Tier1: Hosting Sector Under Pressure

The mass-market hosting sector is fragmented, under pressure and transforming rapidly, according to a report from Tier1 Research.

Rich Miller

March 13, 2008

2 Min Read
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The mass-market hosting sector is fragmented, under pressure and transforming rapidly, according to a report from Tier1 Research (T1R), a research firm that tracks the hosting and IT infrastructure sector. T1R says the hosting industry is being reshaped by the proliferation of wireless and broadband access, Web-enabled mobile devices, and the movement of personal and business lives to an online environment. This has created growing demand for a wide range of online services that now form a new layer of value that hosters are fighting to deliver to their customers.

"The transformation under way has forced hosters to reconsider old concepts, explore new opportunities and change the way they traditionally do business," said Philbert Shih, Senior Analyst at T1R and lead author of the report. "But it has also opened the door to increased competition as the likes of Google, Microsoft and others look to target the mass market for various types of Web-based services, of which Web hosting is just one, albeit an important piece."

Social networks and functional hosting services continue to challenge hosters for market share, according to Tier1. Shared and dedicated hosting have dominated the mass-market hosting sector for most of its history, but new technologies such as virtualization and open computing platforms like Amazon will test their staying power.

Phil Shih has been tracking the hosting sector for years, first at The WHIR and now at Tier1. We've seen many of the same trends, as I noted in my recent talk with Stefano from Hosting Talk Italy:

Shared, dedicated and VPS hosting will be an important part of the web hosting industry for years to come. They're not in danger of extinction anytime soon. But the hosting landscape is becoming increasingly fragmented, as traditional host are challenged by "functional" hosting services customized around images, videos and blogging.

The market is beginning to be divided between hosting products defined by resources and technical specs and those defined by what the users do with the service. Users are focused less on what they get and more on what they can do with it. Between the growth of functional hosting offerings and the emerging cloud-based services, I think the traditional shared and dedicated accounts will see their market share diminish slowly over time.

Tier1's report is available on its web site, and costs $2,000.

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