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Singapore Web Hosting Outlook for 2008

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The Singapore Web Hosting industry is basically bouyant and is growing at a reasonable pace.  For 2008, our predictions for Singapore Web Hosting industry is that there are will be continued growth but uncertainty in the web hosting industry.

Growth will continue as Singapore economy is growing strongly, despite dark clouds on the horizon due to the sub prime crisis, the high oil prices which may cause the USA economy to splutter,  unless there is a recession in USA, we expect Singapore economy to continue growing.  Hence this will be beneficial to the web hosting industry in general.

We see more and more Asia Pacific countries as well as European countries setting up racks and servers in Singapore to serve their Asia Pacific offices as Singapore is one of the main Internet hub in Asia besides Hong Kong, this will further add on to the growth of the web hosting industry in Singapore.

However, growth maybe offset by the increasing number of web hosting companies who had priced themselves far too low to survive.  They may lower the fees even further or oversell even more to have the necessary cash flow to pay their debts.  This in turn will have negative impact on the industry depressing the web hosting prices and causing problems for proper and honest web hosting companies.   However, as Singapore Internet community matures, it is expected that they will see through the overselling screen and be cautious when selecting web hosting companies.   This year I see quite a few overselling web hosting companies folded and disappear but more appear, though I doubt that they will last for long.

Challenges ahead is the continued high oil prices which converts into higher electricity prices for the datacentres.  Such high electrical costs is already being passed on to web hosting companies.   Server racks take up a lot of electricity and hence the profits of web hosting companies will be eroded.  The oversellers will face far serious issues as their profits if any are already razor thin.   This will affect normal hosting companies as well and it will be a continued challenge to cut costs without cutting services.

Bandwidth costs in Singapore is expected to be high through 2008, I do not foresee any respite from that.   The costs of repairing for the Taiwan earthquake is largely passed on to ISPs which in turn pass on to web hosting companies.   Demand for bandwidth is expected to be high and with demand high and supply not being able to be increased that easily (you cannot build a submarine cable in 24 hours) prices are expected to remain high if not higher.

Labour costs in Singapore is expected to be higher as wages increase due to better economy.   Wages is the second highest component for a web hosting company besides datacentre costs and will affect the profit margins.

Therefore despite the continued growth in the web hosting industry in Singapore, it is predicted that 2008 will be a challenging year for the industry.   Only the fittest, leanest and meanest will survive.

Sad State of Web Hosting Industry

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I wonder if this is what is known as the Lemons problems, where the bad chase away the good. Take for eg a hosting company that promises unlimited everything versus a normal hosting company. Clients looking for bargains will take the unlimited company. There is no such thing as unlimited so they are more or less faced with lousy service.

Their expectations of hosting is thus lousy. They may not be willing to pay high prices for hosting but may pay medium prices. Such experiences occur again and again for the clients till they feel even medium prices is not worth it. So prices is lowered till the basement. As such good hosting companies are forced out.

I have seen more and more of such cases, more and more of respectable hosting companies forced to go to the basements. Really hoped those companies would stand firm and compete on quality, not quantity and on good services, not unlimited empty promises.

Prices of everything, electricity, labour, rentals are increasing, only hard disk prices and server prices are decreasing.  For those who just look at hard disk storage to sell is very myopic considering that this is only a tiny fraction of the overall costs.  You need to take the larger picture into perspective.  If you give larger space, you need larger bandwidth.  There is also a limit on I/O capacity, even if you have a 500 GB hard disk, you cannot use all of it, there will be bottle necks in the hard disk transfer rate.  You need to get high end SaS hard disks which have much smaller capacity and typically costs 3-5 times more than comparable SATA 2 hard disks.