Saturday, July 14, 2001

Hosting Market Faces a Period of Radical Change

In a new Report, the Yankee Group boldly predicts that hosting has finally begun the drive toward fully managed services, and it believes this drive will ultimately result in the virtual elimination of collocation services. The Yankee Group predicts that vendors will differentiate themselves by specialty (vertical or horizontal), which will result in the industry no longer competing on communications transport and real estate, but rather on management services.

"Hosting has performed strongly for the past several years due to physical undercapacity. Today there is enough physical capacity, but a strong undercapacity in services," said Andy Efstathiou, a program manager in the Yankee Group's E-Sourcing Strategies research and consulting practice. "Ultimately, we believe that successful hosting providers will be focused on managed hosting services, not physical plant."

Efstathiou submits words of caution as well: "The market will react much more harshly on ill-considered initiatives, and therefore the cost of not getting it right will be higher in 2001, and the benefits for getting it right will be higher as well."

The Report, "Managed Hosting Centers: Focus on Service, Not Space," discusses what managed hosting offerings will succeed in the marketplace in the years ahead, and is available immediately from the Yankee Group's E-Sourcing Strategies research and consulting practice.