Cityreach International, which opened a $30 million (€31.86 million) technology facility in Dublin yesterday, has cut back its European expansion plans and is changing its business strategy.

Mr Sanjaya Addanki, chief executive of Cityreach, said the company had trimmed its expansion plans and would establish eight Internet centres this year, instead of the 20 originally planned.

The London-based company currently has four "live" facilities in Dublin, London, Budapest and Amsterdam, and will complete Internet centres in Germany, France and Sweden later this year.

Other facilities planned for Madrid, Geneva, Brussels and a host of other cities across Europe have been put on hold until next year.

Mr Addanki said the company would focus on selling space and managed services within its centres for the next six months, instead of setting up greenfield operations.

In a change of strategy, these secure facilities will offer co-location rack space and a host of managed services to Web-hosting companies and application service providers, rather than directly to corporates.

This would enable Cityreach to cut consultancy costs and offer its services to other Webhosting firms and established industry players such as IBM, Cap Gemini and Accenture, said Mr Addanki.

The company recently struck a deal with BT Ignite in the UK as part of its new strategy, he added.

Cityreach was positioning itself to win business as corporates strove to put their business processes online, said Mr Addanki. This would account for up to 90 per cent of spending in the sector, he added.

Mr Addanki developed the new strategy to offset the growing cash squeeze affecting the Web-hosting sector. Several colocation and managed services companies have been forced to delay stock market floatations and may get into difficulties, he said.

Only about half of existing companies would survive the year, and there would be major consolidation within the sector. he predicted.

Cityreach was expected to float in the early part of this year; however, volatility on worldwide stock markets has put the firm's plans back until the fourth quarter.

Mr Addanki said Cityreach would aim to list on the London stock exchange first, before seeking a secondary listing on the Nasdaq the following year to fund further expansion.

He said the firm had no cash problems, with a $150 million private equity funding round completed in September and a debt facility worth $120 million. He said the company would drive towards profit by fourth quarter. Cityreach will announce a number of customers in the next few weeks for its Dublin facility, and it is understood the firm has secured a deal with Baltimore Technologies for some of its security requirements.

Mr Addanki said the Irish Government had set up a good economic platform and the necessary infrastructure for e-commerce, but it must now move to aggressively market Dublin as premier centre.