The strength and stability of the web hosting industry gives hosting buyers a strong position from which to negotiate with suppliers, according to a procurement report released by IBISWorld on Friday.
The Web Hosting Services Procurement Research Report is intended to assist buyers of dedicated hosting services, and does not take into account shared hosting or related services like domain name sales.
IBISWorld’s procurement reports give the industry being reported on a rating out of 5, with a higher number indicating a better negotiating position for the company procuring the service. Web hosting scores a 3.9, and IBISWorld suggests that the industry’s maturity represents an opportunity for businesses.
“Web hosting services are in the mature stage of the product life cycle, which presents stability for buyers,” according to IBISWorld procurement analyst Andrew Yang. “Many web hosting services providers are diversified companies with multiple revenue streams and low bankruptcy risks.”
While bankruptcy is not frequently an issue in hosting, the recent Chapter 11 filing of cloud storage provider Nirvanix provided a sobering example of industry risks, and the difficulties they can cause for hosting customers.
The report identifies “medium supply chain risks” caused by hosting providers’ reliance on hardware, and suggests that increases in price for servers would mean increases in price for hosting services. Despite this, IBISWorld forecasts prices to increase modestly between now and 2016, after rising by 0.7 percent between 2010 and 2013.
There are over 18,000 website hosting providers in the US market, and low concentration, giving availability and even choice of hosts to prospective buyers. At the same time, the total number of businesses is expected to rise as economic recovery continues, driving IT investment and therefore demand for hosting services.
Expectations of growth in demand for hosting, and particularly cloud services, are well established. An IDC study released in September projected that spending on public cloud services will more than double by 2017.
The report suggests that customers can benefit from the industry situation by negotiating long-term contracts with fixed prices, or by negotiating the inclusion of additional services offered by the same provider.
IBISWorld has previously produced procurement reports on data center, website design, and disaster recovery services, as well as ISPs and other hosting-related industries. A single report can be purchased for $925 from the IBISWorld site.