Data hosting market to decline

The Gartner Group is predicting a decline in the market for data hosting services. A combination of overbuilding and overcapacity, allied to a downturn in customer demand, is being blamed for the decline.

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By  Matthew Southwell Published  June 26, 2001

The Gartner Group is predicting a decline in the market for data hosting services. A combination of overbuilding and overcapacity, allied to a downturn in customer demand, is being blamed for the decline.

“Demand has dropped most among wholesale customers - application services providers, Internet service providers and Web hosters - that buy from providers,” says Gartner analyst, Ted Chamberlin.

According to Andrew Tomes, of Internet application development and hosting company Advanced Digital Technology, this decline is being echoed in the local market. However, he believes that this is due to the fact that most companies that want an Internet presence now have one. “The trend we are finding within the market is that most of these companies are happy with their current status and see no immediate benefits in expanding the services of their site,” he said.

Yet the news is not all bad. Both Tomes and Gartner believe that by shifting their focus towards the service side of hosting companies can continue to grow their business. To this end Chamberlin explains that, “the demand for full-service offerings is actually increasing.”

Tomes adds that, “hosting companies that are to move forward need to focus on providing higher levels of service and support [and at the same time] gear their services to highly customisable solutions.”

He goes on to say that it is within the realms of customisation that the smaller local hosting company will really make the difference.

“Customisation is not supported by the large tier one hosting companies, [as] they concentrate on volumes and manageability…Conversely, smaller hosting companies that deal with less volumes are more able to deal with more specific requirements, and perhaps due to a shortage of business, more willing to go the extra mile for a customers unique requirements,” says Tomes

As the hosting market embraces these changes the biggest winner will undoubtedly be the user. Gartner predicts that prices will likely fall 20% to 25% through 2003 and this, in addition to better service, can be no bad thing.

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