One year ago, data centers were not available and everyone was trying to frantically build it out in order to meet demand. A lot of vendors bit off more than they could chew when they started building data centers, which is capital-intensive. It takes anywhere from six months to 12 months to get return on investment. Lewis says the market leader, Santa Clara, Calif.-based Exodus Communications Inc., has cut back on its growth plans. Exodus recently announced it's reducing its staff by 15 percent, or 675 jobs.
Companies have a couple of choices.
They can sell space or partner with someone. Lewis says the Internet hosting marketplace is a buyer's market now because companies are canceling plans to build data centers. The market is not getting enough traction. Everyone is tightening up their belts and holding on to their cash. Craig is founder of Fourthstage.