a heavily weighted criterion.

NTT Communications has a solid understanding of business practices, networking and

security in both Eastern and Western societies. This helps it provide additional benefits to

customers expecting their hosting needs to reach into the Asia/Pacific region.

Cautions

The service offerings of NTT America and Verio are still disconnected solutions, requiring

different portals and logins, among other things.

In North America, NTT Communications lags behind its peers in terms of technical innovation

and expansion of services. Innovations are slow to move from the broader global NTT

portfolio to its North American operations.

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Peer 1 Hosting

Peer 1 Hosting is a midsize Web hosting provider, headquartered in Vancouver, British Columbia,

which was acquired by Cogeco Cable in January 2013. The company offers managed hosting on

dedicated servers and private or public cloud IaaS, as well as colocation services, from 12 data

center locations throughout North America and four in Europe. Peer 1 acquired the U.K. provider

NetBenefit in 2012.

Strengths

Customers that use multiple data centers from Peer 1 do not pay transit costs across its

backbone network. This may provide significant cost savings for some application and

workload scenarios.

Peer 1 has created the customer-focused position of "customer advocate," a role not tied to

sales quotas or support metrics but dedicated to ensuring general customer satisfaction.

Cautions

Although Peer 1 has a good track record for customer service, acquisitions can have

unknown effects on the parties involved as organizations work to rationalize their portfolios,

sales activities, billing systems, support models and so on. Although Peer 1 indicates that

nothing should change with its business strategy, customers should be especially thorough

when reviewing contractual terms and conditions.

With the sole exception of Microsoft Exchange, Peer 1 does not provide support for modern

enterprise applications.

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Rackspace

Rackspace is a large, publicly traded managed hosting and cloud IaaS provider, headquartered in

San Antonio, Texas, with over $1 billion in revenue. The company offers managed hosting on

dedicated servers, public IaaS based on OpenStack and XenServer, and private cloud solutions

based on VMware, as well as hosted Microsoft Exchange and SharePoint, cloud storage and

hosted virtual desktop services. It provides these services from five data centers in the central

and eastern U.S., as well as Europe and Asia.

Strengths

Rackspace is the market share leader in pure-play managed hosting, and historically has

grown significantly above the market average.

Rackspace has a strong cultural focus on providing superior, high-touch customer service. It

is typically an exceptionally responsive provider in both the sales process and day-to-day

operations.

Rackspace has made significant improvements in the past two years to target enterprise

customers, including a new enterprise-focused sales force and an expansion of its

professional services capabilities.

Rackspace is an extremely cost-efficient provider, with prices that are often significantly

below those of comparable offerings. However, these prices depend on standardization —

Rackspace's service portfolio is narrower than those of other competitors that target the

midmarket and enterprises.

Cautions

Although Rackspace founded the OpenStack project for an open-source cloud management

platform, and launched an OpenStack-based public cloud IaaS offering in August 2012, most

of its managed hosting customers still use dedicated servers, sometimes with VMware-based

virtualization. Rackspace does not have a utility hosting offering, nor does it offer the full

extent of its managed services portfolio on its cloud IaaS platform.

Rackspace does not have data center infrastructure further west in the U.S. than Texas.

Customers looking to build Web applications should consider latency to West Coast users

before deploying.

Rackspace's enterprise sales force efforts are a relatively new focus for the company. It will

likely take time for the company to execute on a par with some of its more enterprise-



focused peers.

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Savvis

Savvis, a CenturyLink company, is a large colocation, managed hosting and cloud IaaS provider.

The company offers managed hosting on dedicated servers and private or public cloud IaaS, as

well as colocation services. It operates data centers in 20 metropolitan markets throughout North

America, as well as locations in Europe and Asia, many of which are near major financial

exchanges.

Strengths

Savvis can handle extremely complex deals, including large-scale e-commerce and enterprise

application hosting needs. It has a very broad portfolio of supported infrastructure,

middleware stacks and application environments.

