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Gartner Dataquest Says U.S. Hosting Market to be a $9.3 Billion Industry in 2004
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San Jose, Calif., November 20, 2000 - Hosting, a new IT service that enables business activity on the Web, is a primary engine for the new economy. The U.S. hosting market is forecast to experience strong growth, with revenue forecast to grow from $2.1 billion in 1999 to more than $9.3 billion in 2004, according to Dataquest Inc., a unit of Gartner Group, Inc. (NYSE: IT and ITB). The U.S. hosting segment is projected to reach $2.8 billion in 2000.
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Gartner Dataquest defines hosting as the provisioning of data center facilities, bandwidth, compute and storage capacity, with varying degrees of administrative and management services. In hosting, clients are essentially responsible for applications management. In colocation, included in this definition of hosting, clients are responsible for applications and hardware management and also own the servers and other equipment located at the colocation facility, which is basically the physical infrastructure plus bandwidth.
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In 1999, U.S. hosting represented 6 percent of the $34.5 billion U.S. management services market. By 2004, the hosting segment will account for 13 percent of the $69.2 billion management services market.
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"Hosting enlarges the IT outsourcing opportunity by providing an external IT infrastructure that can serve as the foundation for a supply chain of services. End-user enterprises can use hosting services directly, or they can buy services from a service provider supported by the hosting company," said Bruce Caldwell, senior analyst for Gartner Dataquest's worldwide IT Services group. "Thus, hosting has a traditional retail market and a new, fast-growing wholesale market. E-business, speed to market and the IT skills shortages are strong drivers for retail and wholesale customers of hosting services."
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The wholesale market is where one service provider sells its services to another service provider. The retail market is where the services are sold to an end-user enterprise. Gartner Dataquest analysts said the wholesale market is driven by application service providers (ASPs) that want to focus on their core application management competencies by partnering with a reliable hosting service. The retail segment is driven by a strong demand among end-user enterprises for scalable bandwidth, compute and storage capacity for new and legacy application management.
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"The wholesale and retail markets are benefiting from a surge in startup companies and spin-offs in need of their services, as well as from small and midsize enterprises that are beginning to take advantage of more accessible and more affordable IT services based on hosting," Mr. Caldwell said.
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Gartner Dataquest analysts recommend that full service outsourcers, telcos, hosting companies and other vendors should join forces to forge the future infrastructure of IT outsourcing services together and allow each to invest in and develop their core competencies. These relationships to obtain bandwidth on-demand and facilities can take various forms, from alliances and mergers, to contracts for service.
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"Telecommunications companies with global networks and hosting companies with a focus on colocation should continue to build out data centers but must keep in mind that colocation is rapidly becoming a commodity," said Lydia Leong, principal analyst for Gartner Dataquest's Worldwide Telecommunications group. "These companies must take steps to ensure that they will be able to offer additional services through relationships with one or more hosting companies or IT outsourcers or through expansion of their existing systems integration and consulting capabilities."
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Additional analysis is available in the Gartner Dataquest Perspective, "U.S. Hosting Market: Preliminary Forecast." This document provides the forecast for hosting service in the United States and explores the various combinations that telcos, hosting companies, IT outsourcers and other are forming to jointly pursue the emerging market.
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To purchase the report or subscribe to Gartner Dataquest programs, please call 800-419-DATA, or 408-468-8009. More information about Gartner Dataquest's programs, descriptions of recent research reports, and full text of press releases can be found on the Internet at www.dataquest.com.
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Gartner Dataquest is the recognized leader in providing the high-technology and financial communities with market intelligence for the semiconductor, computer systems and peripherals, communications, document management, software, and services sectors of the global information technology industry.
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About Gartner
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http://www.gartner.com. Gartner subsidiary TechRepublic, Inc. ( www.techrepublic.com) is the leading online destination developed exclusively for IT professionals by IT professionals. Gartner, founded in 1979 and headquartered in Stamford, Connecticut, achieved fiscal 2000 revenue of $859 million. Gartner's 4,300 associates, including 1,400 research analysts and consultants, are in more than 80 locations worldwide. For more information about Gartner's industry-leading products and services, please visit us on the Web at
http://www.gartner.com.
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