In terms of focus, the report emphasizes the fully managed segment and is restricted geographically to the North American operations of 11 vendors: AT&T (att.com), BellSouth (bellsouth.com), Cable & Wireless (cw.com), Conxion (conxion.com), Digex (digex.com), EDS (eds.com), Genuity (genuity.com), IBM (ibm.com), Qwest (qwest.com), Sprint (sprint.com), and Verio (verio.com).

"The $2.7 billion market for managed hosting services is slowing to a 23 percent growth rate as many customers consolidate contracts and migrate services in-house," says Corey Ferengul, vice president and principal analyst with META Group's operations strategies. "Emerging industry trends that will accelerate hosting market growth include Web services, utility computing, and the general emphasis on outsourcing as a strategy to reduce costs and extend capabilities. The outsourcing relationship should be viewed as a trusted strategic relationship, emphasizing business value over pricing."

According to the META Group, the managed Web hosting market has undergone significant change during the past year and should see more stability in 2003 with large providers continuing to dominate the market. META Group sees more room for improvement in service offerings and recommends that customers seek providers with strong financials, a proven track record, and a broad complement of services.

A summary of the key findings include: 1) a strong market presence is essential for leadership; 2) market maturity for high-end managed services will not occur before 2005; 3) the managed Web hosting market will be dominated by large players; 4) successful vendors will provide hosting services as part of a broader services portfolio; 5) the key differentiator in the enterprise market is professional services; and 6) vendors must demonstrate a commitment to Web hosting.

META Group is a leading provider of information technology research, advisory services, and strategic consulting.