While some companies choose to build from scratch, others will look to outsource this function to IDCs (Internet Data Centres) and focus instead on their core business, thereby providing growth opportunities to the hosting industry with its inherent concept of reducing costs while increasing reliability with additional managed services.
Although a bit of an oxymoron as IDC services are originally outsourced, some IDCs also outsource part of their services to another service vendor because of unique demands by customers or they don't have the expertise in-house. Companies which used to host their servers in-house will know the myriad levels of expertise required to maintain a large application serving a wide group of users located in different countries.
Managing multiple suppliers has always been a difficult task. Customers now seek a partner that can provide a one-stop service with best-of-breed network, system and applications solutions.
Your place or mine?
According to Sam Lin, CEO of NetTasking, the over supply of hosting services is propelling the industry into the maturity phase whereby the hosting service offerings have become commodities. Supply is outstripping demand so fast, creating intense price competition in the hosting industry. IDCs really have to look at how they can differentiate themselves from the competition and find out how they can make their voice heard amongst the noise. The provision of a set of services and value propositions beyond that offered by any other competitors is the key. The IDC that can quickly scale to provide customers with a unique service offering will emerge as the winner of the race.
This view is also borne out by Roger Lim, CEO of Webvisions who sees the influx of IDCs forcing the early movers to provide global offerings and strong value-added services such as managed services and high service levels in order to survive. It is inevitable that these IDCs will then form partnerships with other players to quickly boost and complement their company's capabilities. Partnerships will ensure the fastest speed to market in the most cost effective manner. IDCs will look for infrastructure management service and solution providers with the resources and right technology to help them boost up their service offerings quickly.
Gregory Chia, COO of 1-Net, while agreeing that IDCs will be more competitive with attractive prices feels that we may soon see a number closing their doors or failing to reach profit expectations as they drop prices, sometimes below cost, to build a reasonable customer base. He also sees the proliferation of the ultra dense servers (1U) will result in higher demand for power and cooling.
Dennis Muse, President and COO of iAsiaWorks has seen a continued and strong demand for world-class hosting services in the Asia-Pacific region despite the economic slowdown in world markets. Although some companies may expand their online businesses more slowly than they might have anticipated a year ago, he believes that as they move forward, quality and reliability will be foremost in their minds.
He has seen increased competition in the low-end of the market, from what he calls the -mom-and-pop server farms" that offer very basic services. But he feels that because high-end IP infrastructure is very capital-intensive, there will be less near-term build-out than some earlier estimates predicted, and that a few early entrants in that market will be the major players for the next few years to come.
Arthur Leung, General Manager, Hutchison GlobalCenter and Y C Lee, Senior Manager, Data Center Technology both see a consolidation trend happening in the data centre business. They perceive data centres changing focus and drifting in their directions looking for survival and it is not unlikely to see them competing with their own customers, e.g. IDCs turning into ASPs themselves.
