Small Business Key to Growth in Europe Adam Eisner, theWHIR.com
July 10, 2003 — (WEB HOST INDUSTRY REVIEW) — Companies searching for success in Europe’s Web hosting market need to look no further than small to medium sized businesses (SMBs), which are poised to drive much of the industry’s growth in the region for the next several years.
According to a recent study from research firm IDC, companies with 100 to 499 employees were expected to be the fastest-growing business segment in Western Europe, and would “offer good revenue opportunities to IT vendors.” A stabilizing financial forecast and an increasing recognition of the value that IT services provide will drive the sector’s growth, the company said. However, IDC expected the lowest end of the SMB spectrum (1 to 99 employees) to suffer somewhat in the short-term, committing IT funds mainly to keeping their current services running.
This surge in IT spending is occurring at a time when e-commerce activity is increasing significantly. According to eMarketer, an e-business research and analysis firm, business-to-business (B2B) e-commerce will double 2002′s level by the end of the year. What’s more, e-commerce growth in Europe is expected to increase by about $60 million annually for the next three years. This rapid growth in e-commerce adoption, coupled with an increase in IT spending for mid-sized businesses in Europe, bodes well for the continent’s Web hosting industry.
As mid-sized businesses in Europe increase their IT spending and e-commerce activity picks up, an increase in demand for Web-based IT services like Web hosting will invariably follow. Demand for managed, dedicated and even “do it yourself” discount dedicated servers, all of which can be expensive but not excessively so for small and medium-sized businesses, will drive much of the industry’s growth.
According to recent data from Netcraft, a U.K.-based Internet services firm, an increase in demand for mid-level services is already fueling the growth of several larger hosting providers in the United States. Rackshack (rackshack.net), DataPipe (datapipe.com), Rackspace Managed Hosting (rackspace.com) and Interland (interland.com) are all among the top 10 U.S.-based fastest-growing hosting providers, and all offer mid to low-end Web hosting services tailored toward smaller businesses. European firms currently leading the hosting pack in terms of growth, like Schlund (schlund.de) and Host Europe (hosteurope.com), also offer similar services, and can expect to see similar demand from small businesses in the near future.
“Small-business Web hosting trends in Europe and the U.S. show significant parallels,” said Shirley Siluk Gregory, senior analyst at ebi Group, a marketing intelligence firm for tech companies focused on the small business sector. “Given that, the European market can expect to see growth in mid-size company spending on Web hosting, just as the U.S. market is seeing. Similarly, Europe is also likely to see continued adoption of outsourced Web hosting by smaller enterprises, which – as in the U.S. – have a long way to go before they get anywhere close to a saturated presence on the Web.”
Much of the business growth in Europe is expected to be in regions that have matured as Internet hubs, and where consumer adoption of high-speed Internet is growing rapidly – namely Germany, the UK and France. However, signs are beginning to emerge that several Eastern European nations, like the Czech Republic and Poland, are also moving to the Internet’s forefront and should not be ignored. According to a recent paper by Aqute Research, an IT analysis and research firm, the upcoming addition of several eastern European nations to the European Union in 2004 (including the Czech Republic, Poland, Hungary and Latvia), means “an end to the view that Eastern Europe is a second-class market,” and also signals that small businesses in Eastern Europe may soon be creating demand for mid-level Web hosting services.
While the past two years have been tumultuous ones for hosting companies both in Europe and worldwide, it is becoming apparent that significant growth opportunities are emerging for Web hosts, particularly in Europe. Many of these opportunities are being driven by mid-sized businesses, a great number of which are only beginning to realize the value in purchasing services like Web hosting – which is good news for companies that provide IT outsourcing services.
