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Dedicated Hosting Expected to Benefit from Public Cloud Growth: Report

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Sixty-percent of hosting company CEOs expect hybrid cloud to be a meaningful driver of company growth, according to Cowen and Company’s semi-annual Hosting Survey Report.

Released on Friday, the report looks at growth expectations from a small sample of private hosting companies. The results show that while competitiveness in the hosting industry has definitely increased over the years, many web hosts view their companies as thriving, especially with cloud services on their side.

While 70 of respondents believe that in the past six months competition has increased, 20 percent said that the continued adoption of public cloud offerings has meaningfully helped private cloud or dedicated hosting growth. Fifty-percent said it slightly helped growth, and a further 20 percent said it had no impact. While the results are similar to the spring 2013 survey, Cowen said these results dispel concerns that public cloud is hurting growth for other hosting providers.

All of the respondents said small- and mid-sized business customers are their focus, but 50 percent are also targeting large enterprises and 20 percent are targeting the Fortune 500, down from 73 percent and 36 percent from last year, respectively.

For example, web hosts like GoDaddy have doubled down on SMB customers, by updating hosting product lines through acquisition and through technology improvements designed to appeal to smaller businesses.

“While the SMB market will continue to be a focus for many providers, as enterprise IT requirements continue to evolve, we would expect an increasing amount of hosting providers will decide there is a large enough opportunity to also begin targeting them with their hosting services,” the research said. “More specifically, we also believe the push to move upstream will be largely driven by the increasing adoption of hybrid cloud solutions by enterprises which has already provided a meaningful driver of growth.”

Earlier this week, Parallels released its SMB Cloud Insights reports which found that the global SMB market for the major hosted services will be $95.7 billion by the end of 2015, growing an average of 28 percent over the next three years.

Consolidation in the hosting industry was another point of discussion for web hosts in the survey. The majority of respondents (90 percent) expect there to be a significant amount of consolidation in the industry over the next three years. More than three-quarters (78 percent)  of respondents view themselves as more likely “acquirer than a target, which on the surface suggests companies continue to have confidence they will be successful.”

“We believe this is also indicative of the critical need for scale and potentially could be a growing acknowledgement by the smaller providers that their window to rise above their peers could be beginning to close before larger more established companies (ex. Google) more actively enter the space and leverage their scale to disrupt the current equilibrium,” the researchers said.

All respondents acknowledged the need to expand their product offerings, with 67 percent planning to add products that fall outside the “core” hosting offerings, including adding virtual disaster recovery and application performance monitoring.

About the Author

Nicole Henderson is the Editor in Chief of the WHIR, where she covers daily news and features online. She has a bachelor of journalism from Ryerson University in Toronto. You can find her on Twitter @NicoleHenderson.

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  1. Good article Nicole, thank you. Very interesting to read that 78% of respondents expect to acquire rather than be acquired. That certainly shows that there is a great deal of confidence in the hosting market.

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