As The Yankee Group predicts the end of colocation, service providers on the ISP-Colo discussion list look forward to an era in which small, profitable colo providers will do well.

ISP-Planet Staff [July 19, 2001]

The Yankee Group, a research firm based in Boston, issued a report last week that "the drive toward fully managed services. . . will ultimately result in the virtual elimination of colocation services."

"Hosting has performed strongly for the past several years due to physical undercapacity. Today there is enough physical capacity, but a strong undercapacity in services," said Andy Efstathiou, a program manager in the Yankee Group's E-Sourcing Strategies research and consulting practice. "Ultimately, we believe that successful hosting providers will be focused on managed hosting services, not physical plant."

The report is called. "Managed Hosting Centers: Focus on Service, Not Space." Efstathiou warns: "The market will react much more harshly on ill-considered initiatives, and therefore the cost of not getting it right will be higher in 2001, and the benefits for getting it right will be higher as well."

This analysis is roughly in line with today's commentary published on ISP-Planet in its ongoing "Best of the ISP-Lists" series of articles (see related articles, below). Hosting practitioners note that companies that did not overexpand will survive and grow.

Notes one list member, "Yes, there were bad business plans out there, and many providers leased buildings and installed billions in infrastructure, only to watch those buildings sit there empty. But not all of the companies out there have this mentality. Some of them know how to properly manage a company."

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