Back in October, we noted web and application hosting is losing market share. So said 451 Research in their comprehensive market forecast for the sector. That news underscores the fact that change happens. So we highlighted three specific takeaways we thought had special power to help hosting providers reach into the future and grasp profitable opportunities to grow your business in this evolving marketplace.
In fact, the 451 Research report identified six key trends that will dominate web and application hosting between now and 2019. Each of these trends offers food for thought as well as actionable opportunities to reposition your company, develop new business lines and forge new relationships. The underlying theme of all these trends is specialization. Customer needs are evolving; to survive and thrive, your business must evolve, too.
Multiple Ways to Adapt
Like the marketplace itself, these six trends don’t apply equally to every web hosting provider. Neither do all the recommendations in the report. Nonetheless, adopting or adapting those that match your current status and goals will keep your business strong and growing in a changing, competitive market.
Here are the six trends 451 Research says will reshape the web and application landscape over the next four years.
1. Growth will slow, but it will continue.
The report estimates growth will continue at an annualized rate of 9.4% through 2019. That’s slower than we’ve seen in recent years, but it still offers a pool of about $7.5 billion in annualized revenue for the period. To earn your share of that revenue, you’ll need to adapt. Web and application hosting as we’ve known it is undergoing a transformation, and the lines have blurred in terms of which types of providers offer what products and services:
- Hosting providers are offering a broader range of applications and platforms plus managed and unmanaged services.
- Infrastructure providers now incorporate cloud computing.
While web and application hosting is expected to slow, managed hosting is gaining momentum. The message here is that Business As Usual is no longer a reliable strategy.
2. Foreign markets beckon.
For those of you who operate strictly within North America, this same growth-but-slower trend prevails. Currently North America holds 59% of the hosting/cloud market, and the Europe/Mideast/Africa sector holds 27%. These shares will drop to 53% and 26% respectively by 2019. Meanwhile, Latin America and the Asia Pacific region are coming on strong, capturing ever-larger shares of the global market. Look for Latin America to double its current 2% share by 2019.
For larger providers, international expansion into these areas offers significant opportunity. Eastern Europe, India and Brazil are notably attractive.
3. Strategic change will focus on “best execution venues.”
451 Research says specialized IaaS and SaaS environments are luring workloads away from traditional hosting resources. For every workload type, there is an ideal infrastructure environment, or “best execution venue,” based on multiple factors from performance and flexibility to security and pricing.
So you may lose some business, but find new opportunities to retain those customers by replacing traditional services with emerging options that provide a more relevant, customized fit.
4. Managed services open new doors.
Managed services are becoming increasingly modular, and it’s a natural extension of hosting to manage services, too. For instance, your hosting customers are using apps they really don’t want (or have the resources) to manage themselves. Examples include WordPress, Office 365 and public cloud infrastructure.
The more ways you can support customers with “background” services, the more efficiently they can focus on their core work. That’s a significant competitive advantage for them and a valuable marketing distinction for you.
5. Targeting is critical.
No web hosting company can effectively serve all market segments. Knowing what customers you want – and what they need to succeed -- allows you to sharpen your product and service offerings and narrow your marketing scope to exactly the right audience. Finding your niche and zeroing in on it makes you more competitive and more efficient. You’re be able to:
- Attract more customers.
- Increase revenue per customer.
- Reduce churn, which is both frustrating and costly.
6. Mergers and acquisitions remain popular.
Consolidation has long been an effective expansion technique for businesses across all industries. For hosting providers with enough resources, it’s a way to instantly grow your customer base, add business lines to up-sell existing customers or enter new geographic markets. Providers with an eye on foreign markets see M&A as an efficient way to overcome language or cultural barriers and enter new markets armed with the cachet of a “local” name.
How will you take advantage of these opportunities over the next three years? Evolution is all about adaptability. Hosting providers that transform themselves to align with emerging trends will be the ones that remain relevant. And profitable. That requires two things:
- Know thyself – your business goals, strengths and opportunities.
- Know thy customer – their business goals and challenges.
Traditional web and application hosting’s market share may be shrinking, but that doesn’t mean your market share has to shrink. In upcoming articles, we’ll explore how you can turn these trends into actionable steps to sustain and grow your business.
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