As the market for hosting services is evolving, providers are adding capabilities and skills to their portfolio of service offerings. Following are critical factors for HSP survival in today's business environment:

Managed Services Trend
In order to best meet today's challenges, hosting service providers should aggressively add value to their existing services and increase the velocity of service deployments. Hence, the focus should be to increase both the value proposition and volume of service offerings. Experts say the managed services possess true capabilities to lead the market in this respect. Forrester estimates the managed hosting market to increase from $1.8 billion in 2001 to $11 billion in 2004, constituting around 55 percent of hosting services revenues. These projections are based on the very nature of managed services -- providing service packages ranging from basic Web site development and management (dedicated Web server with database capabilities) to high-end, high availability e-commerce capabilities (dedicated server for customer applications and fully redundant Web and firewall servers) based on pre-packaged components with proven technology solutions to reduce deployment times from months to days. 

Targeting Specific Segments
According to Stratecast Partners, the hosting service revenues for 2002 are expected to be $4.1 billion. Another analyst group, Frost & Sullivan projects the 2008 hosting revenues at $20 billion level based on the disaster backup and recovery services as the driving factor. In order to effectively take advantage of the future market growth, experts believe providers should target specific service segments, vertical segments, and special customer segments -- such as small and midsize businesses (SMBs). 

Outsourcing 
Customers outsource hosting since they desperately need service reliability, performance and accessibility. According to a recent IDC study, Web Hosting Services -- Analyzing the Demand-Side View: 2001, 44% of U.S. companies said they were outsourcing their Web site hosting functions. The above is reflected in the 2001 Global Network Strategies (GNC) Survey that said more than 70% of the U.S.-based multinational corporations were using an outsourced solution for at least a portion of their Web operations.

Partnerships With Best-of-Breed Providers
Since the variety of hosting services demand wide ranging competencies, providers can become more competitive by leveraging capabilities of skilled partners. Hence strong partnerships with best-of-breed providers and resellers are essential for consistent delivery of seamless solutions to the end-users.

Management of Constraints
Changing market situations, customer demands and resource limitations can have a strong influence on provider's business model. Only by deeply understanding customer business processes can hosting providers improve upon their practices, procedures and service offerings.

Scaling and Automation
In the hosting services landscape, automation of tasks is critical. By automating delivery procedures one can ensure consistent service quality and customer satisfaction. The technology for embedding intelligence in the devices can enable significant level of automation for successful operational scaling. 

Standards-based Solutions
To facilitate scalable business models and to deliver cost effective and reliable solutions, technology standardization is important. Experts believe it is extremely difficult to manage growth if every new customer environment is totally customized. To reduce this laborious task, managed hosting technologies allow customers to select standardized components, and then customize the remaining implementation to meet their particular technology environment needs.

Key Categories of the Hosting Services Market:

• Application services providers
• Brand leaders
• Providers with extensive installed base of enterprise customers
• Professional services/ system integration capabilities
• Providers carrying wide breadth of infrastructure service options 
• Companies with strong hosting sales teams 
• Providers enjoying extensive partnerships
• Providers with International capabilities

Leading Hosting Providers:

• Cable and Wireless 
• Exodus - a Cable and Wireless service
• Opsware - previously LoudCloud
• EDS
• AT&T
• WorldCom
• Digex