Hosters start moving beyond the big three to SaaS

Nov 18, 2013

Guest Blog by Phil Shih, Structure Research Given the pace of the market’s development hosters have not been compelled to move very quickly. Many services still look the same as they did a decade ago. But that complacency is becoming increasingly dangerous as the shared hosting landscape beings to change.

Now the sector is starting to see real traction with the delivery of SaaS applications. Historically shared hosting customers have bought very few services and the big three were the domain name, email and hosting. Customers are now starting to move beyond that and buy additional services – primarily SaaS applications.

The move to an open standard for packaging applications and services is one of the key reasons why SaaS delivery has improved. Some continue to go it alone and stick with proprietary standards, but open standards are a good thing. It is going to make it easier for hosters of all shapes and sizes (and importantly, non-hosters as well) to get into SaaS and online service delivery. And that is precisely what the sector needs if it is going to stave off the scale and scope of large Internet entities. Parallels deserves a lot of credit for pushing standards.

A move to focusing on ARPU

In mature markets there is a tangible level of maturity that has been achieved. The low-hanging fruit continues to decline and at the same time the cost of acquiring new customers has increased. As a result, there has been a concerted effort to focus more on driving revenue from existing customers. There is less risk and the margins are better. It also reinforces the base – the more customers buy the more likely they will stay. Hosters are not focusing on the existing customer base exclusively but more resources are being allocated here.

Bundling of add-on services is becoming more common because of the importance of timing and because it just makes sense to purchase things together. For example, if you buy email, it makes sense to buy archiving and spam filtering as well. Hosters are making this easier to do by bundling everything into one package. This is a lot easier than selling one service at a time and is more margin-friendly.

Email to unified communications and consolidated App Suites

Hosters sell a lot of email and increasingly, various other SaaS applications. Historically most of this has been done on a standalone basis with customers buying them one by one and having various different logins. That is starting to change as we now see more integration of applications. We see this in unified communications and in the growing prevalence of application suites that combine capabilities that were previously separate into a single consolidated experience.

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