Servervault Company Case Essay

2186 words - 9 pages

ServerVault Case

Servervault is a company in the hosting industry located in the United States which has been in operation since December 1999. A hosting company provides its customers with physical space for servers and supporting services. Servervault chooses only to operate in the managed hosting section which gives more value-added services to customers.
ServerVault attracts Internet-reliant and security-savvy customers. It also provides end-to-end solutions to customers. Servervault differentiates itself from competitors by offering high level of security protection. It also has enough bandwidth and power supply to ensure the Internet access is always available.
Servervault has ...view middle of the document...

The growth in GDP brings more business capital spending. (Please see Appendix A(3)). Some of these capital spending may be used to hire third parties to strengthen firms’ IT departments. Therefore, it is a good news for ServerVault since it may have more customers in the future.
Social background
An analysis in social background will help ServerVault to determine what customer needs. The number of internet users worldwide was only about 30 million in 1995, but it increases to around 280 million in 2000. Please see Appendix B. The popularity of internet offers businesses a new way to advertise and sell their products. Nowadays, people like to shop online so that more and more companies need reliable internet servers to handle complex transactions. Since ServerVault specializes in this area, the increase in the number of internet users is definitely good.
Microeconomic analysis
Competitors
Competitors are a major threat to the business. Therefore, to gain some insights of competitors’ businesses can help ServerVault to determine where it stands in relation to the industry. According to the information from the Bureau of Labor Statistics, ServerVault faced intensive competition in 2000, as the number of establishments in the data processing and web hosting industry was approximately 28000. However, that number decreases by 46% to around 15000 in late 2011. (Appendix C(1)). As the demand for web hosting services has kept growing, during the 10-year period, some firms in the industry become very large while a lot of them failed.
In 2000, the leaders in the managed section of the web hosting industry were Digex, IMB and Data Return.
The major service provided by Digex is largely the same with the one offered by ServerVault. However, Digex also has revenues from value-added services including firewall management, stress testing, consulting services. It also provides computer hardware, software, network technology, and systems management necessary to customers. In the year of 2000, it had revenues of 168 million and a net loss of 143 million. As it can be seen from its balance sheet, it has huge investment in capital assets. Its property and equipment account for 77% of its total assets. (Please see Appendix C(2)).
IBM operates in five business segments. Web hosting services would fall in the system and technology segment, which provides clients with business applications requiring computing power and storage capabilities. The total number of signed strategic outsourcing contracts valued at more than $100 million increases from 24 in 1997 to 58 in 2000. In 2011, the system and technology segment had revenue of 20 billion with pre-tax income of 1.6 billion. (Please see Appendix C(3)).
Data return also offers ongoing maintenance of hardware and software, including content back-ups and system upgrades, in addition to its web hosting service. It has total revenue of $7.1 million and a net loss of $12 million in 2000. (Please see Appendix C(4)).
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