The slowing economy has led to a glut of data centre space,
resulting in plummeting prices in the Web-hosting services
sector.
Paula Hunter, chairwoman of the ASP Industry Consortium, compared
the Web hosting sector with the housing market, which fluctuates
according to how well the economy is doing.
Web hosting firms were "offering other services to offset a loss in
revenue or erosion in pricing", she said.
Vendors in this space, which include Exodus Communications and
Globix failed to return phone calls seeking comment about whether
the recent economic downturn has led to a slowdown in demand for
their services or to price cuts.
However, Ted Chamberlain, an analyst at Gartner, said the price of
data centre space had dropped by as much as 25% in the past year.
Last year, companies charged $110 to $120 (£78 to £85) per square
foot. Today, they're charging $75 to $80 per square foot, added
Chamberlain, who expects to see further price cuts.
Interliant is an application service provider that owns six data
centres in the US. Its president and chief executive officer, Bruce
Graham, said the company was unlikely to be affected by any pricing
wars because data centre operations accounted for only about 2% to
3% of its revenue. The bulk of Interliant's business lay in
providing managed services, he explained.
Analysts and vendors differentiate co-location, a service under
which vendors provide bandwidth, floor space and basic monitoring
for Web site servers, from more complex hosting services under
which vendors actively manage the servers.
More vendors are shifting to the latter model as the Web-hosting
market matures and co-location becomes a commodity, said Dana
Tardelli, an analyst at Aberdeen Group. "Hosting is becoming a
plain vanilla service," he said.
Falling prices may be good news for customers, but they are bad
news for vendors. Exodus' stock recently traded for less than $2
per share on the Nasdaq stock exchange, well off its 52-week high
of $69 per share.