Teflon, my thoughts on EXDS as a net Gorilla:
<<The issue boils down to whether a business that's focused primarily on web hosting services may have a hard time living up to Gorilla/Godzilla Game standards.>>
Focus is considered a desirable characteristic according to Michael Porter's competitive strategy model (the other two Generic Strategies are Differentiation and Overall Cost Leadership), and each strategy has been shown to be effective in establishing competitive advantage.
In a research report from BancBoston Robertson Stephens analyst Richard Juarez, he sited 5 different layers for the internet, with the core being the (1) components, then (2) access, (3) hosting, (4) outsourced e-commerce apps, and (5) content.
It would appear that EXDS is filling the hosting space fairly quickly, and was in fact mentioned in a passing article (don't have a link) as the Gorilla in its field. I like to think of them as a Cisco of web hosting, given their role in establishing further another layer in internet real estate, and an impressive ability to hold onto those customers they sign up (e.g. 2% annual churn rate and 80% win rate for competing bids, taken from Morgan Stanley Dean Witter research report on 10/27/99, written by Camp, Flynn, and Cervantes). I make the comparison to Cisco because once companies staked their internet territory over Cisco's routers, they had little incentive going forward to relocate on a different vendor's routers. That low churn rate and a similar "if it ain't broke don't fix it" attitude is what makes EXDS plan so attractive; once the customer is there, it doesn't move away.
While I have not yet analyzed in too much depth whether or not the switching costs or barriers to entry in the industry would be considered high, one could make the argument that they are building "stickiness" to their model, and it seems to me that that is one of the core necessities to making it in the web world. On the subject of barriers to entry, I consider the low churn rate to contribute to that effect.
Rainier |
