5 Ways Hosting Providers Can Stand Out In The Crowd

Opportunities Bring Challenges

There are 33,000 hosting providers that have more than $1 million in revenue, a number that is only increasing as more companies move into the cloud, said Michael Mayer, executive director, worldwide channel at Peer1 Hosting, a Vancouver, B.C.-based global Web hosting providers, specializing in managed hosting, dedicated servers, co-location and cloud services.

While the hosting market is huge, the challenge will come as consolidation begins to take hold, he said.

"Assuming that price is going to be dictated by demand and supply, and the platforms are going to be somewhat consistent in the next couple of years and you have service levels that are pretty similar, you see an industry that is ripe for consolidation," Mayer said.

With that challenge in mind, Mayer offered five tips on how to best position a cloud hosting business to come out on top.

Differentiate Yourself

Hosting providers need to seriously think about how to differentiate themselves, according to Mayer. For example, Peer1 Hosting helped make itself stand out by laying fiber cables across Canada in the 1990s. He said that now that lets Peer1 Hostinghave lower costs and stronger networks.

"That put us in a really good position in the country," Mayer said. "It really helps you differentiate yourself and you don't have to pay for the cost of bandwidth."

Find The Higher Margins

Mayer compared the current situation for hosting providers to that of cable companies, which used to offer many similar Internet services. There was a low cost to entry and many companies entered the market at relatively the same level, trying to grab a piece of the profit. Then, the market began to consolidate as smaller companies were bought up.

Mayer said that he expects the same scenario for hosting companies in three to five years. To prepare for the shift, Mayer said positioning for higher margins is crucial.

"It seems to me that any competition is going to require you to find higher margin in the long run," Mayer said.

Pick A Market

There are a variety of hosting providers out there, ranging from small niche players to bigger generalist providers, and everything in between.

Niche players have the advantage of being able to charge a premium for their expertise, while bigger players have access to a larger customer base. The niche players can target something more specific, but they lose the benefit of a large marketplace. It's a trade-off, Mayer said. The important part is positioning the business accordingly, he said.

Make It Secure

Of course, the security of the data being hosted is top of mind for all hosting providers, said Mayer.

"If you're going to trust your data, which is probably one of the strongest assets you have, you are probably going to want to take a look at it to make sure it's up to your standards and your customers' [standards]."

Be Flexible

If you're not the "800-pound gorilla" -- what Mayer called the huge hosting companies -- then the key is to be flexible. For niche players, it is much easier to be nimble, he said. Peer1 Hosting is constantly growing its portfolio to make sure it stays competitive as the market changes. To fill in the gaps, companies can form partnerships with one another to supplement services and capabilities.

"It's an ecosystem that works pretty well," Mayer said.