Jun 24, 2013

From 451 Research: Codero Relaunching Cloud Services Around Hybrid Hosting Environment

The following article was written by Liam Eagle on June 20, 2013 for 451 Research. 451 Research, a division of The 451 Group, provides syndicated research, data and advisory services focused on the business of enterprise IT innovation. Over 60 publishing 451 Research analysts provide critical and timely insight into the competitive dynamics of innovation in emerging technology segments such as cloud computing, data center technologies and Internet infrastructure services.

Codero Relaunching Cloud Services Around Hybrid Hosting Environment

Mid-sized managed hosting provider Codero is prepping for the relaunch of its infrastructure-as-a-service (IaaS) cloud products, with a new set of tools designed around the hybrid cloud model. The revamped product set will focus on delivering a seamless provisioning and integration for the company’s cloud and dedicated infrastructure resources.

Codero indicates the move is intended to focus its services more explicitly around the delivery of a hybrid cloud environment. The hybrid model is gaining steam as a preferred method of delivering cloud infrastructure among managed hosting providers, and Codero believes it best addresses its own customer type.


Codero was founded out of the acquisition of by Catalyst Investors in 2006. In 2009, the private equity firm (which also invests in colocation and managed hosting firm Latisys) sold off the company’s shared hosting and domains business to Deluxe (which owns wholesale hosting business Hostopia). It refocused the business around its strengths in dedicated hosting and a budding cloud business, and renamed the company Codero. In early 2012, the company appointed Emil Sayegh, former Hewlett-Packard cloud VP and Rackspace cloud GM, its CEO.

According to management, the company closed 2012 with revenues in the high teens and 20% year-over-year growth. It is currently at a $20m run rate, and has hit 30% quarterly growth this year. Codero’s revenue currently comes about 85% from its dedicated server business (including smart servers) and about 15% from its cloud products, although it indicates that about 45% of new sales are of its cloud products.

The company currently employs about 55 people, and has datacenter space in Phoenix; Chicago; and Ashburn, Virginia, with the bulk of its capacity at its own 30,000-square-foot facility in Phoenix. The company is planning to expand its footprint this year, both in the US and in Europe. With about 30% of its growth coming from overseas, and pressure from customers to expand in that direction, Codero is looking to expand into either London or Amsterdam this summer, but is leaning toward Amsterdam. It also plans to rely on a wholesale colocation partner in the future, rather than operate facilities.

Codero has about 4,000 customers, with roughly 20% in the e-commerce vertical, 15-20% in the SaaS space, 10% in gaming and about 5% VoIP service providers.

The New Hybrid Cloud Product

Today, Codero’s services include dedicated servers, public cloud and privatecloud products (its micro-cloud SMB-tailored private cloud product), as well as infrastructure products. It all runs on the same homegrown automation anda layer of management that can be either applied or not applied to any of it provisioning platform. The company plans to relaunch its cloud products this month around an improved hybrid provisioning environment that better integrates its existing public cloud and dedicated server offerings. Codero’s products are all provisioned from the same end-user interface. The public IaaS product is a utility cloud product built on the CloudStack platform. Its dedicated servers product is a ‘smart servers’ offering (bare metal with a hypervisor per physical machine), which provides portability, ease and speed of provisioning, API access and other advantages.

For the new hybrid product, Codero indicates the bulk of its engineering went into the provisioning system, which now enables provisioning for both dedicated and cloud resources through a single interface, with API access to both types of resources (through separate APIs; the company indicates a common API for hybrid is on the road map in the near future). Hybrid resources are provisioned on a per-customer private network (within Codero’s systems) by default. The product is currently in beta with some existing customers, and expected to launch later this month. Codero ultimately intends to include more features, including the common API for hybrid and extending the private network to customer premises.

Hybrid Cloud Strategy

Codero indicates that its customers tend to be mid-market SMBs with substantial IT needs or specific dependence on their IT, but with no large internal IT department. While the company has historically served one- or two-server customers, management suggests it is seeing an increase in higher-value customers. Codero is committed to the hybrid hosting model, delivered in a managed hosting environment, as the correct strategy for serving the needs of that specific customer base. The company says the hybrid model embraces the utility of cloud while enabling a range of use cases that are still best served by dedicated hardware, because they aren’t designed for the cloud, because of the cost savings versus continuously running a utility cloud instance or because they have a fixed IOPS requirement (databases, for instance).

The hybrid environment also enables customers to move workloads between dedicated and cloud resources, for instance, testing and developing on cloud and then moving the production workload to a dedicated environment. Conversely, customers can mothball dedicated server workloads on cloud instances. Codero believes the flexibility of the hybrid environment is ultimately what customers need to enable them to move their in-house workloads to the cloud, because of those cases where SMBs are running apps in-house that aren’t designed to run on cloud.

The company is slowly building up a channel program. The channel currently represents about 15% of the company’s revenue versus zero at the start of 2012. It is ramping up slowly and taking on new partners sparingly, targeting businesses that add value on top of the infrastructure itself (it gives the example of Website Movers as a particularly effective partner).


Codero’s focus on managed services, and its hybrid approach to infrastructure, puts it in competition with a specific set of dedicated server hosting companies moving into the cloud space or generally working to add value on top of traditional dedicated resources. At the high end, the company indicates it competes for what Rackspace would consider smaller customers. In its sweet spot, Codero competes with most of the larger dedicated server and cloud companies, including SoftLayer, SingleHop, iWeb Technologies, LiquidWeb and PEER 1 Hosting.

The 451 Take

At about $20m in revenue, Codero is a comparatively small player in the managed, dedicated, cloud and hybrid hosting spaces. It has an advantage over some of the legacy players in the space due to the integration and automation of its platform, although companies like SoftLayer and SingleHop share that advantage. In the last 18 months, however, Codero has zeroed in on a very specific customer type, and a very clear vision for the hybrid cloud. And it has paid off with six consecutive quarters of growth, including better-than-average growth numbers in recent quarters. Completing the engineering work to bring its hybrid product offering in line with its vision is likely to improve its fortunes further.

As always, if you have any questions regarding Codero’s portfolio of exceptional hosting services please email, call (1-866-2-CODERO) or chat with us anytime.

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  • Hybrid hosting environment is suitable for having managed hosting. Nice to learn that through this environment, workload can be moved between cloud and dedicated resources.