Webmaster tips & trix   contact | privacylink partnersfree website content
Home » Articles » Hosting
Articles

» Affiliate programs
» SE optimization
» Miscellaneous
» Newsletters & E-zines
» Promotion
» Web design
» Usability
» Domain names
» Create income
» Web writing
» Hosting
» Guerrilla marketing
» Accessibility
» Web credibility
» Data recovery

» Archive

 


Special articles

» Google tools/services
» Yahoo! tools/services


The host with the most

Author/s: Philip Hunter
Issue: April 26, 2001

Any e-business considering Web hosting is faced with a tough choice -- to co-locate or to outsource. Philip Hunter weighs up the options

Web hosting in one of its various guises should be considered by any enterprise embarking on e-business. The potential for cost savings and benefits through reaching customers and coming to market faster is huge, but there are also great risks. The principal danger is of choosing a Web hosting provider that is either unsuitable -- perhaps being unable to deliver the level of service you require -- or worse, about to go bust.

The dangers of the latter were demonstrated by the high-profile agonies suffered last year by PSInet, the company previously touted as the "Internet super-carrier", which is now threatened with bankruptcy. The problem with the Web hosting business is that to make it viable, major investment has to be made up-front in data centres, staff and network infrastructure, in the hope that the customers will then come flocking in.

Although rapid growth in Internet use continued through 2000 despite the dot-com debacle, PSInet suffered because it was over-ambitious in its projections and a little ahead of its time. Caroline Bryan, Web hosting analyst at Datamonitor, says, "It over-reached itself and sunk too much money into its IP network and datacentres, while the services did not take off quite as expected,"

This showed that size alone is no guarantee of success in the Internet service business, so the question is how can a potential Web hosting customer make sure it is entrusting its Internet shop window to the right provider. After all, in the case of full outsourced Web hosting, an enterprise might be relying on the service provider to collect a sizeable proportion of its revenue through e-commerce, as well as to deal with customers.

According to Bryan, hosting companies that have spun off from some existing large players in telecommunications or systems integration are better placed, because they have independent revenue streams and so rely less heavily on the goodwill and patience of their financial backers. The best UK example is BT Ignite, said Bryan, which although still losing money overall has a huge existing network infrastructure it can call on, as well as BT's IT solutions business Syncordia and its outsourcing company Syntegra.

This point is echoed by other analysts, such as consultant and analyst Ovum's ISP-watcher Henning Dransfeld. "ISPs with a telco background can leverage their telecom network and are in a good position to offer good quality of service," he says. This includes not only the big incumbent carriers such as BT, but also the likes of NTL with cable TV networks and in future others exploiting the unbundled local loop.

It can be argued that BT has over-reached itself with the huge investment in 3G mobile networks on which there will be no immediate return. There is also the little matter of the $1.25bn ([pound]8.5bn) it is spending jointly with US telecoms giant AT&T over three years in setting up the global network of at least 44 data centres for the Ignite Web hosting services. But the principal risk is of takeover rather than collapse, with hopefully less disruption to the hosting.

In any case, at least according to BT Ignite's vice-president of sales and marketing Perses Sethna, the company is on target to start making money on Web hosting by 2003. Some of the individual country businesses making up BT Ignite are already profitable, for example I.net in Italy, which recently had a successful initial public offering with BT retaining a 50.8% stake. But other Ignite businesses, including the UK operation, are still making significant losses.

Expansion

The Web hosting story began in the US with basic co-location services and has since expanded into more managed offerings, including up to full outsourcing and application provision. There is now a broad spectrum of services on offer, but most analysts assign these to just three categories.

For this reason, others such as Worldport only provide dedicated services. Few if any ISPs in the hosting business want to confine themselves purely to co-location because, as research director specialising in ISP issues at the Gartner Group Eric Paulak points out, it delivers a relatively poor return per unit of space and in locations such as the City of London, where property is expensive, it is only just viable.

Matching hosting providers to these categories is easier said than done, as suppliers are reluctant to admit that they are only in the co-location arena, even if that is all they are capable of providing. BT Ignite addresses the entire spectrum, but Sethna admits cheerfully that all their marketing effort is pitched at dedicated hosting because that is where the most money is to be made.