Through its acquisition of the IT outsourcing business of Ciber in July 2012, Savvis gained a

broader set of enterprise application support skills and can start bringing new application-

centric services to customers.

Savvis has consistently had one of the best end-user portals, which generally covers every

product that Savvis sells, including hosting, network, cloud and colocation offerings.

Resource management and utilization views across multiple hosting and cloud services help

customers identify where they may have overprovisioned their infrastructure and could

potentially save money.

Through its Consumer Brand Solutions, Savvis can provide complete online presence

management for e-commerce and consumer packaged goods companies, including Web life

cycle management, brand protection, social media engagement and more.

Cautions

Gartner clients have noted a dilution of focus and support quality within the business

following the spate of acquisitions during the past two years that have led to the company's

current organizational structure.

Savvis has multiple hosting and cloud IaaS offerings among its suite of services, which can

leave customers unsure which line of service is best for their needs.

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SunGard Availability Services

SunGard Availability Services is a large IT availability and business continuity provider

headquartered in Wayne, Pennsylvania. It offers managed hosting on dedicated servers and a

virtualized utility hosting platform, as well as colocation services from over 30 data centers

throughout North America and multiple locations in Europe.

Strengths

SunGard is strong in recovery and availability services, as it can design highly available

platforms to meet customers' needs, even incorporating legacy systems into plans.

SunGard is overhauling its business from the top down and sharpening its focus on service

capabilities, delivery and the more customized needs of complex accounts.

Cautions

SunGard's solution engineering is improving, but its standard managed hosting SLA is still

based on a rolling three-month period in which targets must be missed in two of the three

months for the customer to qualify for a credit — a significantly weaker guarantee than is

typical in this industry.

Although SunGard supports standardized application use cases, by moving toward

customized workloads it may find it challenging to generate cost synergies from

standardization and automation.

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Verizon Terremark

Verizon Terremark is the hosting and cloud business unit of Verizon. It was formed from the

merger of Verizon's own hosting, colocation and cloud offerings with the assets of Terremark, a

company it acquired in 2011. Verizon Terremark offers managed hosting on dedicated servers and

private or public cloud IaaS, as well as colocation services, from 25 data centers throughout North

America, and locations in Europe, Asia and Latin America.

Strengths

Verizon and Terremark both have long and successful histories in the managed hosting

business. Customer service for historical Terremark customers has improved significantly

since Verizon acquired Terremark.

Verizon Terremark is one of the few North American providers with strong Latin American

capabilities, largely due to the company's NAP of the Americas peering hub in Florida, a key

landing point for fiber routes from South America.

Verizon is able to use its network as a differentiator for use cases where network access is a

heavily weighted criterion, and where end-to-end service management with SLAs is required.

Verizon Terremark's Enterprise Cloud Managed Edition offers customers the ability to

provision dedicated physical servers as well as virtual servers, with billing available in daily

increments.

Cautions

Although the integration of legacy services has been completed, Verizon Terremark has yet



to consolidate all its service offerings in a single portal. This means users have to sign into

different portals to manage different infrastructure stacks.

Although Verizon Terremark is rewriting its SLA for high-availability managed hosting

solutions, its current 99.5% availability SLA is below that of its peers.

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Vendors Added or Dropped

We review and adjust our inclusion criteria for Magic Quadrants and MarketScopes as markets

change. As a result of these adjustments, the mix of vendors in any Magic Quadrant or

MarketScope may change over time. A vendor's appearance in a Magic Quadrant or MarketScope

one year and not the next does not necessarily indicate that we have changed our opinion of that

vendor. It may be a reflection of a change in the market and, therefore, of changed evaluation

criteria, or of a change of focus by the vendor.

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Added

None

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Dropped

None

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Inclusion and Exclusion Criteria

The inclusion criteria are used to determine which vendors will be covered in this Magic Quadrant.

