How will the Credit Crunch affect The Hosting Industry in 2009

[Marks]

We know that a lot of smaller webhosting companies don't rely on loans from the bank and require very little investment from investment groups.

Will we see businesses consolidate in 2009? Companies go into liquidation and will more service be the factor to maintain the loyalty of the customer? Can we see the entry level service providers increase their prices to maintain their profits?

Thoughts from the Providers and the End Users are welcome :smash:

 

[Lesli]

I'm currently operating at a point where I don't require (or even use) business loans to stay in business, and am profitable. Not by a huge margin...but am profitable. I've actually added staff this past fall.

The business has grown slowly, but remained steady. TLM Network is expanding. We've never been flashy or amazingly hot-cha, but our customers are happy, our employees are happy, we don't have to eat cheap cat food to keep the lights on It's all about working and living smart - and building up your support base when times are good so that you can ride out the bad times.

I have no idea how long this recession will last. Certain pundits are saying that the US economy will be in recovery by this summer...but frankly, I'll believe it two months after it happens. The US economy has been operating on shaky ground for far too long - this won't be fixed in a mere 18 months. But we're ready for a protracted period of lean running.

Hopefully I'll see many of the same usernames in these forums when all this shaking out is done. You're my competitors - some more directly so than others - but I wouldn't wish disastrous business failure on anyone. Luck to us all, for our customers' sakes as well as our own.

 

[romes]

So far, business has been good, and I dont need or require loans as well. Like Lesli said, things wont get fixed right away, it takes time. As long as business stays as it is now, I dont think i'll have any problems

 

[Rick]

Perhaps the US Gov. will begin to nationalize the web hosting industry on top of the other industries :uhh:. Or, hosting companies could see an increase in customers as people lose their jobs and look for alternative ways to make money.

 

[AquariusRyan]

I think if anything we will see a increase in the hosting market as more business look to offset costs more and more costs and one way to do that is to start selling online. :agree:

 

[The Hosting Team]

I've seen new customers who want to learn about affiliate marketing; that probably fits the situation described above.

 

[cyberworldhost]

Perhaps the US Gov. will begin to nationalize the web hosting industry on top of the other industries :uhh:. Or, hosting companies could see an increase in customers as people lose their jobs and look for alternative ways to make money.

How could the US gov nationalize the web hosting industry? I think that the whole web hosting industry as a whole will keep growing for a long time to come. The internet is only 18 years old, its still a teenager

 

[handsonhosting]

Well similar to Lesli, we operate mainly as a cash business, however our credit cards are maxed every month in order to pay the server bills, and then are paid off 100% in the middle the month.

For a while, we were using a temporary line of credit each month to help expand or pay employees etc, but even these days, those lines of credits are being cut to almost nothing. The banks just are not lending, and keeping $35k on hand each month for bills is getting to be a chore!

None the less, the recession we really haven't seen much in our business. We still see a fairly constant growth of new clients (from an international scale), but we ARE seeing some of our lower end customers moving to our cheapest plans in order to concerve funds.

We even had a time when some of our resellers were closing shop and just turning over their customers directly to us to provide hosting to customers.

I really haven't seen much of the recession however in our business. Some companies starting to stuggle as they overextended themselves, but being too risky in ANY business will surely come back to haunt you in the end.

 

[PVT-Jordan]

I can see a number of ways that the economy is going to affect this industry. We've already mentioned how business is for a few companies, but you always have to consider the opportunity cost of being in this business as an individual. What are you giving up to run a business? Are you giving up a full time job? Could you have made more money somewhere else? While this time last year, it may have been a good time for you to chase your dream and start a business, perhaps you're also trying to start a family and you can't give up the income you used to see in order to build a profitable business that can support you and your family. There is more to the situation than just a loss of clients and revenue. It becomes more personal and opportunities always need to be weighed. If you can play in the NFL, why would you be a waiter? You might enjoy it, but it's not economically efficient for you based on your skill set. For some, being in this business is optimal, but for others (probably more) there are other opportunities available that can provide a greater income. Some may take advantage of that, while others may not.

As for the company side of things, business start ups are going to be fairly rare as the downturn progresses, so we will most likely see a decrease in new clients. Some clients may have to leave because they need to find a less expensive option or cannot afford to stay in business any longer and need to go back to a day job. Right now, you can't really predict anything.

