Technology | Media | Telecommunications

Tuesday, September 30, 2008

Out-Tasking Web and Application Hosting

According to the latest In-Stat market study, the U.S. business market currently devotes the largest part of managed services spending to managed infrastructure in 2008 at 35 percent.

Most of this current spending is done by the enterprise market -- firms with more than 1,000 employees. While enterprises devote the largest portions of their managed services budgets to managed infrastructure services, at the other end of the spectrum SOHO and small businesses (fewer than 100 employees per firm) spend the bulk of their managed services dollars on Web and application hosting.

Managed network services is the biggest slice of the pie among mid-sized businesses (100 to 999 employees per firm).

The leading trend in managed services is the quickly increasing spending on the out-tasking of Web and application hosting among enterprises and, to a lesser degree, mid-sized businesses.

Spending on Web and application hosting is expected to experience strong increases and a CAGR of 20 percent through 2012. Meanwhile, managed infrastructure and managed network services, are expected to experience solid, but lower growth, with CAGRs of 4 and 3 percent over the same period, respectively.

Spending on Web and application hosting is expected to become the largest area of managed services spending by 2010. The combined growth in the three areas of managed services spending is expected to result in a 7 percent CAGR for total managed services spending through 2012.

Enterprises make up the bulk of wireline data spending, 67 percent in 2008. Mid-sized businesses account for 21 percent of the market. Small businesses (5 to 9 employees) and SOHO businesses (1 to 4 employees) make up just 10 and 2 percent, respectively.

I believe that the upside potential for managed service providers to target the SMB and SOHO segments of the market is truly substantial. Given an appropriate marketing strategy, this is an unprecedented new revenue opportunity.