To be included, vendors had to meet the following criteria:

They must sell managed hosting as a stand-alone service, without the requirement to

bundle it with application development, application maintenance or other IT outsourcing and

DCO.

They must have managed hosting offerings that can be delivered on demand, with flexible

contracts that allow infrastructure capacity to be changed monthly (or more often).

This service must be enterprise-class, offering 24/7 customer support (including phone

support) and SLAs.

They must have a geographic footprint within North America of at least three different

metropolitan markets, or global presence that includes at least two North American

metropolitan markets, with enterprise-class data centers suitable for large-scale managed

hosting.

They must be among the top 15 North American providers according to Gartner's estimated

market shares for managed hosting.

Products and Services Excluded From This Evaluation

This Magic Quadrant is for managed hosting only. That means the following adjacent services are

explicitly excluded from evaluation:

Colocation: Although many managed hosting providers also offer colocation, the quality of

colocation offerings is not evaluated in this Magic Quadrant. This Magic Quadrant should not

be used to select colocation vendors.

Self-managed cloud IaaS: Many businesses want a self-provisioned, self-managed

dynamically provisioned infrastructure; they want to take advantage of the cost-efficiencies

of a provider's scale and automation tools, but do not want to relinquish control. If your

interest is primarily in self-managed cloud infrastructure, consult "Magic Quadrant for Cloud

Infrastructure as a Service."

DCO and remote infrastructure management (RIM): Although many DCO providers may

manage the infrastructure for Web applications as part of a DCO contract, this Magic

Quadrant evaluates only managed hosting that is sold as a stand-alone service within

provider-owned data center facilities. It explicitly excludes hosting that may be part of a

more general DCO or RIM contract. DCO providers are covered by "Magic Quadrant for Data

Center Outsourcing and Infrastructure Utility Services, North America" and "Magic Quadrant

for Data Center Outsourcing and Infrastructure Utility Services, Europe."

Application management services: While some managed hosting providers may have some

expertise in understanding how best to run the infrastructure underlying specific

applications, we consider that managed hosting services stop below the application layer.

Application layer services are part of the application management market, for which see

"Magic Quadrant for Oracle Application Management Service Providers, Worldwide" and

"Magic Quadrant for SAP Application Management Service Providers, Worldwide."

Cloud management platforms: Cloud-building hardware and software — software such as

BMC Cloud Lifecycle Management, Citrix CloudPlatform and OpenStack, and turnkey solutions

such as HP CloudSystem Matrix — are not evaluated in this Magic Quadrant, which is

restricted solely to services.

Vendors Considered but Not Included

For this Magic Quadrant we evaluated a significant number of managed hosting providers

operating within North America, but were unable to include them all. Some did not qualify for this

Magic Quadrant on the basis of their market shares in North America or because they failed to

meet other inclusion criteria.



The following providers were considered but excluded:

Hostway, headquartered in Chicago, Illinois, provides managed hosting, cloud IaaS,

colocation and shared hosting services from data centers in North America, Europe and Asia.

Its cloud solutions are built on Microsoft's Hyper-V hypervisor, which enables it to bring

Hyper-V replica solutions to customers using Windows Server 2012.

ViaWest is a hosting, colocation and cloud services provider based in Denver, Colorado. It

has an expansive 450,000 square feet of data center capacity throughout the western U.S.

The company's private and public cloud IaaS solutions are built on VMware.

Windstream is a communications service provider, headquartered in Little Rock, Arkansas,

that entered the managed hosting and cloud market via its acquisition of Hosted Solutions in

2010. The company has facilities throughout the eastern U.S.

Latisys is a hosting, colocation and cloud services provider, based in Denver, Colorado, that

operates from data centers in four metropolitan markets in the U.S. Its cloud offerings are

based on HP's CloudSystem Matrix platform, which can support both VMware and Microsoft

Hyper-V hypervisors.

