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MGI 360 Ratings Oct 18 2013: Peer 1 Networks - Public Cloud

We are initiating coverage of Peer 1 Networks with a 60 rating and a POSITIVE outlook. 

OpinionThe company has been able to set itself apart through the performance of its cloud service which relies in part on its proprietary fiber network, by offering customers a choice among a whole range of cloud services, through focus on security, disaster recovery and failover and by structuring its customer contracts in a balanced and user-centric way. Peer 1 guarantees customers a refund if the performance metrics are not met or if there is an outage. Company still faces challenges in harmonizing its various offerings, improving its market visibility and elevating the value of its brand among a sea of numerous cloud service providers.

The attached MGI 360 Ratings note contains detail on company rating in five major categories:
  • Product
  • Management Team
  • Channels
  • Strategy and Marketing
  • Finance
This rating is a result of an extensive independent effort to evaluate the company on almost 150 different criteria in five major categories listed above. The process involves in-depth interviews with management, customers and business partners. Companies are asked to provide input into the rating process but are not required to do so.

Company Summary: Peer 1 Hosting, a subsidiary of Canada-based Cogeco Cable, offers a spectrum of cloud services from on-demand public cloud, to enterprise focused Mission Critical Cloud, to cloud storage to custom Private Clouds. Peer1 also offers a traditional colocation and managed hosting. The company operates 16 data centers worldwide backed by a proprietary fiber network. The company has grown through a build, acquire and partner approach and a number of its services are based on 3rd party technologies from VMware, Citrix, as well as open source. Acquired by Cogeco in early 2013.

Market Outlook: The market for public cloud services is shaped by three key trends:

  • Dominance by Amazon Web Services - AWS is an extreme price competitor and has been able to continuously update its product lineup with offerings that disrupt computing status quo
  • Attempts by AWS competitors - Google, Microsoft, VMware, OpenStack group (IBM, RedHat, Rackspace) et al, to create viable alternatives to AWS
  • Evolution of select companies in the hosting (incl. managed hosting) and colocation markets into a public cloud solution with some differentiation (e.g. high security cloud)

Cloud infrastructure services like the Public Cloud continue to grow overall at over 25% per year with select companies growing by 8-10% per month. Our 2013 Public Cloud revenue estimate is about $6.5 Billion with Amazon Web Services likely to hit near $4Billion in 2013 revenues. See MGI Research 2013 Cloud Scenario for reference. Customer demand remains strong, fueled by continued price pressure put on all vendors by AWS and increased acceptance of cloud as a viable option for production-grade corproate IT workloads.


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