DigitalOcean Growing Rapidly as Cloud Service Without Data Centers

NEWS ANALYSIS: DigitalOcean is growing rapidly by focusing on serving as a "platform for developers" that provides not just computing resources but also plenty of tutorials and documentation that support software development.

DigitalOcean Platform

NEW YORK—As traditional enterprise technology leaders Cisco and Hewlett-Packard Enterprise give up trying to compete with Amazon Web Services in the public cloud, at least one relatively smaller player is doubling down on its efforts.

The budding success that DigitalOcean, the New York City-based cloud provider, is having is due to the fact that, unlike Cisco, HPE and even VMware and IBM, it is not trying to beat AWS at its own cloud game. In fact the five-year-old cloud services company asserts that it's AWS that is trying to play catch up with DigitalOcean.

At the AWS re:Invent conference a few weeks ago, AWS introduced Amazon Lightsail—which are reconfigured and easy to launch compute instances with low monthly fees. Observers immediately pointed to Lightsail as a potential DigitalOcean killer.

But the company is not worried. "I'm not sure if that's the reason behind Lightsail," said co-founder and Chief Marketing Officer Mitch Wainer in an interview. "But it validates what DigitalOcean has been doing all along."

Privately-held DigitalOcean doesn't release revenue figures, but the 300-employee company, with 150 in New York, is profitable, Wainer said. The real proof is that it now claims that the number of developers registered with DigitalOcean is "approaching 1 million," which includes about 40,000 team or business accounts. The numbers are important because DigitalOcean calls itself a platform for developers.

"We really see the competition as any developer that is experiencing pain with infrastructure," Wainer said. "We're carving out our own space. It's not the enterprise market we are after. I feel that Amazon, Google and Microsoft are building for the needs of the enterprise and DigitalOcean is instead building for the needs of the developer."

As has been evident over the past year or so, developers and programmers, have become a real force in the enterprise. They are now involved in all aspects of IT, from storage to networking and, of course, compute and actual application development.

They are making decisions for businesses on which technologies to adopt and how to innovate with software. As more businesses adopt software-defined data center technology, developers are making a lot of the decisions. "The developer is now king," said Bruce Davie, VMware's CTO for Networking, at this fall's VM World.

"We believe that the long-term strategy is a bottom up approach of technology adoption," Wainer said. "We are truly catering to the end users' [developers] needs because the bigger players are over-complicating their systems. They have thousands of features on their platforms to choose from, also tools to leverage outside these platforms as well. The cloud infrastructure ecosystem is very complicated as a result."

What DigitalOcean developers get instead are Droplets, which are compute instances that start at $5 per month (or $.007 per hour) for 1 core, 512 MB memory, 20 GB of SSD drive space, and 1 TB of data transfer. On top of that the company offers several distributions of open source Linux, database, development and container management tools, including Docker and Kubernetes.

The company, which hosts more than 300,000 web-facing computers, according to Netcraft, "is doubling down on shipping products in the next year to support production applications for businesses and larger workloads," Wainer said.

DigitalOcean isn't pretending to have the customers and resources available to AWS. Most of its customers are small businesses and digital native startups running production workloads that include big data, data streaming and Platform-as-a-Service environments.

Currently most medium and large enterprises are confining themselves to test and development at this point, but the company sees that growing as more workloads shift to the cloud, as they inevitably will over the next 5 to 10 years.

Another difference that separates the DigitalOcean from the giants is the extent to which it has built its business so far on social networking, community building and word of mouth. "Very early on we invested in content," Wainer said. "The best form of marketing is documentation, especially to the developer audience. We have 1,500 tutorials on our platform available that drive 6 million web site visits a month. We're known as a go-to resource for system administration education."

DigitalOcean meet-ups have 12,000 participants in 30 cities around the world, and the company is just starting to tap into that user base. This year it hired a vice president of Sales and is building out an account management group to turn developers into enterprise customers. They also brought in Julia Austin, an industry veteran and former VMware engineer, as Chief Technology Officer.

Perhaps the best way to look at DigitalOcean is to see it as the latest incarnation of the gig economy. The oft-quoted statements that "Uber is a taxi company with no cars and AirBnB is a hotel company without any hotels" can be applied to the new breed of cloud-based companies.

Twilio is a communications company without communications infrastructure. And DigitalOcean is a cloud company without data centers. The company rents space in co-location facilities around the world, including North American, Europe, India, and Singapore.

"We don't want to be in the data center business," Wainer said. "We want to be in the software orchestration business. Like GitHub, Stripe and Twilio, we are carving out this B to D niche—business to developer—a market segment that is completely new. It's not B2B anymore. It's B2D. That's the future."

Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. He has an extensive background in the technology field. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture, at TechTarget. Before that, he was the director, Editorial Operations, at Ziff Davis Enterprise. While at Ziff Davis Media, he was a writer and editor at eWEEK. No investment advice is offered in his blog. All duties are disclaimed. Scot works for a private investment firm, which may at any time invest in companies whose products are discussed in this blog, and no disclosure of securities transactions will be made.

Scot Petersen

Scot Petersen

Scot Petersen is a technology analyst at Ziff Brothers Investments, a private investment firm. Prior to joining Ziff Brothers, Scot was the editorial director, Business Applications & Architecture,...