Connectria is a hosting, colocation and cloud services provider based in St. Louis, Missouri

that has data centers in three metropolitan markets in the U.S. It has had success meeting

the needs of healthcare organizations that fall under Health Insurance Portability and

Accountability Act (HIPAA) compliance, and in addition to traditional x86-based hosting and

cloud solutions, the company can provide services for AIX, HP-UX, Solaris and IBM iSeries

needs.

There are thousands of service providers around the world that offer managed hosting services of

some type, and hundreds that focus primarily on this market or derive a significant amount of

revenue from it. Many small providers can provide an excellent level of service, so do not let lack

of inclusion in this Magic Quadrant deter you from evaluating such providers since we do not

consider service quality when determining inclusion. Insufficient revenue and geographic presence

alone could disqualify otherwise excellent providers.

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Evaluation Criteria

Ability to Execute

The most heavily weighted criteria for a managed hoster's ability to execute are their service

offerings and service excellence, as reflected in customers' experiences with sales, support and

operations. Overall business viability, as reflected in the provider's ability to serve a customer

successfully over a three-year period without significant disruption, and the provider's track

record, also contribute to this rating. Here, Gartner emphasizes immediate capabilities for the use

cases we see most often.

Table 1 shows weightings for our specific evaluation criteria.

Table 1. Ability to Execute Evaluation Criteria

Evaluation Criteria Weighting

Product/Service High

Overall Viability (Business Unit, Financial, Strategy, Organization) Standard

Sales Execution/Pricing Standard

Market Responsiveness and Track Record Standard

Marketing Execution Low

Customer Experience High

Operations Standard

Source: Gartner (March 2013)

Completeness of Vision

The market for managed hosting is evolving rapidly, so it is vital that service providers have a

vision for the future needs of customers and for how they will adapt their offerings to meet those

needs. The full context of a provider's vision is important, as cloud computing continues to alter

the market dramatically. We also evaluate a provider's approach to growing its business,

including its strategy for marketing and sales, international expansion and vertically focused

market solutions.

Table 2 shows weightings for our specific evaluation criteria.

Table 2. Completeness of Vision

Evaluation Criteria

Evaluation Criteria Weighting

Market Understanding High

Marketing Strategy Standard

Sales Strategy Standard

Offering (Product) Strategy High

Business Model Low



Vertical/Industry Strategy Low

Innovation High

Geographic Strategy Low

Source: Gartner (March 2013)

Quadrant Descriptions

Leaders

Leaders have proved they have staying power in this market, can frequently innovate on their

existing products, and can be relied on for enterprise-class needs. They have proved their

technical competence and ability to deliver services to a wide range of customers. They address

multiple use cases with stand-alone or integrated solutions.

New managed hosting customers should sign two-year contracts with these companies, whereas

larger enterprise application hosting customers should aim for longer contracts of three to five

years. Satisfied customers renewing a contract with one of these firms should sign a three-year

deal. Cloud IaaS customers should buy these services on demand when the pricing structure

makes sense to do so, or in contracts lasting one year or less.

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Challengers

Challengers have a track record of delivering good service capabilities but are trailing the market's

evolution. They are typically companies that have solid traditional managed hosting services but

have not exploited technology and market demand to build cloud services.

New managed hosting customers should sign two-year contracts with these companies, whereas

larger enterprise application hosting customers should aim for longer contracts of three to five

years. Satisfied customers renewing a contract with one of these firms should sign a three-year

deal. Cloud IaaS customers should buy these services on demand when the pricing structure

makes sense to do so, or in contracts lasting one year or less; they should exercise caution as

these vendors are likely still proving their cloud services.

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Visionaries

Visionaries have an innovative and disruptive approach to the market, but their services may be

new and unproven, and they frequently have limited service portfolios. Visionaries have an early-

mover advantage in providing cloud services, as well as road maps that may turn them into

Leaders in the future.

