Evolution of the Web Hosting Industry
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Where is the web hosting industry now, and where is it going? Every industry goes through four stages of development; knowing what stage an industry is in, and where it is going, can help industry players make plans and decisions, as well as consider what they need to do to attract and keep customers. This article examines those four stages, and considers where the web hosting industry is in relation to them.
The web hosting industry has been around for roughly ten years now. It has gone through many changes in that time, from apparently wild growth through the terrifying business climate caused in part by the terrorist attacks on the World Trade Center. Given this, people who work in the web hosting industry – and those who are served by it – might find it beneficial to take a step back and look at the industry’s evolution, to get a better idea of where it is now and where it is going in the future.
When studying industries, it is commonly accepted that they evolve through four basic stages: introduction, growth, maturity, and decline. These vary in length with the type of industry, and have speeded up in recent times because of the increased pace of technological development, which now affects so many different industries. For example, the introductory stage of development for the automobile industry lasted 25 years; we have since seen many high tech products introduced and then become obsolete in a tenth as long. Technological developments can not only speed up the evolution of an industry; they can also throw a mature (or even declining) industry back to an earlier stage of development, with changes renewing and revitalizing the products and services offerings.
With these points in mind, we can begin to understand why it might be helpful to know where the web hosting industry is in its evolution. To answer this question, though, we need to know what indicators characterize each of the four stages. Not surprisingly, many factors affect industries, and a sense of the numbers we get from these factors can help us figure out where an industry is in its development.
When trying to figure out what stage an industry is in, researchers and analysts examine something called value drivers. To quote an article by M. Eric Furlow of Furlow Consulting, “A value driver is a measure used to track financial and operational variables in a business or an industry.” While value drivers affect all industries, different value drivers affect different industries to different degrees. Furlow identified ten value drivers for the web hosting industry. Among others, these include churn and net gains; average revenue per account per billing; revenue/EBITDA per square foot of data center space (which reflects efficiency in use of resources); market size and market share; and free cash flow, which is the real amount of money left after all expenses are accounted for.
Value drivers are not the only indicators of where an industry is in its evolution, however, as we shall see shortly.
Next: The First Stage: Introduction >>
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