This recent article by Pingdom, got me thinking about the changes in the Irish hosting business, specifically in the shared hosting business here over the last 10 years.
10 years ago, the hosting landscape in Ireland was dramatically different. The only providers of hosting back then were Eircom (the incumbent telco) and small independents like Webworld and Digiweb. (My own first Irish hosting account was with Webworld 
)
In 1997, the Wayback Machine shows Digiweb were selling hosting for roughly €40 per month, which bought you 25Mb of disk space and 1 pop3 email box and 200Mb of bandwidth per day (roughly 5GB per month) [ http://url.ie/9rm ] It’s worth noting that at this time, Digiweb was a hosting company, not a broadband telco as they are now.
At around the same time, Webworld was offering plans from just under €20 per month, offering 30Mb of disk space, 1 pop3 mailbox and ‘unlimited’ traffic (albeit with a once off set-up charge of nearly €65[ http://url.ie/9rn ]
Eircom were the largest host in the land, with pretty much all of the market that wasn’t already hosting offshore, although finding out exactly what they were offering or for how much is rather difficult!
Fast forward 4 years to 2002 and Hosting365 has been launched! [ http://url.ie/9ro ] The basic offering was 100Mb disk space, 100 pop3 email accounts and 2000Mb transfer per month for €12.95 per month. At the same time, Irish Domains were offering 25Mb space, 5 mailboxes and 1GB data transfer for €12.50 [ http://url.ie/9rp ] , Webworld were offering 50Mb and 5 mailboxes for just € 7.50 [ http://url.ie/9rq ] and Digiweb offered 100Mb space and 3 mailboxes for €14.95 per month.
So, skip forward to 2008 – ten years since internet hosting came to Ireland, and how do things look?
Well, for a start, the providers that were here ten years ago are still here, albeit Digiweb now a Telecommunications company (that does some hosting on the side) and Webworld and Irish Domains relatively small providers ( in about 11th and 8th place in the market, according to WebHosting.info ) The current market no. 2 – Blacknight, began in 2002 as a web design and hosting service provider (they dropped the web design soon after), and was for a number of years a customer of Hosting365, striking out on their own around 3 years ago.
In terms of the competitive landscape, Hosting365 rose rapidly to dominance, now with over 35% of the market, and larger than the next 5 or 6 providers combined and continuing to grow more than 4-5 times faster than the next fastest growing competitor. (Following a market evolutionary style common with many EU countries).
So, what do hosting plans look like now? Well, we started offering 5GB space, 50GB transfer and 250 mailboxes for €3.95 per month about a year and a half ago – this is for a fully featured plan with lots of domains, databases, etc. If you take a look around the sites of Digiweb, Webworld, Blacknight you will see a remarkable similarity in specification and pricing.
So what happened in ten years of ‘high tech’ innovation and development? Well, for shared hosting, nothing, nothing at all. It has become the archetypal commodity service. Prices have decreased tenfold in ten years (from nearly 40 euro per month to around 3 euro) while the volumes of space, mailboxes, etc, has increased two hundred times! (from 25MB to 5000MB). It’s worth noting that during those same ten years, one could easily assume a decent rate of inflation, which actually makes the decrease even sharper.
What does this mean? Well, for the consumer, it means you can avail of huge amounts of resources and services for a really tiny cost (less than you’d spend having lunch for two at a coffee shop for a years service). It also means that, to remain competitive and differentiated in a commodity world, customers are now getting 24/7 support, a wide range of supported platforms, tools, free scripts, auto installers and much much more.
For the provider, this relentless shift to commodity means a tightening of margins (in some places a removal of margins, hence you see hosting providers branching into broadband, for example). The cost of buildings, electricity, people and almost all of the things that really contribute to the cost base of a host have increased steadily in the same period and increased dramatically in the case of power. Inflation has been running high but none of these costs have been passed on to hosting customers.
The result is classic commoditisation of a marketplace. Let me give you my ‘5 year prediction’ on the shared hosting business in general.
- The market will consolidate to a relatively small number of companies. A bit like car manufacturing today, there might be a few brands, but behind them will be a small number of companies. The overselling levels and infrastructure requirements will squeeze the market down to a few core providers, with any other providers reselling.
- Also like the car business, there will be a number of successful niche providers, catering to a specific group or demographic (Premium style hosts).
- Services will widen into more ‘application’ style delivery. As all services move to the cloud, the provision of a small businesses website will become more intertwined with the delivery of email, collaboration, online business, crm, intranet, extranet and other tools that will be delivered as a service. All built on the same building blocks of ‘webspace, email accounts and bandwidth’ but sold for specific purposes.
In Summary
* Big hosts will get bigger
* Smaller and undifferentiated hosts will be swallowed by the Big hosts
* The market will continue offering more and more (space as well as features and functionality) for about the same price
* The specialised SAAS providers (Salesforce, Sugar, Zimbra, Basecamp, etc, etc, etc) will continue growing and start also consolidating.
* Few providers will own their own data centres.
