The Yankee Invasion: Competetion for US Data Centers

However, the crash of the Nasdaq has been fatal to many of these businesses - while British technology companies seem to be immune to the adverse effects of the dot-com bubble. This is most likely because unlike America, Britain was able to maintain balanced, equal growth in both its infrastructure and technology providers.

According to a recent IDC report, the European Web hosting market will quintuple by the beginning of 2004. European businesses are beginning to focus on Web-level and application-level services, and, as a result, Web hosting is one of the economy’s fastest growing segments. Local network operators and carriers are beginning to realize significant gains through their hosting offerings - but the question is, can they survive an onslaught from their heavily financed American competitors?

Because of the current timidity of the U.S. e-commerce market, a number of major American providers are making a concerted effort to enter the U.K. hosting market, relying on their heavy technological outlays to give them an advantage over Britain’s existing providers. Late last summer, IBM announced plans to spend $1.9 billion on a group of Internet hosting sites in Europe … working in partnership with Dutch communications giant KPN/Qwest, IBM hopes to realize more than $4 billion revenue from 18 new European data centres.

US-based infrastructure provider Conxion Corporation is pursuing a similar strategy, working in cooperation with British telecom provider Versatel.

Having acquired Versatel’s Internet subsidiary SpeedPort, Conxion can integrate SpeedPort’s five-country network into its own backbone connection in order to create a fault-tolerant, transatlantic wide-area network (WAN). This network will provide data centre capacity for 10,000 European servers by the end of 2001 - and for ten times as many by the second quarter of 2002.

According to industry watchers, one factor that has fueled the advance of American companies is their managed hosting offerings. Especially in the younger European market, managed hosting is extremely lucrative - it allows customers to turn over complete responsibility for their servers to the host, and this makes its quite attractive to first-timers.

By way of contrast, colocation, which is the norm in the U.K., gives customers data centre space and Internet connectivity, and then leaves them to fend for themselves. Compared to managed hosting, the colocation model demands that customers pay higher upfront costs, and that they take on an at least rudimentary technical staff.