Bits of debris from the “dot-bomb” continue to take their toll on the networking outsourcing sector. According to a recent study, North American service providers are still feeling the blow and are struggling to stay afloat by offering new services and tweaking old ones.

The study, “Service Provider Plans for E-Business Infrastructure and Services, US/Canada 2001” was conducted by San Jose, Calif.-based Infonetics Research. It found that in the wake of so many customers of hosting service providers having gone under, present customers are delaying hosting decisions and service providers are delaying expansion plans.

“When the dot-bomb hit and all the dot-coms went under, there were a lot of empty racks in the hosting centres,” said John Lawler, directing analyst, e-business infrastructure for Infonetics. “A lot of the media dot-coms were in New York in Silicon Alley and it got hot very hard. It took a little longer to hit Silicon Valley. But what is happening is happening across the board.”

Lawler said that the dot-bomb is to blame for the low hosting provider projected expenditures. Estimating that expenditures will grow 35 per cent, from US$6.5 billion to US$8.8 billion between 2001 and 2005, the study found that 60 per cent of service providers surveyed said that lack of available capital and related issues of revenue and profitability are each primary financial challenges.

However, the study did show that there are significant “bright spots,” namely content delivery and network-accessible storage.

“[Content delivery and storage services] are particularly well-suited for hosting providers because to do them well, they both rely on a lot of bandwidth,” Lawler said. “[Hosting providers] can charge for it because the customers see that there is a lot of expense in trying to reproduce that infrastructure themselves. What happens is that customers will look at it and say, ‘How much would it cost for me to do this?’ For something like content delivery, they say they cannot possibly reproduce that.”

He added that in terms of storage, customers want to be able to spread the physical risk of losing data, which leads to backing up data in multiple locations. It is feasible for customers to outsource storage needs to a hosting service provider because the cost to reproduce the environment themselves is not worth it.

According to AT&T Canada, which recently acquired Mississauga, Ont.-based hosting service provider Bird On A Wire, storage is considered to be a popular service to outsource among its customers, but content delivery has not yet been high in demand.

“The whole content delivery thing is something we have been working on, but our experience is that this is a topic written about more in the press than…real customers asking us for it,” said Fred Sass, director of product management for Internet and e-business services at AT&T Canada. “We have plans to roll out services and be there when the market is ready to take that in high volumes.”

Even more popular, Sass said, are managed security services in conjunction with hosting. He said that AT&T is able to layer on managed firewall services, managed VPN services and special applications.

“As we are trying to win more hosting business, we take advantage of having those multiple services and we try to sell our customers on some related security services. I think that is something that has a very clear return on investment for customers.”

Looking ahead, Sass said that AT&T will be focused on tapping into the account relationships it has developed and work on convincing customers that, in terms of outsourcing, the time is right and the facilities are right.

“Our biggest bang for our buck right now is not going to be in radical new technology that is really going to surprise you,” Sass said. “A lot of it is awareness among our customer base.”

Bits of debris from the “dot-bomb” continue to take their toll on the networking outsourcing sector. According to a recent study, North American service providers are still feeling the blow and are struggling to stay afloat by offering new services and tweaking old ones.

The study, “Service Provider Plans for E-Business Infrastructure and Services, US/Canada 2001” was conducted by San Jose, Calif.-based Infonetics Research. It found that in the wake of so many customers of hosting service providers having gone under, present customers are delaying hosting decisions and service providers are delaying expansion plans.

“When the dot-bomb hit and all the dot-coms went under, there were a lot of empty racks in the hosting centres,” said John Lawler, directing analyst, e-business infrastructure for Infonetics. “A lot of the media dot-coms were in New York in Silicon Alley and it got hot very hard. It took a little longer to hit Silicon Valley. But what is happening is happening across the board.”

Lawler said that the dot-bomb is to blame for the low hosting provider projected expenditures. Estimating that expenditures will grow 35 per cent, from US$6.5 billion to US$8.8 billion between 2001 and 2005, the study found that 60 per cent of service providers surveyed said that lack of available capital and related issues of revenue and profitability are each primary financial challenges.

However, the study did show that there are significant “bright spots,” namely content delivery and network-accessible storage.

“[Content delivery and storage services] are particularly well-suited for hosting providers because to do them well, they both rely on a lot of bandwidth,” Lawler said. “[Hosting providers] can charge for it because the customers see that there is a lot of expense in trying to reproduce that infrastructure themselves. What happens is that customers will look at it and say, ‘How much would it cost for me to do this?’ For something like content delivery, they say they cannot possibly reproduce that.”

He added that in terms of storage, customers want to be able to spread the physical risk of losing data, which leads to backing up data in multiple locations. It is feasible for customers to outsource storage needs to a hosting service provider because the cost to reproduce the environment themselves is not worth it.

According to AT&T Canada, which recently acquired Mississauga, Ont.-based hosting service provider Bird On A Wire, storage is considered to be a popular service to outsource among its customers, but content delivery has not yet been high in demand.

“The whole content delivery thing is something we have been working on, but our experience is that this is a topic written about more in the press than…real customers asking us for it,” said Fred Sass, director of product management for Internet and e-business services at AT&T Canada. “We have plans to roll out services and be there when the market is ready to take that in high volumes.”

Even more popular, Sass said, are managed security services in conjunction with hosting. He said that AT&T is able to layer on managed firewall services, managed VPN services and special applications.

“As we are trying to win more hosting business, we take advantage of having those multiple services and we try to sell our customers on some related security services. I think that is something that has a very clear return on investment for customers.”

Looking ahead, Sass said that AT&T will be focused on tapping into the account relationships it has developed and work on convincing customers that, in terms of outsourcing, the time is right and the facilities are right.

“Our biggest bang for our buck right now is not going to be in radical new technology that is really going to surprise you,” Sass said. “A lot of it is awareness among our customer base.”



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