Vancouver’s NetNation Wednesday took the next step in its plans to grow by acquisition in the Canadian Web hosting market.

The company said it had bought Cephren Hosting, the Web hosting division of Cephren Communications

in Brampton, Ont. NetNation will serve the former Cephren customers through its data centre in Vancouver. Financial terms of the deal were not disclosed.

Jan Gillan, NetNation’s vice-president and general manager, said the firm has been on an acquisition hunt since being purchased last June by Chicago-based Hostway Corp. Although Hostway was already active in the United States, the U.K., the Netherlands and Korea, Gillan said the firm saw Canada as the next area of opportunity in Web hosting.

“”Toronto is a place where we should have some presence,”” he said. “”If Cephren was a larger organization, perhaps we would have taken on their presence there and done more than just an account acquisition. But we are looking for more Toronto companies.””

Cephren’s decision to exit the Web hosting business will allow it to focus on its core competency of building data centres and technology complexes, Gillan said.

Lower-end, dedicated Web hosting is a business where accounts might yield only $50 to $1,000 a month, Gillan said. This has precipitated much of the industry consolidation.

“”The smaller entities are having a difficult time surviving,”” he said. “”They’re not able to lower their cost structure. The prices are being driven down, but they can’t get the costs down. So they’re selling.””

Although NetNation is only beginning to compete for the kind of enterprise services offered by Q9 Networks or managed services like Peer 1 Networks, Gillan said the firm is keeping is eye open for a way to get into those markets. This could have a major bearing on whether NetNation could continue to serve clients across Canada from Vancouver, he admitted.

“”The fork in the road is that if we plan to cobble up the lower-end hosting entities, we may not even need a presence in Toronto, or at most a sales office,”” he said. “”But if we plan to get into the managed hosting, enterprise hosting space, then we’re going to need a local data centre.””

Mark Quigley, an analyst with the Yankee Group in Canada, said NetNation would be wise to consider a more expanded portfolio.

“”Shared hosting is really becoming a commodity-type offering. You’re depending on the volumes to make it work,”” he said. “”Eventually, you want to be able to add on those managed services.””

NetNation was originally known as Canada’s largest domain name registrar as one of the 39 premier partners of Network Solutions Inc.


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