"If you look at the pricing for basic co-location within the UK, it works out at about [epsilon]100 ([pound]65) per square foot," says Paulak. This figure can be increased by perhaps 25% by offering some additional management, for example of the IP routers, but pales into insignificance when compared to the pickings that can be made with dedicated services.

The gulf is not difficult to estimate, As a rule of thumb, according to Paulak, a business-class hosting service with management will cost between [pound]100 and [pound]400 per user per month, depending on location and level of sophistication, with the average being around [pound]200. A typical Web server can handle 50 users and 12 such servers can be accommodated in a rack occupying nine square feet in a room. This equates to about [pound]10,000 per server per month, or [pound]120,000 per rack per month. Dividing by the nine square feet, this comes to about [pound]13,500 per square foot per month, which is a good 100-fold increase on what can be earned with co-location.

The result is that dedicated services are that much more expensive for customers, but when you put into the equation the cost of managing the facility and acquiring the necessary in-house IT skills, it may look more attractive. For a mid-sized company with 100 users, the cost of a dedicated Web hosting service would be [pound]240,000 per year on this basis.

So despite these costs, there is a strong swing in demand from co-location towards dedicated services, according to Sethna. But because of the huge cost differential, a number of larger enterprises that already have most of the human resources needed to run a Web site will at least start off with co-location to test the waters. To cater for this, many business sector ISPs, such as UUnet, will continue to offer co-location services for the foreseeable future, almost as loss leaders to lure customers into their Aladdin's cave of more lucrative services. As Bryan notes, "Web site hosting is one of the first things that a company is quite willing to outsource."

Dedicated services

Basic co-location is technically far easier to provide and is more of a vanilla service, with fewer differences between the contenders. But when it comes to dedicated services, some providers are more capable than others, both in their ability to offer the high levels of availability needed for e-commerce and in the range of options offered. BT Ignite, for example, can now go beyond full outsourcing of IT to embrace customer relationship management (CRM), "In this way we can provide not just the technology but surrounding services to get a company to market quickly," says Sethna.

This could appeal not just to end customers but also to aspiring application service providers (ASPs) which might have a sound proposition but not be geared up to handle CRM issues on behalf of its own customers. "So we are packaging this as a wholesale ASP offering," says Sethna. Some of the value-added services that a large player can bring embrace both IT and surrounding business issues. One is Web caching, which is particularly important for international multinationals, where a global enterprise might want localised content located close to the relevant customers for performance reasons. This in tarn requires the hosting company to have at least a satellite data centre in each country in which they operate.

But before getting carried away with value-added options, users should evaluate the ability of hosting companies to deliver maximum availability, says Worldport's vice-president of sales and marketing Frazer Hamilton. This cannot be achieved through resilient hardware and communications alone, but requires attention to the operating systems and applications as well. "For this reason we do not use a standard operating system," says Hamilton. "We harden the operating system to make it more secure, and also the applications." The essence here is to close unnecessary routes into the system that a hacker could exploit, using similar principles to those applied to military-grade software development. Now with large Web site hosting, there is a growing need for such hardened software in the commercial sector.

Another pressing need in Web hosting is better support for peering arrangements between providers. Progress is being made in basic connectivity to create faster transmission with better quality of service along end-to-end paths through the Internet, traversing the domains of multiple service providers. But what is lacking is the ability to retain information about content during such multi-ISP transmission.

"We think new content peering arrangements are needed to drive the industry forward," says Sethna. "We want to be able to swap content across the network and retain the intelligence and functionality so that, for example, information on the consumer is passed back to the source. Then an advertiser might be able to have granular information of who is looking at their content."

This may raise privacy issues, but that is another story. Without doubt though the next chapter in the hosting saga will address the content distribution question

About the author
HostingChecker.com - help for all your web hosting needs.

Latest articles

» Change your mind about an eBay bid?
We have all made choices in life that two seconds later we know we should take back. Especially when there is money involved this can become a problem.

» A simple way to create 7 effective autoresponder messages
Email is the Net's most powerful marketing tool. And autoresponders are the best idea yet for marketing with email.

» 7 ways to drive laser-targeted traffic to your website
Getting people who matter to see one’s website is a difficult undertaking if he tries to consider the fact that there are rivals everywhere waiting to pin him down.

