Web hosting industry analysis

1) The challenges facing the web hosting industry

2) The future outlook of the web hosting industry

Through my experience in the travel industry, I’ve been able to track clear booking trends against current events.   The consumer booking cycle comes in waves, which I believe peaked in summer of 2006.    Basically, my business is affected by the economy, employment, and of course increased competition from other suppliers.

I can draw similar conclusions with the hosting industry.  However, unlike leisure travel, I consider dedicated hosting to be a business necessity.  If the business climate is good, new companies require hosting services and existing companies consider expanding their services.

In a declining market, businesses may choose to cut hosting services back, as we saw in the 2000 dot com crash or consider off-shoring their hosting services to companies in India or China.

From now through 2010, I expect there will be an industry shake out, particularly if the current economic trend continues.    During this time, larger hosting will consume smaller hosting companies and regionalize their business.  Through territory expansion, hosting companies will be able to scale their overhead and equipment costs more efficiently.  By this, I envision a parent hosting company with subordinate hosting companies that are scaled according to the business needs in their respective geographic regions.

This is speculation, but I believe there is an attraction for a larger, mainland hosting company to set up a data center in Hawaii, particularly to create a larger dedicated hosting network.  Developing the business from the ground up could prove to be a costly venture, however there may be acquisition opportunities with local hosting services such as DR Fortress of Century Computers.

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