Structure Research

The accountants have been punching away and the sector is ready to report its 4Q11 earnings. Digital Realty Trust was first out of the chute earlier this week and turned in a strong quarter. Many are soon to follow. But before earnings season gets into full swing, some of the privately held companies reported how they did with some basic disclosures. Typically private companies do not provide a lot of details and keep things close to the vest. But even with the limited information it is quite clear there was some healthy growth in the hosting space last year.

The SMB market continues to be a key driver as more organizations become receptive to the value proposition of the outsourced hosting model. But there are other factors at work. The desire for more managed services is raising existing customer ARPU and cloud infrastructure is helping bring a new audience to the hoster’s sales pipeline. For bigger firms, growth seems to straddle the 20% mark – give or take – on a y/y basis. But what is really encouraging is that smaller hosters are scaling up and growing 50-70% or even 100% on an y/y basis. It’s obviously easier to hit those rates when you are smaller but the growth speaks very clearly to the health of the sector. As we roll into 2012, the outlook is positive and there are signs the sector is shaking off the recession. If many cases, the shift to outsourcing alone has minimized the impact of the depressed macroeconomic environment. Earnings season will tell us if the trends we are seeing are truly in motion.

Speaking of earnings season, we will begin coverage here at Structure Research after skipping 3Q11 to get our site ramped up. We will be using our “less is more” approach and try to condense as much as we can and make liberal use of bullets.  For this quarter at least, we’ll only be covering the hosting companies that trade on the public markets: namely, Rackspace, PEER1 and Web.com. We’ll add to that list over the course of the next few quarters as we bring on resources.

A quick update: our site continues to be under development and we are happy to report that subscription-based access is almost ready to go live. In about a week or so (keeping fingers crossed) you will only be able to view about 20-25% of our content without a membership. The remaining 75-80% of our content will be designated premium and require a paid membership. If you haven’t yet committed to a premium content membership, but still want to evaluate, please let us know. We would be happy to put you on a free trial. When that time comes, feel free to email us at info [at] structureresearch.net.