European Web-Hosting Giant OVH Targets US Growth with “Dedicated” Private Cloud

Says Public Cloud Providers Have Yet to Overcome the “Six Drags”

The story of Octave Klaba is a great example of how the collapse of communism has benefited Europe and the world. Klaba was born in 1975 in Poland. He learned to code as a boy and at the age of ten he debugged an early PC his engineer father Henryk had bought to manage the accounts of the collective farm he managed. Octave received his first tech income for that job--a chocolate bar. In 1991, with communism disintegrating and Poland’s border controls collapsing, his family sold up and emigrated to France. They arrived in Roubaix, in the gritty coalmining northeast of France, with $5,000 cash and all their worldly goods in the trunk of an old Wartburg. His father worked in a machine shop to support the family while Octave was put back a year in school as he coped with learning French.

Today Octave Klaba is CEO of OVH, the third largest web-hosting firm in the world with 170,000 servers in 17 data centers and revenue of 225 million euros ($292 million) (*) last year. OVH employs 800 people today, and Klaba envisages employment growing to 2500 or more, as the company grows. As it’s a family-owned company, virtually all the profit goes back into growth. (Octave’s father is still involved in engineering and his mother manages the finances.) At the annual OVH Summit earlier this month in Paris, Octave said the plan is to invest 130 million euros a year into growth.

OVH Founder/CEO/CTO launches the OVH Summit playing bass guitar to Pink Floyd classic "Money". He told audience: "For OVH, the best is yet to come."

The Daily Cloud caught up with several OVH executives at a customer education session in South San Francisco earlier this week. They explained to us that a key part of OVH’s growth strategy is growing their US business, including establishing a data center on the west coast, and attracting more US customers with an offering they call Dedicated Cloud.

Dedicated Cloud: Efficiency and Privacy

OVH’s roots are in an innovative approach to technology. Soon after the founding of OVH in 1999, Octave’s father developed a unique water-cooling system to reduce the power needs of their servers. Today, they build 300-500 servers a week, each equipped with an OVH water-cooling module, in their Roubaix and Beauharnois (Quebec) data centers. The result is that OVH data centers need no air conditioning at all, and OVH has a power efficiency metric of 1.1, which they claim is the lowest in the industry. (As in so much of the cloud industry, definitive industry data is hard to come by, but as an illustration, Microsoft announced in a press release a couple of years ago that its power efficiency was 1.53 and it was working on reducing it. HostGator has said they are at 1.2.)

According to OVH VP of Operations for North America Jerome Arnaud, the Beauharnois facility is a former aluminum plant with capacity for 360,000 servers, which would make it the world’s largest data center. Today, 20 months after launch, it’s running 20,000 servers. OVH does not do web hosting in North America. Here it’s focused on cloud. It does have a public cloud offering, which it calls RunAbove, but its real focus here is what it calls Dedicated Cloud. This is a package of private, dedicated resources, available either with the VMware software stack, the Microsoft stack, or the OpenStack Nova stack. Arnaud cites an OVH software product, V-Rack, which enables customers to manage an OVH Dedicated deployment and their private IT facility as a single network. “You get the best of both worlds,” he says, “the efficiency of cloud servers and the total privacy of your own private network.”

“Six Drags on Public Cloud”

OVH offers the public cloud in North America via www.runabove.com, and says that since it can pass on its savings on power consumption (“the biggest single bill a provider pays every month”), its costs are competitive with other providers, including Amazon Web Services (AMZN). This claim is borne out by an interesting blog post from Austrian search engine startup Blippex claiming they cut their costs by 77% when they switched from AWS to OVH. “AWS is really great and i can tell everyone use it when you start! But when you know what you are doing think about alternatives,” advised the Blippex blogger.

OVH’s strongest focus today is on Dedicated Cloud because it believes that public cloud is still not ready to fulfill its promise as a mainstream technology.

OVH VP of Sales and Marketing Alexandre Morel says that the company did a survey of enterprise CIOs and found that 90% of respondents said they used the public cloud for tests and bursting and small projects, but they were not yet confident enough to put strategic or critical workloads onto the public cloud. “The typical AWS customer, who started on AWS, loves AWS,” says Morel. “But it’s different for customers who had data centers before the public cloud came into existence. For 90% of the customers who already had dedicated data centers, they still have to be convinced that service providers can overcome the six drags on the public cloud.”

Morel lists the “six drags on the public cloud” as follows:

1. Service level agreements (SLAs). In general, cloud providers do not offer SLA or uptime guarantees.
2. Network capacity. “If the bandwidth is not there, data cannot be transferred fast enough, especially as a customers’ needs grow.”
3. Reversibility: “What if I [the customer] want to get all my data back, or move it to another provider? The cloud provider doesn’t guarantee that.”
4. “Will a cloud provider write into a contract the compensation or what it will do in case a customer’s website or deployment goes down? Most will not.”
5. “Is your service provider able to give you all the advice and training you need to help you go to the cloud? Can your provider deliver SaaSification, in other words help you move your apps to the cloud?”
6. “We are talking not only about application security but throughout the entire stack. For customers like health care, you need to certify not only your virtual machines but your whole data center.”

“Each of the public cloud providers has solutions that address some of these points, but when you look at any one provider carefully, you always see three or four holes in their story. That’s why we propose an alternative, a Dedicated Cloud which is private but external. Each customer is the only one on his servers.”

Today, says Morel, the public cloud customer base is dominated by “developers, devops, startups, testers and incubators,” with the mainstream enterprise cloud market is still to come. Not surprisingly then, in the near term OVH too is targeting more technical customers, especially developers, software publishers, and gamers. Gamers, according to Morel, have two key priorities: low latency and good anti-DDOS (distributed denial of service attacks) defenses. OVH is addressing the latter in part with their recently-announced partnership with IBM (IBM) for the Power8 processor, which offers strong security at the root level. They will address the latency issue with a west coast data center, because the time needed for bits to travel to and from the Quebec data center is a latency issue for the gaming market.

He adds that in the longer term, OVH, like most cloud providers, is targeting the enterprise market. In its homeland of France, OVH already does business with 14 out of the 40 companies that make up the Paris stock market CAC-40 index.

Morel provides an intriguing overview of the cloud market. While some in the press present the public cloud market as a three-horse race between AWS, Microsoft Azure, and Google Compute, it’s clear to us that this is a very young market with a lot of growth and a lot still to play for. The existence of competitive providers like OVH who are able to undercut AWS on price shows the market could evolve in many different ways. Comments OVH’s Jerome Arnaud: “We built our business on word of mouth in Europe and I expect the same thing will happen here.”

(*) OVH confirmed server numbers in this article. Financial data are unconfirmed estimates from the French press. OVH does not disclose financial data.