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OnApp buys SolusVM to boost the demand side of its federated marketplace

Cloud automation company OnApp has bought SolusVM, the virtual private server management system, in order to boost demand for the capacity on offer in OnApp’s federation.

London-based OnApp has had an interesting history. It started off providing software for ISPs and old-school hosting outfits to start offering cloud services. Once it had over a thousand of these companies on board, it started federating their spare content delivery network (CDN), storage and compute capacity – first so that they could supply each other through an internal marketplace, and then so they could supply cloud customers through OnApp portals like CDN.net and Cloud.net and through other new virtual service providers.

Problem is, there’s more spare capacity on offer than the other providers in the federation want, and no pure-play virtual service providers have popped up yet. “We’ve got oodles of supply in the marketplace and we’ve got some demand,” OnApp CEO Ditlev Bredahl told me. “We do around 1,000 buys and sells a week in the marketplace, but to be honest I was hoping to do about 10,000 by now.”

The supposed buyers in OnApp’s marketplace would largely be service providers that have limited scale and geographical reach, and that want to serve customers anywhere in the world, providing a credible alternative to the likes of [company]Amazon[/company] Web Services. However, according to OnApp, most of these providers focus their efforts on squeezing what they can out of their own capacity before trying to buy in more through the marketplace.

Hence the SolusVM buy, the price for which was not disclosed. SolusVM is used by thousands of small service providers to manage their virtual private servers (VPS), and OnApp wants those outfits to boost the demand side on its marketplace. As Bredahl explained, the idea is for SolusVM users to see, alongside the option of adding another hypervisor, the option of “simply buying resources you need from the OnApp suppliers, then supplying to your customers a mix of your own infrastructure and excess infrastructure.”

“We think SolusVM clients are likely to think this is an awesome idea,” Bredahl said. “We think the reason these guys aren’t growing as they should be is because of capex limitations that are required to grow.”

This isn’t purely a matter of buying a customer base, though that seems to be the biggest driver – it also gives OnApp something for more bare-bones cloud deployments.

“What we don’t do is VPS and this is where Solus helps out,” Bredahl said. “If Digital Ocean for example had come to look at OnApp, they would have looked at it as over-featured. It’s an enterprise hosting platform, and [many service providers] thought it too complicated. The Solus guys have an extremely intuitive, easy-to-install setup … we’ve closed the gap here.”

SolusVM has relocated from Lincoln in the east of England to London, and the offices have already merged. The platforms will continue on an individual basis with SolusVM retaining its brand. The fact that it was needed is rather worrying, but this move is well underway – now let’s just see if it makes OnApp’s marketplace more worthwhile for all concerned.

2 Responses to “OnApp buys SolusVM to boost the demand side of its federated marketplace”

  1. Emrul Islam

    Phil, with any first attempt to create a market place through commoditisation there will be either over-supply or excessive-demand. It happens with everything tangible from solar panels, to TVs, bitcoins etc. OnApp are trying to establish a marketplace and that will take some time for there to be some equilibrium between buyers and sellers and only then can price discovery take form.

    It will happen, its just early adopters need to figure a way through the initial imbalance. What this acquisition will do is try to find more buyers and so OnApp are clearly putting their money to work to establish a real marketplace.

    Personally I’d like to see this type of model work and I believe it can, it is the only real way small, independent hosting businesses can face off against the likes of AWS, Azure and co.

  2. Phil Neil

    We have been an OnApp customer for a few years and also ran SolusVM for a while. You’re right, the federated CDN market makes absolutely no money at all, everyone is selling and no one is buying, supply and demand has driven prices so low that participating just uses hosting resources and generate no revenue. There is no reason why federated compute will be any different. OnApp needs to try something, but this isn’t it. If you’re getting into cloud hosting do it the hard way, use OpenStack or CloudStack. You can’t make money when your core platform is licensed.