Because the business of Visionaries can change radically in a short period, we recommend that

customers buy these services from them on demand, or in contracts lasting one year or less.

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Niche Players

Niche Players are typically specialists with more focused product portfolios, or are emerging

vendors. They may serve one use case particularly well — better than a more generalized vendor.

New and renewing customers of stable, narrowly focused Niche Players should sign two- or three-

year contracts. New and renewing customers of emerging Niche Players whose businesses are

still rapidly evolving should buy services on demand, or in contracts lasting one year or less. If you

are using managed services, be wary of making short-term, tactical choices, as it can be

inconvenient and expensive to change provider.

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Context

Despite being in the media shadow of cloud computing, managed hosting remains the most

appropriate solution for many organizations that want to outsource the infrastructure and IT

operations management associated with an application or website. Most organizations prefer to

source this infrastructure on a flexible, pay-as-you-go basis, where capacity can be adjusted to

meet demand. Consequently, in addition to offering dedicated servers, managed hosting

providers frequently also offer shared and virtualized utility infrastructure platforms, or cloud IaaS.

Indeed, some managed hosting providers are primarily or solely focused on delivering their

solutions on cloud IaaS.

Most solutions for complex needs are hybrid, mixing different types of infrastructure to achieve

cost-effectiveness and to meet the customer's availability, performance, security and IT

operations requirements. Customers may, for instance, need test and staging servers hosted on

an IaaS platform, their front-end Web and application servers on utility infrastructure, and their

database on dedicated physical servers. This has spurred providers to develop and productize

hybrid hosting services that connect colocation, traditional hosting environments and cloud IaaS

within unified networking and security contexts.

Managed hosting is typically sold on a one-to-three-year contract via a consultative sales process.

Buyers should expect to interact at length with the solution architects of prospective providers to

achieve a solution that meets their needs. Every provider's solution will be subtly different, and

service and support quality vary tremendously across the industry. Consequently, managed

hosting providers should be chosen with care.

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Market Overview

The market for managed hosting is mature, but the introduction of cloud IaaS has driven

significant evolution during the past five years, with stronger emphasis on automation, flexible

contracts and capacity on demand. This Magic Quadrant covers only solutions that include

managed services, emphasizing complex implementations that require significant human labor on

the part of the service provider, regardless of whether the underlying infrastructure platform

comprises physical servers, virtualized servers, cloud IaaS or a hybrid combination. For self-

managed cloud IaaS, or cloud IaaS with an emphasis on highly automated management (rather

than humans performing managed services), see "Magic Quadrant for Cloud Infrastructure as a

Service."

Buyers of managed hosting service should be aware of the key aspects of the market described

below.

The Infrastructure Platform Is a Means to an End

Increasingly, prospective managed hosting customers approach sourcing a solution with an

attitude of "I want to be in the cloud." However, for many customer needs, cloud IaaS is not the

ideal solution from a technical or cost perspective. Instead, you should consider the goals you are

trying to achieve. Each component of your application needs a particular level of availability,

performance and security, which results in different demands on the underlying infrastructure.

You may also have scaling-related business needs, such as the ability to scale up and down

quickly in response to unpredictable spikes in demand, the ability to handle seasonal needs

without overbuying capacity at other times, or the ability to add extra capacity rapidly (for the

launch of a new initiative or the signing of a new customer, for instance). Some scaling needs

must be addressed technically — for instance, if you need to add large amounts of capacity at five

minutes' notice, virtual machines are a must — but some needs, especially seasonal ones, can

often be met by flexible contracting.

Managed hosters may offer both nonvirtualized physical servers, as well as virtualized servers.

Virtualized servers may be single-tenant (not shared with other customers), or multitenant

(shared with other customers). There may be self-service provisioning for some or all of these

resources. The use of virtualization or the existence of self-service do not by themselves make a

service a "cloud" service. Because the word "cloud" is used inconsistently within the industry, you

should simply ignore the labels used by providers. Instead, look at the technical characteristics of

the service, as well as the contract language, and ensure they meet your technical needs and

business goals.