It's definitely going to be an interesting ride for everybody regardless of what industry they're in. This is the time to really focus on making smart decisions and not acting marginally.

 

[bgsa2472]

for me business in the internet is not stable for your future plans.

need local business.

 

[genesis]

I'm not sure if the credit crunch will effect the Hosting Industry in a big way,well,but Its obvious to say that If It will effect the Industry,It wont be in a positive way.
However I think the Hosting Industry is sort of recession proof,not 100% but some what,however this will effect small and medium Agencies,especially Companies that are looking to come into business as there is need for Finance in buying the hardware.
But I still think there wouldn't be a large Shift in customer base.

 

[cyberworldhost]

I forgot where I read it but it said since the internet has open the web hosting business has increases 25% ever year. I am not to worry about the global recession. I believe it will continue to grow for a long time to come.

 

[Rick]

How could the US gov nationalize the web hosting industry? I think that the whole web hosting industry as a whole will keep growing for a long time to come. The internet is only 18 years old, its still a teenager

Uhhhh, the same way they are nationalizing the auto industry and the banking industry and the auto insurance industry.

 

[Artashes]

Uhhhh, the same way they are nationalizing the auto industry and the banking industry and the auto insurance industry.

I don't see this sort of thing happening with the web hosting industry, unless we have only few market players. Luckily, the cost of entry into this business is so low that even biggest companies are going out of business (which sounds like oxymoron by itself), there will be a few others ready to jump in for all the troubled customers.

 

[Rick]

I don't see this sort of thing happening with the web hosting industry, unless we have only few market players. Luckily, the cost of entry into this business is so low that even biggest companies are going out of business (which sounds like oxymoron by itself), there will be a few others ready to jump in for all the troubled customers.

I was mostly being facetious, but you are probably correct.

 

[Artashes]

I was mostly being facetious, but you are probably correct.

Ah, sorry, didn't read between the lines.
That's why I always suggest to use a when making a joke. With so much bailout talk I don't even know anymore when someone is making a joke or being serious.






















Not! :smash:

 

[ldcdc]

there will be a few others ready to jump in for all the troubled customers.

Yes, and it's not like the people have bought a car and can, if really necessary, keep using it until it all rusts away, and then get a second hand one. Hosting is more like gas, where they continue to need it each month.

 

[JamesCWilson]

There is little doubt that the credit crunch will affect the hosting industry, and it's also safe to say that it won't be much of a positive affect either. Some hosts will no doubt go out of business, or make some changes in order to keep themselves afloat.

 

[Artashes]

There is little doubt that the credit crunch will affect the hosting industry, and it's also safe to say that it won't be much of a positive affect either. Some hosts will no doubt go out of business, or make some changes in order to keep themselves afloat.

I disagree completely. The nature of the hosting industry is that if you know what you are doing - you will run a profitable business, so no outside investment is necessary. Hosting does not also represent a high cost for companies/people to get rid off and/or save on. If anything, it is a minor cost - considering the benefits. Nowadays, you can find hosting for as long as $5-10/month and it will give you, a small or a medium sized company all the basics it needs to keep online presence running.

The hosting industry will continue to enjoy 25%+ yearly growth (we reported on it earlier http://www.hostingdiscussion.com/blog/2008/11/01/hosting-market-to-reach-244-billion-in-2010/ ) I think this is an amazing sign for this industry and among many other niches, hosting will be immune to the credit crisis.

As I mentioned before, you don't need a large budget to start a hosting company. Most companies are still started by individuals who saved up a couple of thousand dollars and started it as a side venture. Even if you are going for a large datacenter-like investment, the news has also been good: everyone from ThePlanet to i/o Data Centers have raised $45 and $56 million for their new projects without much hassle.
http://www.hostingdiscussion.com/blog/2008/10/28/the-planet-attains-45-million-credit-facility/
http://www.hostingdiscussion.com/blog/2009/01/09/io-data-centers-to-launch-new-elite-dc-in-phoenix/

Hosting, in large part of it, is a data storage industry and it will be growing like mushroom in the next 5-7 years, especially when other businesses are not doing so well.

Anyway, that's just my personal feeling.