Do you think web hosting market is over saturated?

No way. It is a run the mill business - unless you either get customers cheap (existing customer base) OR invest a LOT (with a small profit margin) it simply is not something with hugh profit potential in most cases.

OR: you find your niche. Cloud hosting seems to be the current thing.

You cannot compete with places like GoDaddy and Host Gator for hosting on price. It's just not realistic.

You would need to find a market niche like:

• Heroku - Ruby on Rails hosting
• Engine Yard - Ruby on Rails hosting
• Phpwebhosting.com - Early PHP focus
• PowerDNN.com - Focus on hosting DotNetNuke CMS
• ihostasp.net - ASP .Net hosting

Hosting really isn't just turn a computer on setup some FTP accounts and let it rip. You have at a minimum to worry about:

• Power (real hosting companies have battery & generator backup)
• Connectivity (need multiple sources of highspeed internet)
• Disaster recovery (must have offsite backups if trying to do it from your home)
• Hardware (drives, ram, motherboards) on hand incase of failures

I wouldn't even consider hosting from a residential location. Buy a dedicated or co-locate a server at a local facility. Some place like LiquidWeb.com or RackSpace.com

Then you have to think about:

• Marketing - where will you get customers
• Signing them up
  • Online credit card collection
  • Recurring billing (could use recurly.com)
  • Provisioning their accounts
  • Control panels (cpanel / plesk etc.)
• Many IP addresses available for clients who want SSL certificates
• DNS servers

But if you want to host some friends and family on a machine in your basement go for it! That is no big deal but it would be irresponsible for you to sell it as business grade.

Best bet is to carve out a niche and specialize in hosting a specific programming platform, or open source project. Like Redmine hosting, or knowledge tree hosting, or name 1 of a million popular open source products out there. At this point in the game you need a niche.

Have a web hosting company is, as you say, easy to start-up on the side. However, its not as easy as 'turn the computer on and watch the money come in.' At least not to do it right.

Things to consider:

• Security (Physical, Network, Intrusion Detection, Inter-Client Hosting)
• Security 2 (PROTECT THE DATA, PROTECT THE USER, RESPECT PRIVACY)
• Availability (Uptime Monitoring, Power Surges/Outages, Equipment failures)
• User Interface/Experience (Will they just have an FTP site?)
• Application Hosting (Will you offer LAMP setup or only a place for files?)
• Payment System (Will this be through PayPal, Direct Deposit?)
• Indexing (Did you hear about Blippy? Make sure you don't leak your users documents)
• Brand Image (If you just want to run something, no biggie. If you want people to flock to your site, you have to consider brand image integrity /loyalty and ensure nothing hampers it)

It doesn't sound like you want to build the next great web hosting company, but just something to do on your spare time - is that correct? If so, then you can easily through up a second server (may need to check with your ISP to make sure they don't have a clause prohibiting it with your Residential Account). If you want to make a killer product, then you will need to address some of the above. Don't worry about tackling them all at once, definately address the first 2 (Security) and go from there.

I think there are markets out there for specific purposes. Having a hosting site with disposable SECURE accounts would be nice (think: Hushmail for Hosting).

If your going to be running the server from your own house, consider your hosting business doomed before it has even started. You are honestly better off leasing a server and some server rack space that is properly cooled in a secure and backed up environment.

You as a hosting provider will have a few responsibilities such as reliability, performance, speed and versatility. another caveat is that if you are running a server from your own home, even with a dedicated internet connection, you're most likely not going to be able to provide a decent connection speed to run the server, not to mention costs associated with electricity, cooling and bandwidth.

Try this site: http://www.leaseweb.com/en - leasing a web server is probably your best bet and it'll allow you to upgrade much easier and expand out if you get big. The market is oversaturated without a doubt though.

"Starting a new one which offers more services for lower price."

Show me evidence people are changing hosts for more services. Clearly 99.5% of those services are solved by 99.5% of hosts already - the very reason there's a price war.

"Starting one seems very easy with very low cost with a single server."

Right...so why do it...anyone can. Washing cars would be a better business. Really.