The more complex your needs, the more likely it is that your best solution will be a hybrid of

different infrastructure approaches.

Cloud IaaS Is Often Not a Well-Integrated Solution

Broadly, many managed hosting providers initially architected their cloud IaaS platforms primarily

with a self-service model in mind — as environments the customer would self-provision and self-

manage. Consequently, they did not pay sufficient attention to integration issues with their other

offerings, and were unsure how to offer managed services on these platforms. As a result, many

providers do not seamlessly integrate their cloud IaaS solutions with the rest of their

environments. Specifically, the following are common:

The cloud IaaS solution tends to be on its own segregated technology infrastructure and

LAN. It may not be located in the same data centers, or all the data centers, in which the

provider offers other managed hosting services.

The provider may not have integrated customer support across all its offerings. A different

and lower level of support might be provided for its cloud IaaS.

The provider may not offer the same managed services on cloud IaaS that it offers on

dedicated servers or utility hosting; it might price and provide those services differently, or

those services might not be available.

The portal for cloud IaaS may be segregated from the provider's main customer service

portal, and features that are included for dedicated servers or utility hosting, such as

systems monitoring, may not be included or available with cloud IaaS.

Additional costs may be associated with a hybrid cloud solution, such as a requirement that

the customer use a load balancer or firewall to bridge cloud and noncloud environments.

Before adopting a hybrid solution that includes cloud IaaS, you must carefully investigate how the

provider's service differs across the infrastructure platforms in use.

Cloud IaaS Is Evolving Rapidly

The cloud IaaS market as a whole is growing rapidly, and new providers are flooding in, often

with incomplete offerings and strategies that revolve around "not being Amazon Web Services."

This approach characterizes many offerings that have been launched by managed hosting

providers, data center outsourcers and others that have entered this space from a related

business model.

Furthermore, rapid market evolution, along with the rapid evolution of technology through the

stack from hardware to applications, is driving a rate and a level of change that present

significant management challenges for service providers. This evolution is making it difficult for

customers to decide which solutions to adopt, because providers may release new features

several times a quarter and are evolving their service models.

In some cases, service providers have ended up building multiple cloud IaaS offerings, or multiple

versions of the same core service, as technology has evolved and the providers have learned

hard lessons about the technology and cloud IaaS business. Providers that have grown through

mergers and acquisitions may have multiple cloud IaaS platforms.

The multiple infrastructure platforms used by managed hosting providers are a reflection of



market and technology immaturity. The cloud IaaS platforms are usually cutting-edge

implementations unburdened by the provider's legacy managed hosting systems; as a result,

they may lack the functionality provided by those systems.

Gartner expects that, within the next five years, successful service providers will fully converge

their infrastructure platforms and provide the following capabilities:

The ability to provision both physical servers and virtual machines from a shared pool of

capacity that allows hardware components to be dedicated to a customer on an as-needed

basis, or shared among customers

The ability to offer multiple infrastructure tiers, with differing levels of cost, availability,

performance and security

The use of a unified management portal that can manage a physical and virtual

infrastructure, with views for the provider, the customer and third parties such as resellers

A unified approach to support and manage service options across all infrastructure options

Few providers offer fully converged infrastructure platforms. Even those that are well on the path

to convergence frequently still support and sell a legacy managed hosting platform, along with

their current infrastructure solution.

All Infrastructure Requires Management

All types of infrastructure require management. Prospective customers often assume that cloud

IaaS requires less management — they think that because they are in the cloud, IT operations

management functions such as patch management, backups and disaster recovery are taken care

of automatically. Broadly, this is not true, although providers may bundle managed services with

cloud IaaS, and are starting to automate these aspects.

