Hosting Services - 2

High-profile deals mark booming sector

Web hosting is one of the fastest-growing sectors of the new telecom economy. Dozens of carriers are investing in data center construction, and hundreds of customers are signing up to host their Web sites with third-party providers.

The sector has seen its share of high-profile deals. Exodus Communications swallowed Global Center, its chief competitor, for $6 billion, and WorldCom acquired complex hosting powerhouse Digex for a similar amount. Now WorldCom and Exodus vie for dominance in the managed hosting space, where revenue growth is based not on the number of square feet leased by a customer, but on the number of services customers buy.

WorldCom got a big boost from the Digex deal. By some estimates, Digex controlled 70 percent of the managed hosting market in early 2000.

Exodus, nominally the worlds largest Web hoster, trails precisely because it doesnt have a Digex-strong managed hosting offering. Still, after swallowing its major competitor, Global Center, Exodus competes in this market because of its sheer square footage. But this situation is changing rapidly as the company develops its own managed service group and scouts the market for acquisitions. Exodus tried to buy Digex, but those talks collapsed.

Verio is another significant presence in the top five. Owned by Japans Nippon Telegraph and Telephone, the company has long been a champion of small and midsize businesses. Verios continued success in generating revenue suggests that smaller companies are aggressively leveraging the Net as a development equalizer.