January 4, 2002 -- (WEB HOST INDUSTRY REVIEW) -- Research firm the Yankee Group (yankeegroup.com) has released

its popular annual "Prediction Edition" for 2002. Each of the Group's

research teams have considered last year's predictions, assessed their

accuracy, and forecasted trends for the next year.

Among the predictions made:

"Managed network services will not sell themselves." Yankee Group

says enterprises will approach increasingly-hyped managed services with

caution, until they can see real economic or service value from them. Only

13.5% of large businesses are currently outsourcing / out-tasking network

operations, and only 12.3% are considering the option.

"Hosting vendors' sales and marketing efforts will markedly shift

from customer acquisition in 2001 to client up-selling and retention in

2002." As customer acquisition is becoming less popular, the focus of

vendors' hosting strategies next year will be to retain their existing

client base while drilling deeper into those accounts. Service offerings

will revolve around practical needs like site marketing tools, and less

glitzy applications like video streaming. Web hosts will also concentrate on

improving services to become more user-friendly, such as e-commerce, Web

analytics, and better customer support overall.

"In-house remote access VPNs will lose ground to managed solutions,

which will narrow the gap by 50% in 2002." Although in-house remote access

VPNs outnumber managed services by 2:1 in 2001, the ratio will close to 3:2

by the end of 2002, the Yankee Group predicts. More service providers will

be bundling remote access with Internet access, and in some cases

collaborating with hardware vendors, a service that will be adopted by

smaller, less technically sophisticated SMBs. Inhibiting managed services

will be still be preferred among larger SMBs, to control their own network

services and lower long-distance phone rates.

"In 2002, 21% of medium businesses currently using DSL to access the

Internet will abandon DSL in favor of more reliable broadband alternatives,

namely dedicated T-1 access." Companies that used DSL as a means of cheap

entry to test the value of a broadband connection will be convinced of the

value of the Internet, but frustrated by the lack of reliability and

consistency of DSL. However, the overall market penetration of DSL will

increase in the SMB market, especially among very small business.

"Application service providers will reinvent themselves by becoming

vertical service providers (VSPs) or providers of pre-integrated application

solutions, or will go out of business." ASPs will be able to gain footing in

the market by developing solutions for specific vertical markets, such as

health care. Successful companies will be to offer a new solution to big

problems.

"Dedicated hosting explodes in Europe as more sophisticated new

enterprise users emerge." The Yankee Group has forecasted 2002 to be the

year of the more sophisticated Web hosting customer. Shared hosting will

officially become a low-end commodity, with fewer enterprise users opting

for it. Web hosting service providers will be focusing on providing

quick-start dedicated hosting packages to support smarter, more ambitious

new customers.

The full Prediction Edition is available online at

http://www.yankeegroup.com/ygrn1-1-2002.html.

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