Investors Exert Pressure On CenturyLink To Exit Web Hosting

Thu, 15th October 2015, 14:10

A couple of news stories making the rounds have caught my eye - although only one was even remotely connected to web hosting. The first involved telecommunication company CenturyLink, which is considered number three in the US local phone company market behind AT&T and Verizon. Back in 2010 CenturyLink bought data center operator Savvis for $2.5 billion. It appears the investment community is pressuring the company to sell the hosting aspects of its business despite management adamant assertions that colocation and hosting are key to differentiating between players and a integral growth driver.

Investment banking firm Cowen & Company analyst Gregory Williams reports: “CenturyLink and other telecom firms have struggled as newcomers to the cloud computing business. Since acquiring Savvis the hosting product segment could be seen as a disappointment as the segment experienced elevated (customer) churn, a $1.1 billion asset write-down in 2013 and grew just 4.5% in 2014" (editor’s note: customer churn is a driving force behind clients writing nasty reviews)

Last year it was rumored that CenturyLink was flirting with the idea of acquiring Rackspace. Verizon has also jumped into the hosting market when it acquired cloud service firm Terremark in 2011 for $1.4 billion.

Also grabbing headlines for its attempts to appease investors was a second story about a major big box retailer encountering headwinds and diving stock prices down after delivering news of less than stellar quarterly earnings. The company is proposing a stock buyback, and instigating a comprehensive plan looking to ensure every aspect of their operation is streamlined to produce maximum returns.

While strategies such as this may be all routine fare in the world of corporate giants - agile maneuvering necessary to retain the trust of their corporate bloodline, the investors. That’s not to say that companies don’t have a vested interest in maintaining some level of customer satisfaction.. they do. But one can’t help but wonder whether something has been lost in the realm of corporate consolidation, mega web hosts, IPO’s, and private equity funds. Have the clients, and the adage ‘the customer is always right’ been reduced, at least on some level, to an expendable commodity like the servers they’re hosted on… traded to the highest bidder.

There is no disputing that deep pocketed corporate giants do have advantages envied by their smaller web hosting counterparts. A consistent offering achieved through volume buying power, marketing budgets, and the ability to infinitely scale. But to survive and flourish in the highly competitive web hosting and tech industry requires more. It necessitates a focus on quality, service, agility, and a innovative spirit seldom found in the bureaucracies of giants.

Customer may not always be right, but firms of any size that fail to embrace the supposition that a relationship exists between a client and their webhost will soon have more issues than just its stakeholders to contend with… it will have churn.


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