Storage Management und Colocation Services

Collocation: More than Just a Real Estate Play

The overall Web hosting market has seen enormous growth and change over the past year. But, as with many technology companies, the downturn in the economy has taken its toll. While last year many providers were praised and rewarded for their aggressive build-out plans and total gross square footage, this year those same providers are dealing with high debt loads and falling stock prices. Further, many providers are now grappling with the difficult task of shifting their customer base from collocation to managed hosting. In the process of these changes, some would say that collocation has become a dirty word. While the Yankee Group believes that enterprise customers will embrace outsourced solutions, we also believe that there will always be a place in the market for collocation offerings. We think that the best-positioned providers will offer more than just "ping, power, and pipe"(see Exhibit 1). Value-adds such as diverse network connectivity and access to additional services can create a much more attractive offering for prospective collocation customers and can enhance revenue opportunities for collocation providers. This Report examines the different ways providers are approaching this market and their respective strengths and weaknesses. We further explore the various customer segments interested in collocation services, as well as the factors most critical to them in evaluating their choices.