North American SMB Web hosting market getting interesting again
9 August, 2004
by Liam Lahey
Web hosting is not an easy business, particularly in the small to mid-sized business (SMB) market.
According to Helen Chan, senior analyst, SMB strategies, for Boston-based The Yankee Group, the past five years proved Web hosting is not the silver bullet telecom providers were hoping would offset declining voice revenue and transform their companies into leading providers of IP-based services.
Several key reasons contributed to this outcome, she said, including low barriers to entering a highly competitive and commoditized Web hosting market, and telco providers that lacked a clear hosting strategy and strong execution had low to moderate levels of commitment.
?The biggest challenge facing Web hosting market players is the tech-oriented language they use to market their products and services . . . SMBs don?t have the technical knowledge,? she said. ?Web hosting companies are not doing enough (to educate their customers) on the types of software and marketing tools and help walk them through the process.
?The value proposition (for SMBs) is not there if they have no way of understanding what?s available to them.?
Long-term success requires ongoing investment in infrastructure, streamlined operation through automation, integration of platforms (from acquisitions), and strong customer service and support, she said.
The Web hosting industry was marked for failure following the high-profile collapse of Exodus and the exit of Cable & Wireless and Sprint from the U.S. hosting market, Chan said. Despite this, SMB Web site adoption in the U.S. is rising and many more SMBs will have Web sites because their customers and business partners demand it. As testament to the potential of the SMB Web hosting market, Chan cited new market entrants such as Yahoo! Web Hosting and 1&1 Internet to the fold.
?There?s more stability in the market now than previously,? she said. ?Still, there are still significant challenges for the industry to overcome. For instance, a customer service track record hasn?t existed in the Web hosting market.
?SMBs don?t want to be on the cutting edge of technology, they can?t afford to be. What also characterizes them is the notion of being risk-averse. SMBs touch only proven technologies and you can?t say that was the case in the Web hosting market.?
Today, 36 to 60 per cent (depending on size of business) of SMBs with Internet access have a Web site. Largely, the penetration among companies with two to 99 employees remained steady; medium businesses displayed more substantial growth with an increase of five percentage points. More than 52 per cent of SMBs host their Web sites with a hosting company ? the penetration rate of hosted Web sites rises to 75 per cent for companies with two to 19 employees. Similar to trends in 2000 to 2002, more medium businesses prefer to host themselves, with 50 per cent of them currently hosting at their own offices. The motivations for Web-site adoption vary by market segment.
However, Chan said the driving factors for the SMB Web hosting market include the need for the business to establish a Web identity and to meet the demands of its customers that are increasingly expecting to find information about and interact with businesses online.
The Web hosting market is maturing as demonstrated by the following SMB end-user trends, she continued. More than 20 per cent of SMBs with Internet access indicated that the need to integrate offline business applications with their Web sites or e-commerce is a major technology challenge that their company faces today.
?Web hosting players don?t have brand recognition (from customers) similar to a Cisco, HP or IBM in their respective markets; this is a very fragmented market,? she said. ?There are no clear leaders. No one company commands more than single-digit market share.?
The Web site is viewed as an integral customer service channel and the objectives of 50 per cent of surveyed SMBs with a Web site revolve around better customer service whether that?s providing information to customers 24x7, responding to customer demands, or providing an alternative channel for customers to interact with them.
Digital brochure-ware sites make way for increasingly dynamic Web content: More than 77 per cent of SMB Web sites provide static content. That trend will decrease: More than 25 per cent of SMBs with Web sites expect to present dynamic content driven from a database in the next 12 months.
Minimal traffic to Web site and Web site upkeep are the two biggest SMB Web site challenges: SMBs are frustrated and disillusioned with the lack of traffic to their site and find it difficult to maintain the Web site and update the Web content.
by Liam Lahey
Web hosting is not an easy business, particularly in the small to mid-sized business (SMB) market.
According to Helen Chan, senior analyst, SMB strategies, for Boston-based The Yankee Group, the past five years proved Web hosting is not the silver bullet telecom providers were hoping would offset declining voice revenue and transform their companies into leading providers of IP-based services.
Several key reasons contributed to this outcome, she said, including low barriers to entering a highly competitive and commoditized Web hosting market, and telco providers that lacked a clear hosting strategy and strong execution had low to moderate levels of commitment.
?The biggest challenge facing Web hosting market players is the tech-oriented language they use to market their products and services . . . SMBs don?t have the technical knowledge,? she said. ?Web hosting companies are not doing enough (to educate their customers) on the types of software and marketing tools and help walk them through the process.
?The value proposition (for SMBs) is not there if they have no way of understanding what?s available to them.?
Long-term success requires ongoing investment in infrastructure, streamlined operation through automation, integration of platforms (from acquisitions), and strong customer service and support, she said.
The Web hosting industry was marked for failure following the high-profile collapse of Exodus and the exit of Cable & Wireless and Sprint from the U.S. hosting market, Chan said. Despite this, SMB Web site adoption in the U.S. is rising and many more SMBs will have Web sites because their customers and business partners demand it. As testament to the potential of the SMB Web hosting market, Chan cited new market entrants such as Yahoo! Web Hosting and 1&1 Internet to the fold.
?There?s more stability in the market now than previously,? she said. ?Still, there are still significant challenges for the industry to overcome. For instance, a customer service track record hasn?t existed in the Web hosting market.
?SMBs don?t want to be on the cutting edge of technology, they can?t afford to be. What also characterizes them is the notion of being risk-averse. SMBs touch only proven technologies and you can?t say that was the case in the Web hosting market.?
Today, 36 to 60 per cent (depending on size of business) of SMBs with Internet access have a Web site. Largely, the penetration among companies with two to 99 employees remained steady; medium businesses displayed more substantial growth with an increase of five percentage points. More than 52 per cent of SMBs host their Web sites with a hosting company ? the penetration rate of hosted Web sites rises to 75 per cent for companies with two to 19 employees. Similar to trends in 2000 to 2002, more medium businesses prefer to host themselves, with 50 per cent of them currently hosting at their own offices. The motivations for Web-site adoption vary by market segment.
However, Chan said the driving factors for the SMB Web hosting market include the need for the business to establish a Web identity and to meet the demands of its customers that are increasingly expecting to find information about and interact with businesses online.
The Web hosting market is maturing as demonstrated by the following SMB end-user trends, she continued. More than 20 per cent of SMBs with Internet access indicated that the need to integrate offline business applications with their Web sites or e-commerce is a major technology challenge that their company faces today.
?Web hosting players don?t have brand recognition (from customers) similar to a Cisco, HP or IBM in their respective markets; this is a very fragmented market,? she said. ?There are no clear leaders. No one company commands more than single-digit market share.?
The Web site is viewed as an integral customer service channel and the objectives of 50 per cent of surveyed SMBs with a Web site revolve around better customer service whether that?s providing information to customers 24x7, responding to customer demands, or providing an alternative channel for customers to interact with them.
Digital brochure-ware sites make way for increasingly dynamic Web content: More than 77 per cent of SMB Web sites provide static content. That trend will decrease: More than 25 per cent of SMBs with Web sites expect to present dynamic content driven from a database in the next 12 months.
Minimal traffic to Web site and Web site upkeep are the two biggest SMB Web site challenges: SMBs are frustrated and disillusioned with the lack of traffic to their site and find it difficult to maintain the Web site and update the Web content.
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