» Website valuation: Why standard website pricing methods will emerge
The market of buying and selling developed websites is becoming more and more liquid each day.

» One way links are better than reciprocal links
You probably know by now that where your website ranks in the search engine rankings dramatically affects how many visitors you have to your site. Did you also know that you can change where your site is ranked by being proactive and getting as many one way links to your site as possible?

» How to make visitors stay at your website
The very first thing which you should provide the visitors with is some free interesting reading material.

» How to make your visitors click your ads
Here is a simple solution; Convert your banner advertisement to look like a text advertisement!

» Offline advertising should be a part of your online strategy
Day by day, online business has become more & more complicated and competitive.

» How to sell traffic
Selling the traffic arriving at your site is a good method to increase profits from your portal.

» Make money from online auctions
Online auctions have the best benefit of a vast platform. Your product is viewed by loads of people & hence there is more possibility of finding a suitable bidder.

» Groupware explained in easy terms
Groupware is a term used frequently to describe collaborative software. Groupware is application software that integrates work on a single project by several concurrent users at separated random workstations.

» Timely back up can save you from disasters
Few things which people often back up are e-mail addresses, bank records, photographs, personal records, software’s, music etc.

» Why should one go for autoresponders
Autoresponders are programs which get automatically executed in particular situations.

» Become your own boss - Start your own online business today
A survey conducted by SBA states that two third of new business survives at least two year and about forty four percent survives at least four year.

» Express your thoughts - Creating your own blog!
What exactly is a blog? Technically speaking it is a journal or a newsletter which is regularly updated and can be used by any one.

» Pop-up ads - To be or not to be?
According to a study conducted by the Bunnyfoot University, “The Efficacy of Pop-ups and the Resulting Effect on Brands” Internet users feel harangues and harassed by pop-up ads.

» Why content is king on the Internet
The advantages that Internet holds over the rest of the other communication mediums should not wasted because of the inability to find a comprehensive plan that will bind all these faculties together.

» 10 niche marketing tips
In our increasingly driven consumer economies, the average customer is bombarded by choices. With increased saturation of the market, companies look towards niche marketing to search new, ever-evolving and sophisticated consumers.

» Using free traffic exchange
These days internet has emerged as both, a market and hub for marketing. Unlike the ‘brick and mortar’ world where large manufacturers manage to squeeze out the market bases of smaller companies, the internet provides haven like the free traffic exchange.

» Ten ways to drive traffic to your website
Developing a web site and then letting it grow is like planting a tree and then nurturing it.

» Marketing through keyword articles
One of the most effective tools of Internet marketing is the use of keyword articles.

» Want to make money online? Market a service to businesses
Don walked across the street from his house to mine to announce he had finally retired. "But I'm not ready for the golf course," he said. "I want to make a living on the Internet. What can I sell?"

» Web site design mistakes - Database parameters in URLs
Creating a web site takes thought, planning and execution. Unfortunately, many designs are dead in the water before they are even published as far as search engine optimization is concerned. Whatever you do, avoid these critical mistakes.

» Alexa Toolbar - The ultimate internet tool
There are numerous tools available on the Internet to assist online businesses. A valuable tool that you should use is the Alexa Toolbar. Even better, this tool is free.

» Web site design mistakes
Some wise human once said "Learn from the mistakes of others. There isn't nearly enough time to make them all yourself." Hence this article. Here are five of the most annoying and common web design mistakes.

» Abandonment - Why visitors don't turn into customers
Every good Internet business understands the value of conversions versus hits received. Far too often, businesses become fixated on the hits they are receiving instead of monitoring their hit to sale conversion rate.

» Creative search engine optimization - A case study
Search engine optimization this and search engine optimization that. You read and hear about it all day, but what about your site?


Tools & services to enhance your online business

» Site Build It!
Over 100,000 small businesses of all kinds outperform larger, well-financed competitors. Read about this all-in-one site-building-hosting-marketing system of tools that delivers results.

» Secrets To Their Success
Take a private tour of two "Mom & Pop" web sites every month that earn $100,000+ a year... and discover the exact step-by-step strategies they have personally used to generate these massive profits.