Energy crisis could black out web hosting industry growth, says Frost & Sullivan

SAN JOSE, Calif., April 2, 2001 — The U.S. Web Hosting Services market is set to experience high growth that will turn profits for many industry participants, if certain California energy obstacles can be hurdled.

Those in the Web Hosting Industry are now scrambling to find energy security. With proper precautions, these companies will stay up, running and profitable.

Strategic analysis from Frost & Sullivan (www.it.frost.com), “U.S. Web Hosting Service Markets,” reveals this industry generated revenues of nearly $2 billion in 1999, and is projected to top the $34 billion mark by 2006.

“Although the market shows the potential for healthy growth, failure to recognize the energy crisis in the Western power grid could spell disaster for revenue gain,” says Frost & Sullivan Research Analyst Jarad Carleton.

Frost & Sullivan believes that the high-tech revolution has been a major factor in the record economic expansion the United States enjoyed through most of the 1990s. However, economic success spurs population growth and population growth increases demands on infrastructure, of which the power grid is a key part. The fact is, California has not built any new power generation facilities for over 10 years, but phenomenal economic growth has placed the state at electricity consumption levels projected for 2015.

As the energy crisis worsens, data centers will have to rethink their business model and evolve to meet the challenges posed by the increasing regularity of brownouts. Currently, power failures force Web hosting companies to rely on diesel-powered generators to supply the electricity that runs their equipment and services.

“The data centers that think brownouts are best addressed by diesel generators may find themselves on the wrong side of state air quality boards and non-governmental organizations such as the Sierra Club,” Carleton says. “Companies may not care about those issues now, but all it takes is one piece of bad press on your company’s contribution to air quality degradation for members of the media to start taking a closer look at your company and the industry as a whole.”

Carleton recommends that companies seek other means of energy during blackouts, and for the future as well, avoiding reliance on diesel generators all together. The construction of private, permanent, large-scale power generation facilities is an option some of the largest Web-hosting providers are exploring.

“Owning a small power plant makes good business sense,” Carleton says. “Small power plants can keep a data center operating and sell excess power back to the grid for a profit. This is a business proposition that large companies such as Exodus and AT&T have been considering.”

Companies that invest in private power generation facilities can get a leg up in the market by not only avoiding increased pollution, but by offering amplified assurance that their facilities will remain operational despite energy crises. Without this capability, it will be increasingly difficult to convince customers to bank on Web hosting service companies with their mission critical Web operations.

Frost & Sullivan presents the 2000 Marketing Engineering Awards to companies that have worked diligently to make a positive contribution to the U.S. Web hosting service industry. The Market Engineering Leadership and Brand Awareness Development Award are both presented to Exodus Communications (Nasdaq:EXDS – news). The Competitive Strategy Award goes to UUNET (Nasdaq:WCOM – news).

Frost & Sullivan, headquartered in San Jose, Calif., is a global leader in international strategic market consulting and training. Frost & Sullivan’s industry experts monitor the information technologies industry for market trends, market measurements and strategies. This ongoing analysis is used to complement the “Internet/Intranet Online Subscription,” which includes studies on the “U.S. Internet Value-Added Services Market” and the “U.S. Internet Content Delivery Markets.” Executive summaries and interviews are available to the press.

Along with publishing in-depth strategic market consulting research, Frost & Sullivan also provides custom consulting needs to a variety of national and international companies.

“U.S. Web Hosting Service Markets”

Report: 6052-79