The Web hosting market has changed with the collapse of a few big name providers, and a move from co-location to more managed environments. ZDNet Australia takes a look at the market now.
A lot has changed in the Web hosting market over the last two years. In January 2001 it couldn't have looked hotter, but unfortunately it wasn't very long until the market began to show worrying signs, starting with the financial difficulty of Exodus later in the year. Unfortunantely Exodus wasn't a one-off, with many hosting companies, small and large, soon to follow suit.
The last time Technology & Business magazine looked at Web hosting was in January of this year and IDC was still projecting big things for the market, expecting continued growth until 2005.
Looking back, a number of the companies that were featured in the "Who's out there" column no longer exist. Later that month Dell announced it wasn't starting up a hosting arm in Australia, like it had in the US, saying there was no room for another provider in the Australian market. Also Dellhost in the US had only achieved moderate success and certainly the Australian IT market has mirrored a lot of the action from overseas.
Another big name to exit the market was Intel. In June this year Intel decided to can its Web hosting business, integrating the Intel Online Services division back into its main operations.
Intel wasn't alone. That same month Loudcloud also decided to end its interests in Web hosting, selling that arm of the business to services giant EDS. And the fallouts are not expected to end there either, with people in the industry expecting more service providers to go the same way.
Craig Allen, CEO of Virtual Offis, says the hosting provider has been approached recently by two Web hosting companies who are looking to be bought out. Allen is one of the industry professionals predicting further consolidation.
"We are currently in the doom and gloom part of the industry," he says. "There are lots of skilled people out there and a lot of broken dreams. More big names will fall out of the clouds."
But as dire as it may appear, certainly there is continued demand for hosting services and the demise of a few service providers does not mean that it isn't a viable outsourcing option for companies--hosting professionals believe as long as demand for Internet services persists then Web hosting will continue to survive.
But the longevity of your provider is certainly an issue and a savvy customer will carefully consider who to partner with before entering into any agreements.
Marty Gauvin, CEO of Hostworks, says he is seeing strong growth and customer interest, but sale times are taking longer as customers become more conscious of finding the right solution.
Gauvin sees the shift to strategic sourcing--companies moving to outsourcing different segments of their business to different providers, as opposed to a whole-of-IT outsourcing approach--and the increased complexity of Web sites, as drivers of business growth.
"That kind of shift [to strategic sourcing] is reinforcing the fact that we are a different patch--it is a strong driver of customer growth," he says.
For Hostworks, its biggest competitor isn't other service providers, it is customers who are currently managing their hosting in-house. Gauvin says the type of customers that come to Hostworks are companies that have been managing the hosting in-house, but turn to outsourcing when they want to take it to the next level as their needs become more complex.
"There is a strong demand for the Internet, so companies doing it in-house will shift away from that...we provide a lot of advice on increased scalability or availability," says Gauvin.
He sees this as demonstrating that the Internet has changed to become mission critical and outside of what a typical IT department deals with. Allen says that while the industry is currently in a phase of doom and gloom, he is confident that the inddustry will improve. "There I no doubt that more people are going online...it is going to take off."
Bob Ottolino, senior manager for managed Web services at CSC, says companies are feeling more confident moving to the Internet and as long as companies use e-commerce as an everyday part of their business, then the demand to outsource will be there.
He says customers are moving to a managed environment to manage risk, cater for peaks and troughs, gain access to specialist skills, and for the service levels. "Service levels are fixed for outsourcers and there can be rebates, which can translate to return on investment," says Ottolino.
