As the market becomes oversaturated with different service offerings, pricing becomes pressured around them, said ScienceLogic's Piraino.
"That is the truth. As [customers] ask for more, hosting providers are still gaining from the growth overall in the market, but the growth trajectory is slowing down significantly as a hosting provider," said Piraino.
When hosting providers are left competing on prices, setting low prices to remain competitive is the last thing they should do, said Piraino.
"In the long run, none of these hosting providers providing hosting can survive; it's a lifestyle business but it's a difficult business to grow if they are just offering just hosted services even if they are virtual servers." Said Piraino. "They have to do something different, and that can mean offering new services that speak specifically to business productivity, or some other attractive way to enable services for consumers."
To stay competitive and afloat, hosting providers must make a decision to invest, take a risk or offer new services, said Piraino. Supporting the big companies like Microsoft Azure, Google or AWS is a way for hosting providers to remain valuable.
"We see more hosting providers saying maybe Amazon and Microsoft aren't the enemy and aren't trying to take away our business," said Piraino. "There is safety in the sense that they don't need to spend capital on data center and new servers when they can just rely on the big providers that have infrastructure. [Hosting providers can] start to offer new services to further elevate [themselves]."
To differentiate themselves, hosting providers must focus on infrastructure, determining which tools they can invest in -- security, strategies, monitoring and billing systems -- and where they can reduce manual intervention in driving out costs, said Piraino.
"The first thing I recommend [to hosting providers] is to look into their internal systems and see which one of those systems would both reduce costs and increase revenue, and that is where ScienceLogic is positioning ourselves to help with the monitoring and managing," said Piraino. "A lot want to exit the business, make a lot of money, and it becomes a lifestyle business for them. To exit, they need to show some value, and if they are not going to exit, they have to figure out how to grow again by growing the value of the business."
PUBLISHED NOV. 20, 2013