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Once, the world was Web Hosting's oyster. Web Hosting was the great enabler, the one behind the wheel driving the new economy. Web Hosting didn't call you, you called him, and he liked it that way. Everybody loved Web Hosting - the venture capitalists, the investors, the dot coms, the companies that wished they were as hip as the dot coms - Web Hosting lined his pockets and hit the town with their money.

Web Hosting was arrogant. While the dot coms crashed and burned, Web Hosting lit cigars with hundred-dollar bills. While the stock market was plummeting, Web Hosting was ordering another round of martinis.

Web Hosting was untouchable.

Web Hosting is dead.

R.I.P. Web Hosting, 1995-2001. Some are nostalgic. Others are indifferent. Most never really got to know Web Hosting at all.

Web Hosting embodied an attitude, an air of invincibility that no longer exists. What's left in the wake of Web Hosting is something different. At the top, there's been a dramatic shift of focus. At the bottom, a new generation struggles to emerge, one that will decide the fate of an industry. If there is optimism, it is cautious. The lessons learned by the rest of the tech sector finally caught up with Web Hosting. You live fast, you die young, you end of up on fuckedcompany.com. This is a look back, and a look forward.

Not a Bang, But a Whimper

Web Hosting's business model looked good on paper. It would cash in on a proliferation of a bizarre breed of company called the dot com. Dot coms had catchy slogans, tons of cash and geeks who knew their way around server rooms - the Internet was, after all, the very plane on which they existed. And, those without knowledge of the Web's infrastructure needed relatively little in terms of support. They all needed rack space, web hosts were happy to oblige, and soon their pockets were stuffed with VC money as well. Web Hosting was getting fat off a high-tech real estate play, and data centers were thrown up around the world like fireworks stands on suburban street corners in mid-June.

"Dot-commers, in a sense, generated a terrific need for space, bandwidth and power, and that's what they got," says Phil Simmonds, senior director of product marketing at managed service provider Conxion. "Many of them are gone."

As quickly as the ceiling rose, the bottom fell out of the dot-com market. It seems pets.com just never really appealed to that many people after all. Online advertising fell mercilessly out of the stratosphere and back to the ground. Budweiser and Pepsi reclaimed TV spots during Super Bowl Sunday. Bruised, but not bloody, Web Hosting was forced to shift his focus. Enterprise businesses were migrating onto the Internet. "Bricks-and-mortars" became a buzz word, VC cash slowed but still flowed steadily, and data center construction continued. Web Hosting still ruled the Internet world, and if he wanted to play in the land of enterprise, he would.

The real estate play was given a nasty name:

colocation. Web Hosting was the managed service provider and the high-end host. It was publicly held, and it would still make investors rich. Enterprises would line up to sign on the dotted line.

Or so Web Hosting thought.

On July 31, USA Today sounded Web Hosting's death knell with a Money section cover story. The headline: "Web-hosting industry burned by dot-com woes." The gist: that the "so-called Web-hosting industry" had been "stopped cold."

The romance was gone, replaced with the type of schadenfreude small and medium-sized business owners had reserved for those brash, burned dot coms. The Internet industry in general was a shady one, full of liars and thieves. Suddenly, the general public, those with businesses not yet online, and those calling the shots at boardroom tables considering outsourcing mission-critical business operations, didn't trust Web Hosting. And suddenly Web Hosting, with millions of square feet of empty data center space already constructed and millions more being built, badly needed their business.

"What the MSP was hit by was not a bad idea [in concept], it was a great idea," says Paul Santinelli, founder and CEO of NOCpulse, a systems management software company. "The market came down so fast, and so furiously, that would-be customers either went out of business or trimmed their operations down to a bare-bones minimum. It had a ripple effect."

When hosting companies were in demand, VCs gave them a round of funding, with the condition for the next round being that the first round was used up. That fueled a mindset that strayed far from the fundamentals of building a sound business.

