Outsourced Hosting To Decline?

A recent survey of nearly 400 top IT managers by CIO Insights brings difficult news for companies hoping for growth in outsourced web hosting. "Demand for web site development outsourcing services is projected to drop from 42% last year to 30% this year, while demand for Web hosting should decline from 44% to 33%," according to the survey. What gives?

Many analysts have predicted that cost savings would drive future growth in outsourced hosting services for corporate web sites. That's only part of a complex picture. While some companies outsource their web operations because it's cheaper, others do so because they don't have adequate facilities, and still others because they lack the in-house expertise.

It's that third group that appears to be shrinking. The downturn in the Internet sector has made it easier (and in some cases, cheaper) to hire qualified web developers and IT staff that have been laid off from previous positions. As a result, companies that prefer to keep their web site in-house may find it easier to do so.

The decision to outsource requires that a company resolve a clash between two powerful corporate impulses - the desire to save money and the desire to control one's data. If the CIO survey is correct, those willing to pay a little more to keep things in-house may be finding it easier to do so.