ASP Advisor hed: Web hosts with the most dek: managed Web hosting makes life easier in IT. by Don Fitzwater

While some companies still prefer to deploy their own Web servers and manage their own networks, a growing percentage of firms are choosing to outsource their Web sites and supporting infrastructures to providers of managed Web hosting services. According to the analyst firm Aberdeen Group, outsourcing solutions are now favored by about 35 percent of Global 2000 companies-and are expected to become the norm among 60 percent of Global 2000 companies by 2004.

Among small and medium enterprises (SMEs), long characterized by a reluctance to entrust Web initiatives to external service providers, outsourcing is catching on in a big way. Again, according to analysts, the percentage of SMEs opting for managed hosting services is expected to grow from 40 percent today to more than 70 percent in 2004.

In short, managed hosting is coming into its own as an approach to realizing e-business objectives. Managed Web-hosting service providers are increasingly perceived as a knowledge resource that is hard to replicate inside the enterprise. This, in turn, creates the expectation that managed hosting providers can get the job done faster and more reliably.

Managing the perfect solution

The interest in using managed Web hosting services is creating problems for service providers and prospective customers alike. Enterprises, indoctrinated by vendor marketing hype and frightened by the horror stories in the trade press, are expecting and asking for service-level agreement guarantees that are nearly impossible to deliver. And providers are trying to meet these expectations.

For example, companies frequently approach managed hosting providers with requirements that include bulletproof security, zero downtime, and full redundancy with real-time database mirroring across multiple hosting facilities separated by great distances. They want nothing less than perfect uptime and real-time failover. It is deliverable, but at a cost. Many companies have found that high availability and other attributes sought from a Web-hosting service can be obtained-but only for a price they really aren't prepared to pay.

Providers then find themselves in the awkward position of having to adjust customer expectations downward without actually saying no. Thus diplomacy, as well as technical competency and competitive pricing, are factors that separate the winners from the losers in the managed Web-hosting space.

You get what you pay for

The current market is characterized by fierce competition (and frequent changes in business models) as providers strive to differentiate themselves from each other.

The most obvious difference-makers are quality and price. Managed Web-hosting fees vary widely. So does the value that a company can expect to obtain for the service being purchased. As you would expect, there is a tremendous difference between the service quality of a $1,000-per-month managed hosting service and services that cost $50,000 per month or more. At the low end, customers may not receive service features such as dedicated technical-support personnel, integration services, or database administration services.

Some providers define service quality by stressing the difference between shared-hosting and dedicated-hosting models. In shared-hosting solutions, certain hosting infrastructure elements, such as database services or back-end storage, are shared among many customers. Companies that offer dedicated-hosting arrangements, in which the entire hosting platform and its support resources are dedicated to a single customer, consider themselves the quality service offering. As such, they tend to charge more for their solutions than do providers of shared-hosting services.

While dedicated services are probably a wise choice, you should keep in mind that nowadays, most providers use shared-hosting models to some extent. Virtually all managed-hosting service providers share at least some network resources among multiple customer installations (even when providing service based on "dedicated" servers). Providers are driven to the model by a fact of life well understood throughout the xSP industry: The more that infrastructure can be shared, the more likely it will yield economies of scale and reduced operational costs as the number of customers grows.

In the end, the provider's solution architecture must do more than deliver cost benefits to just the provider (that it may or may not pass along to customers). The solution must also deliver the benefits that the customer expects from the managed Web hosting service as a whole.

Who to turn to?

So you've decided to go the managed Web hosting route. Now what? Anyone who has been a regular reader of this column realizes that the managed-services marketplace is, at best, a confused (and confusing) place. So when it comes to choosing a managed Web-hosting provider, how can you proceed while protecting yourself at least a little bit?

Obviously, you need to look at the quality (and coverage) of the service-level agreements offered by prospective providers, in addition to the technology employed, feature sets, and pricing issues. The next things to look at are their business plans and their funding.

Provider failures can often be attributed to neglect of basic business principles. While technology is at the heart of xSPs, companies still need to adhere to sound basic business practices to succeed, just as any brick-and-mortar company would. While a provider is not likely to share its actual business plan with you, it might be willing to discuss parts of it-its goals and projected growth rate (and the elements it believes support that growth rate figures). And it doesn't hurt to do a little research on the company principals, track record (if any), and publicly stated business philosophies.

Then you should ask about how well funded your provider is. According to Christopher Knight, founder of New York-based ISPLists.com, failure to capitalize properly is an all-too-familiar pitfall for providers, since initial funding for xSP startups often is allotted to getting the network up and running, leaving little or no money for customer acquisition later. In today's tight venture capital market, a provider that has managed to secure decent funding is probably a much safer bet than one who hasn't.

The biggest might be the best

Lastly, look for a provider who has been around. A successful hosting operation that has been able to survive and grow throughout these tempestuous times is probably a good candidate to consider. Sometimes the merger of a couple of these players will result in the closest thing you can find to a sure bet in the industry. The executives of two national hosting companies-Los Angeles-based HostPro Inc. >www.hostpro.com< and Atlanta-based Interland Inc. >www.interland. com