InformationWeek
Defining The Business Value Of Technology
September 13, 1999
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Third-party providers are stepping forth to fill the need for hosts of Web services
By Charles Waltner
Indeed, the Web-hosting marketplace is one of the fastest-growing industries in the digital landscape. Generosa Litton, an analyst with Frost & Sullivan, estimates revenue will grow 256% this year, reaching $4.04 billion, for Web hosting and application hosting. And according to Forrester Research, the Web-hosting marketplace will average 76% revenue increases through 2003.
However, mapping the market landscape is challenging. Frost & Sullivan estimates there are more than 4,000 companies providing some sort of Internet value-added services, including Web hosting and application hosting. Constant mergers and acquisitions make it difficult to track the evolution of Web-hosting companies.
Predicting the evolution of the market is even more problematic, says William Klein, an equity analyst with Wasserstein Perella Securities. For instance, basic hosting services will commoditize over the next few years, Klein says, and hosts will need to make money on bundled services, including application development and security management. However, even that's no sure thing. "Hosting companies that try to tell you what their business will look like in a few years have been smoking something," he says.
Still, the market has standardized on certain services. Most of the largest Web hosting companies include among their services remote, collocation, dedicated, or custom Web-server hosting coupled with high-capacity network infrastructure access. Most of the largest players also offer support for application development and management. Other offerings from Web hosts include virtual private network support, site design consulting, and IP telephony services.
Frost & Sullivan's Litton says the need for management and support services, companies' desires for quick time-to-market, and the generally lower cost of outsourced services are driving market growth. Analyst Jeanne Schaaf of Forrester Research says dedicated Web hosting, in which a hosting company uses a separate server for just one client, is the fastest-growing segment within the larger market.
Despite the flux in the market, there are some visible leaders. In the top tier, UUnet Technologies, an MCI WorldCom division, holds the biggest share, with 5.9% of the market, according to Kathey Hale, a principal analyst with Dataquest. Hale ranks IBM second with 5.4%, followed by GTE Internetworking, Exodus Communications, Verio, and AT&T. A dozen or so other companies follow closely behind.
Other analysts also rank Digex, Frontier Global Center, NaviSite (owned by CMGI), Sprint, and Qwest Communications in the top tier. Some of the smaller players--or ones covering smaller businesses--include Concentric Network, Globix, and PSInet, as well as the regional Bell companies.
The requirements for providing Web-hosting services vary. Most of the top Web-hosting services are subsidiaries of established telecommunications or computing companies. Others, such as Exodus and Verio, are pure Internet companies.
Related links from our sister publications:
he Internet has created many new markets, from online auctions to E-mail greeting cards. One of the newest and most promising for business users is the market for third-party providers to develop and run Web services and application software.
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