Providers' approaches to managed services vary enormously. However, they can be classified

broadly into "OS and below" and "everything excluding the application." We refer to these as

simple managed hosting and complex managed hosting, respectively:

Simple managed hosting customers typically want to handle most operations themselves,

but would like the provider to handle routine issues on a 24/7 basis, and to perform routine

IT operations management tasks like patch management and backups.

Complex managed hosting customers typically want the provider to take ownership and

responsibility for the infrastructure, so that they only need to deal with their application. The

customer may choose to retain certain responsibilities — for instance, doing database

administration itself — but the provider essentially functions as the customer's IT operations

team for this infrastructure.

Whichever solution you choose, you will need to decide what responsibilities you will retain and

what will be the provider's responsibilities. You may also have some equipment that you decide to

provide and manage yourself; most managed hosting providers offer a colocation option for this

purpose.

Standardization Brings Benefits

Many managed hosting providers will extensively customize a customer's environment. However,

the more your environment deviates from the provider's norm and blueprints, the more you pay,

and the less consistent your service is likely to be. If you deviate from the standard, you don't

gain the benefit of as much of the provider's automation and tools; therefore, it's more costly for

the provider to serve you, and more things will be done manually, increasing the chance of error.

Standardization becomes particularly important when you consider using a provider's utility

hosting or cloud IaaS platforms. These environments are highly standardized, so you can only use

them if you can accept the standard way they are architected.

If you need a lot of customization in your managed hosting environment, ask the provider what

the cost difference is between its standard approach and the custom approach you desire. Ask

yourself if the customizations you need generate business value or are just to suit the tastes of

your IT personnel. For instance, a custom file system layout that places packages in a different

place from the provider's standard generates no business value, and might mean that you cannot

use the provider's standard patch management approach. Even some customizations done for

cost reasons may turn out to be a bad idea; for instance, a particular set of parameters for

performance-tuning a server may result in more of a cost penalty for deviating from the standard

configuration than you save by getting more efficiency from the server.

Customer Service Is the Key Differentiator

Most established managed hosters have very high levels of operational reliability and excellent

reactive support when customers have issues. However, providers vary significantly in their ability

to respond promptly to customer requests that aren't directly related to an outage or other

immediate operational emergency. Many providers are weak in responding when the customer's

request is complex, or when it crosses multiple groups within the company — for instance, when a

customer has a persistent problem with network performance, engineers that support network

elements may point the finger at system engineers and vice versa, with no one taking

responsibility for solving the problems.

Proactive support is even more of a differentiator. Some providers excel in anticipating customers'

needs, and in partnering with customers to achieve their operational goals. Providers also differ

widely in their ability to manage complex projects.

When evaluating your needs, consider the complexity of your environment, the frequency of

changes in your environment and the scope of those changes. If you have frequent application or

infrastructure changes (not content changes), you will need to work closely with your provider on

a daily basis. If you have large-scale project work, such as new deployments, you will want to be

sure your provider has the appropriate project management resources available. When choosing

a provider, ensure you are comfortable with its implementation process, change management and



project management.

More than anything else, the provider's service organization is likely to determine your

satisfaction with the managed hosting experience in the long term. Evaluate your prospective

account team carefully.

The Vendor Landscape Is Dynamic

This is a time of great opportunity and great risk for service providers in this market. New

entrants are altering the landscape, and hosters that previously had lagged behind have made

bold investments in an attempt to catch or overtake other, more established competitors. Most

providers are aggressively investing in innovative solutions that exploit the proliferation of

technology capabilities in this market.

Mergers and acquisitions have become common as vendors seek to decrease their time to

market, obtain engineering expertise with new technologies, and build market share. We expect

mergers and acquisitions to continue on a global basis.

Because the vendor landscape is highly dynamic, buyers of managed hosting are subject to

greater sourcing risk. It is difficult to predict which vendors will be good long-term bets; neither

small vendors nor large ones can be considered safe. In general, short-term contracts of one or

two years are advisable.

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