AT&T's announcement that it plans to add as much as 1.3 million square feet of Web hosting space over the next several quarters is a clear signal that the company means to be a major player as the hosting business continues to grow rapidly. According to International Data Corp. estimates, the Web hosting market has already passed $1 billion in revenue this year and could reach $11 billion by 2002, with AT&T trailing only IBM in market share.
"We plan to take leadership in this business," said Rick Stein, director of business development at AT&T Internet Services' hosting group. "The battle is engaged."
By year's end, AT&T intends to double the size of existing facilities in New York, San Diego and San Francisco - with as many as 26 new Internet data centers to follow in locations including Europe, the Asia/Pacific region and several major U.S. cities. The build-out will take advantage of AT&T's widespread real estate holdings, mitigating some of the project's cost and showing how existing infrastructure can be an advantage in the new economy.
Midsized and smaller businesses represent AT&T\'s prime market, but Stein expressed his intention to target large companies and "dot coms," too. "One customer might require 10 racks of servers, and another customer might need one," he said.
AT&T clearly has the resources - including control of a sizable international network - and the commitment to turn up the heat on companies such as Verio in that prime market. But becoming the host with the most for content-heavy, hard-core Web companies - the market staked out by Frontier and Exodus Communications - will be a far tougher task.
"You can't just go build raised floors, add some racks and bandwidth, and do the kind of custom, complex hosting that we do," said Paul Santinelli, vice president of technology at Frontier. "You need to put intelligence behind it all for real e-commerce."
Steve Murray, a research manager at IDC, agreed that AT&T must build a reputation in high-end hosting, but he saw a potential shortcut. "They'll have to prove their capabilities there, so you could see them partner with a more traditional IT [information technology] company or outsourcing provider for the core data center expertise," he said.
At a time when Frontier is building large hosting centers of 100,000 square feet or more, Santinelli is quick to boast that size matters. "You can only host four or five large customers in a 40,000-square-foot facility," he said, deducing the average size of AT&T's planned centers by dividing the announced square footage by the number of buildings. While AT&T has not announced any specific dimensions for the new facilities, a spokesperson said the company would be flexible to market demand. "If it looks like we're better off putting 100,000 square feet in one city, that's what we'll do."