Tier 1 Research: Internet Infrastructure Services Sector is Once Again Growing – and Profitable
MINNEAPOLIS — New Report Provides Analysis of Market Size/Share for the Internet Infrastructure Services Sector
A new report by Tier 1 Research finds that after struggling as a sector over the past few years, Internet infrastructure services has once again developed into a growing and profitable sector, with 14.9% year over year (Y/Y) growth to $11.7bn in revenue. Tier 1 Research also believes, despite this growth, that the sector is transforming itself and will meet challenges and opportunities along the way. These challenges and opportunities will cause changes during the next two years, and Tier 1 Research sees numerous strong drivers pushing the sector to 10% or greater annual growth during this period.
“The Internet infrastructure services sector was left for dead in 2002, but through a painful fight for survival in the years since then, the sector is once again experiencing growth,” said Andy Schroepfer, President of Tier 1 Research and lead author of the report. “We believe the transformation taking place will present some significant challenges and opportunities in this sector.”
These findings are contained in a report released today by Minneapolis-based Tier 1 Research – an independent division of The 451 Group that analyzes the financial and industry implications of developments affecting public and private companies within the IT, communications and Internet sectors. This 34-page report, titled “Internet Infrastructure Services – 2005 Year-End Market Size/Share Review,” provides a market size/share review and comparison of companies in the Internet infrastructure services sector, which includes companies that deliver ad-supported services, colocation, content delivery networks, hosting, infrastructure management, utility computing services and Web development. It includes discussion of the challenges faced by this sector, segment-by-segment snapshots and revenue growth details, analysis of the segment leaders and a look at key M&A activity, as well as expectations and recommendations for each of the segments.
Additional highlights from the report include:
–The colocation growth rate nearly doubled in 2005. Following negative growth rates in 2002 and 2003 amid massive segment turmoil, colocation revenue growth reached 11% Y/Y growth in 2005. On significant pricing power across providers and geographies, Tier 1 Research anticipates 14% growth in 2006 and 10% growth in 2007.
–Dedicated infrastructure growth rates are on the decline. Customer dedicated hosting remains the largest segment within infrastructure services ($4.4bn in 2005), but growth rates are on the decline. Price pressure should slow and independent software vendor (ISV) adoption of software as a service (SaaS) will bolster demand, but the sophistication of shared infrastructure offerings will continue to eat away at dedicated hosting.
–Shared hosting will never be the same. After the rivalry of pricing for domains and the hosting account, there was a shift from technology to service to functional solutions. Now, there is a growing number of providers with an ad-supported model for free accounts.
–The definition of “Web presence” is changing. As more Web content is searched, found and viewed in a growing number of places beyond the stereotypical “Web site,” hosting providers need to focus on more services than merely “hosting” the content.
Key Companies Covered
The report covers more than 200 key public and private companies that deliver Internet infrastructure services, including the following: Akamai, AT&T, Attenda, CSC, Data Return, Digital Realty, Digital River, EDS, Equinix, Fusepoint, Globix, GoDaddy.com, Google, Hewlett-Packard, IBM Global Services, Interland, Level 3, Limelight Networks, Microsoft, Netli, Network Appliances, Rackspace Managed Hosting, Savvis, SunGard, Switch & Data Facilities, 365Main, United Internet, VeriCenter, Verio (part of NTT), Verizon and Yahoo.
Report Orders
To learn more about this report, contact Lori Larson, Business Development Manager with Tier 1 Research, at 239-561-9504 or at lori@tier1research.com.
About Tier 1 Research
Tier 1 Research – an independent division of The 451 Group – analyzes the financial and industry implications of developments affecting public and private companies within the IT, communications and Internet sectors. The Tier 1 Research division blends traditional Wall Street investment research with industry analysis to deliver dynamic market and financial intelligence. The division’s clients include institutional investors and technology vendors, along with end users and venture capitalists. These clients leverage T1R analytical insight for idea generation, trend identification, due diligence and grounded opinions, as well as metrics and forecasts on companies and industries covered. Since its founding in August 2000, the Tier 1 Research division’s coverage has spanned the largest publicly held technology companies as well as smaller, pioneering public and privately held companies to provide comprehensive assessments of all companies impacting the technology marketplace in a meaningful way.
The Tier 1 Research division of The 451 Group is headquartered in Minneapolis. For additional information on its research coverage and services, visit www.tier1research.com
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