IBM leads hosting market

IBM leads hosting market

IBM Global Services' Web-hosting business expanded sharply in 2001 despite the tough economy, giving Big Blue a large lead in the Web-hosting market, according to a new report from market research firm IDC.

According to the report, titled "US Web Hosting Services: Market Forecast and Analysis, 2001-2006," IBM's hosting revenues grew nearly 45 per cent, from $US696 million in 2000 to more than $1 billion in 2001. IBM says overall customer contracts for Web hosting reached a record $2.4 billion last year.

Those results push IBM far in front of former high-flyer Exodus Communications, which had similar revenues to IBM in 2000 with $695.7 million. IBM, however, pulled further ahead last year as Exodus struggled under its heavy debt load, a string of executive changes and an eventual Chapter 11 bankruptcy filing. Exodus had hosting revenues of just under $900 million last year, according to IDC.

"IBM [Global Services] maintained its leadership position in the Web-hosting market in 2001," IDC analysts Melanie Posey and Meena Almaula wrote in the report. "The fact that Web hosting is not the company's only line of business and its limited exposure to the collocation market have somewhat insulated it from the downturn in the economy."

As for Exodus, the report's authors say it became "the falling star of the Web-hosting market" and that its bankruptcy "calls into question the underlying business model of pure-play [hosting service providers]."

Two other telecommunications companies, WorldCom and Qwest Communications International, were third and fourth in hosting market share in 2001, according to the IDC report, with $317 million and $230 million in revenues respectively.

Overall, IDC expects the Web-hosting market to grow from $4.8 billion at the end of last year to $20.8 billion by the end of 2006 as more and more enterprises Web-enable their businesses.

"Enterprises are only just beginning to leverage the full potential of Web-based (and therefore, hosting-based) opportunities," the report said.

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