"The problem was everybody had to get big fast, and no one bothered to sit back and look at the economics and say is this a good business, or are we growing too fast and outpacing customer demand," says Santinelli. "It became a game of raising money, spending it, getting big fast and raising more money at a lost evaluation. You weren't evaluated on how great a company it was, or how great the technology was."

By the time everyone did step back to survey the scene, it was too late.

On April 9, 1999, Exodus' (EXDSQ) stock hit its high of $189 a share. On Sept. 26, 2001, the industry's biggest player filed for Chapter 11 bankruptcy protection, with the stock halted at 17 cents a share.

The sector, which had always struggled with its identity, now had a public face and a bad reputation. Maybe Web Hosting wasn't so beloved after all. "Everyone hated their web host," says Amanda Bean, one of three founders (and three employees) at recent startup Hedgehog Hosting. "But they were all stuck."

Enter the Enterprise

When the phone rings these days at DataCentersNow, it's usually not a Managed Service Provider on the other end looking for data center space. Web hosts don't have the funds - or the customers. Instead, those looking for facilities are the very customers who used to sign contracts with high-end web hosts, back when outsourcing a company's infrastructure was the hip thing to do. It seems Corporate America has begun cutting out the middleman.

"What we've seen in the last 60 days has been Corporate America - [as well as] the federal, state and local governments - playing a much larger role in the industry," says DataCentersNow Director of Marketing Jason Britton. "We've seen companies who were participating in the managed service arena in some form or another and who got burned. They're realizing that, while it's always going to be OK for front-end applications to be hosted and run by somebody else - and I mean web sites, email, etc. - the back end is so critical to business and success that somebody wearing the company logo on his shirt has got to be involved. Managed services don't give [a customer] that opportunity to be involved."

Web Hosting is on the ground. Corporate America is kicking its corpse.

But, Britton stops short of saying that the MSP model is doomed to absolute failure. He calls it a "good play," and says that there will always be a market for it, but that roughly 10 percent of businesses - the cream at the top - won't outsource important operations.

Meantime, his company is trying, so far with some success, to differentiate itself from the glut of data center providers that jumped aboard the build-out bandwagon just a few short months ago.

"We serve as a bridge. Where colo doesn't provide you the infrastructure, security and control you want, and managed services at the other end eliminates that control," DataCentersNow is in the middle, he says.

"Nobody's done this before," Britton continues. "You hear all the gloom and doom about the market where X million feet are vacant, but [the question is] what's the definition of data center space? It's mission-critical space. A Wal-Mart is not where I'm going to put my server, and that's what people have on the market, and shame on the real estate market for not being more sophisticated."

DataCentersNow is targeting the Fortune 1000 market, and those are the companies who have come calling. CEO Chris Epstein calls it "outsourced insourcing." The company has completed its CyberFortress2 in Manassas, Va., an outlying Washington, D.C. suburb, and in three weeks it saw interest from 30 enterprise customers.

On Oct. 2, in a move geared squarely toward the enterprise, the company announced it had purchased 425 acres along the Dulles corridor for $23 million. The southern 100 acres will be called CyberPlex@Dulles - of which 860,000 square feet are set aside for data center space, and 2.4 million square feet will be used for office space. The complex is DataCentersNow's first integration of office and data center space.

"CyberPlex@Dulles will set a new standard for the way that office parks are designed in the future," Epstein said in a company press release.

But the speed-to-market dynamic that characterized Web Hosting is dead and buried as well. CyberPlex@Dulles will be a 10-year project.

Says Conxion's Simmonds: "The traditional, old-economy companies have built their businesses for years on [choosing] a provider that's been around. It's, 'What's the value of the services, do I use what I've got, how much time will it save me?'

"It's a formal review of the pros and cons, it's part of a decision process based on a number of parameters."

In April 2000, DataCentersNow broke ground on its original CyberFortress in Loudoun County, Va. By the time it leased the facility in July 2000, it had undergone a 58-tenant bidding war and the company had received 11 written offers.

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