In fact, ASPs have significantly increased their Web analytics market share in 2001, garnering 22 percent of the sector's revenue, up from 13 percent the previous year, the report states. "A Web Analytics system analyzes Web visitors' online behavior, enabling enterprises to optimize their Web site structure and content to improve customer loyalty, increase sales, and decrease support costs," the research company states.

"In 2001, Web analytics ASP revenues were up 54 percent while software suppliers revenue declined by 30 percent," says report author Guy Creese in a prepared statement. "Overall, the Web analytics market was valued at $372 million, down 7% from 2000's $400 million - although a decrease, a highly respectable showing considering the high-tech downturn of 2001."

Interelate Inc., a Web analytics ASP based in Eden Prairie, MN, is seeing the growth first hand. "We're seeing year-over-year growth over the past three years," says Lance Mathern, vice president of consulting services at Interelate.

Thanks to the efforts of its more than 100 employees Interelate, which generates 70 percent of its revenue from hosting services, has increased its 2001 revenue 250 percent over its 2000 revenue.

Interelate is not the only vendor experiencing the substantial growth in a tough economy. "Larger hosting firms are paying more attention to this space. IBM Global Services, EDS, Harte-Hanks, HP, and Axiom are going from transactional CRM to analytical CRM," Mathern says.

"Companies want to retain their customers. That tends to be more of an analytical process. IT departments need to focus on keeping the technology running," Mathern says.