Web Hosting Revenues to Soar

In a new report, IDC (International Data Corp.) forecasts a surge in revenue for U.S. Web hosting services. The reasons for the spike, the research firm claims, are the number of small businesses adding a Web presence and the increasing complexity of e-business.

According to IDC, revenues for the U.S. Web hosting services market will increase by a factor of 10 from year end 1999 to year end 2003, for an overall compound annual growth rate (CAGR) of 87.2 percent. The market, including revenue from overseas branches of U.S.-based Web hosting companies, will grow from $1.8 billion in 1999 to $18.9 billion in 2003.

Small businesses -- defined by IDC as companies having anywhere from 3 to 99 employees -- present a huge opportunity in this market. IDC predicts that by the end of 2000, small businesses will account for 53 percent of the revenues generated for Web hosting services in the U.S. That 53 percent is expected to grow to 61 percent by the end of 2003.

IDC reports that more than 80 percent of the small businesses having Web sites in 1999 used a hosting service, offered by an ISP or other provider. The 1.8 million small businesses with hosted sites spent more than $900 million in 1999 for Web-related connectivity, hosting and site maintenance. Spending by small businesses in the U.S. is expected to increase at a CAGR of 84 percent between 1999 and 2003, reaching $10.7 billion in revenue in 2003.

When asked by IDC in 1998 why they adopted Web hosting, small businesses gave these reasons: performance or bandwidth, support and availability, and cost. The other reasons were expertise, convenience, technology and security.

The primary hardware vendors that have developed offerings in this area that are specifically designed for small businesses, according to IDC, are Compaq, Dell, Gateway, Micron and IBM. HP and IBM are the primary hardware vendors in the enterprise market, a market also featuring chip maker Intel and services firms CSC and EDS.