While consolidation rather than expansion has been the recent theme in the data centre market, growing demand for managed network services has encouraged new investment from both AT&T and BT.
Although it adds further capacity to a saturated market, analysts said the telcos' decisions could be explained by the growing outsourcing trend, continued growth in e-business, new regulations requiring better electronic records and corporate customers favouring large telcos or IT services firms like IBM.
Earlier this month, AT&T opened new centres in Hong Kong, France (Nice) and Australia (Sydney), increasing its total to 21 across three continents, including 13 in the US. It also plans to enhance existing support centres in Europe and Asia.
AT&T conceded that the move was primarily about filling gaps in its global coverage to meet demand from existing customers keen on a consistent global strategy. It is investing $300m (£191m) in infrastructure outside of North America.
"Europe and Asia are obviously key markets for global businesses with networking and applications needs," said Pat Traynor, AT&T hosting and managed services vice president.
BT, meanwhile, said in March that along with eLinia, a Welsh business investment company, it would invest £90m in a new, flagship data centre in Cardiff, although it received grants from both the Welsh Assembly and the Welsh Development Agency.
The telco said that although the market had consolidated, the factors driving the massive capital investment in data centres in the dotcom boom era had not.
"While there have been a significant number of shutdowns, mergers and buy-outs on the supply side, the fundamental demand for hosting services is still strong," said Pierre Danon, chief executive at BT Retail.
"Certainly the growth in use of the internet and e-business has not abated, and there is increased demand for business continuity."
The market has now reached saturation point, which has created significant over-capacity for current demand. But looking to potential future demand, said Katharina Grimme, senior analyst at Ovum, there is plenty of scope for growth.
"By and large, telcos and large IT services companies are in the best position to win managed services contracts," she said.
AT&T expects corporate cost cutting to help grow the managed hosting market by eight per cent in Europe this year. The telco reported that it had seen 100 per cent growth worldwide in 2002, when it signed 240 new customers in the final quarter alone.
Experts said claims made by providers - 15 to 30 per cent cost savings is a typical sales pitch - were not entirely accurate, but external providers did offer improved quality of service, such as 24/7 network support and better security.
Maxine Holt, senior research analyst at Butler Group, said the savings were characterised by how much companies would need to invest in-house to match the provider's improved service, but that outsourcing could also result in some bottom-line savings.
"There's less capital investment so that helps the bottom line, and improved customer service will also have a beneficial effect," she said. "In a lot of cases corporates would be better off going for managed services but many don't appreciate that."
But other experts warned that savings were only likely in the short term.
"In the short term, buying into economies of scale could save you money, but as a longer term strategy outsourcing sucks," said Mark Vanston, programme director at analyst Meta.
"If you have a streamlined in-house operation, I don't see how [providers] can save [users] any money other than through economies of scale, and you've introduced a new level of complexity at a time when greater regulation is about to be introduced," he pointed out.
Vanston said companies were more likely to save money by re-examining in-house operations, although he predicted that around 70 per cent of corporates would consider outsourcing to be easier.
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