Web hosters hang future on enterprise interest

As their market contracts and players fall by the wayside, Web-hosting vendors gathered here Monday at Web Hosting Expo to hash out the future of an industry that hinges on gaining more business from the enterprise.

In his keynote speech, Digex Inc. CEO Mark Shull declared the Web-hosting space as one undergoing serious change, following a lightning-fast inception in 1995 and phenomenal growth until last year.

"We are now in transition as companies struggle to come up with more sophisticated, long-term business models," Shull said.

At the crux of those models are enterprise strategies that offer corporations hosted methods for interacting with suppliers and customers. Also key will be hosted or managed applications that are better integrated with enterprise customers' back-end systems, Shull said.

"The Internet right now is great at connectivity, but it connects everything to a person," he said. Shull added that that the Internet so far has fallen short in b-to-b endeavors.

Shull predicted that much of that will change with the rise of application servers that will replace and expand on the limited functionality of Web servers, the lynchpin so far of the Web-hosting sector.

"The application server now is becoming as prevalent as the Web server," and that will allow for more sophisticated integration between hosted applications and installed enterprise systems, Shull noted.

Enterprises therefore will feel increasingly more comfortable turning over applications to hosters. Those applications, at first, are likely be all sorts of commerce-related undertakings, instead of mere e-commerce operations, Shull said.

Although Shull painted a picture of the Web -hosting industry as one poised to take off in the enterprise sector and foster new players, others offered more somber observations.

Paul Santinelli, CEO of NOCPulse Inc., an Internet infrastructure company in Sunnyvale, Calif., said things will only get tougher for smaller hosters and MSPs (managed service providers) as larger players such as Digex -- owned by carrier giant WorldCom Inc. -- and the telecoms themselves eye the same enterprise customer base.

"The pole-climbers have come off the poles and into the datacenters," Santinelli said.

As did Shull, Santinelli predicted that the hosting and MSP space will undergo a tremendous amount of consolidation in the next eight months.

Specifically, carriers will continue snapping up hosters and MSPs but only after looking those players over closely for attractive intellectual property holdings and/or marquis customers, he said.

All the while, the Web-hosting market is marked by a 66 percent over-supply of datacenter capacity -- a phenomenon that could linger into 2003, according to John Gonsalves, vice president of Boston-based consulting firm Adventis.

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