E-Business Data Doctor: Managed Hosting

SAN MATEO (05/15/2000) - By now, most dot-coms have figured out that when it comes to hosting the data centers behind their transaction-based Web sites, it's best to leave it to the experts. But the harder decision to make is this:

Who manages the Web site and its back end? When your Web site is your business, and your entire company's viability rests on that site's dependability and performance, it's not a decision to be taken lightly.

Many companies, particularly start-up dot-coms, are looking to their Web-hosting partners to provide layers of management services on top of the basic hosting structure.

Operations managers at Web companies cite the prohibitive expense of hiring their own engineering teams, compounded by the difficulty in finding IT talent in this tight employment market, as the main reason for outsourcing data-center management. And many Web companies just aren't interested in supporting their own data centers; they'd rather focus on their core competencies, be they selling fishing equipment or offering online business services.

But the managed hosting trend is still new, and not for everyone. Companies that are used to being able to physically touch their servers and get involved in every aspect of their management will likely be uncomfortable with the managed hosting model. Others just don't want to trust this crucial task to an outside company. For these sites, the older co-location model offers them the opportunity to house their data centers with a hosting company but still be able to perform all the necessary management themselves.

A match for the unattached

It's the newborn dot-coms that appear to benefit most from managed hosting for a few key reasons: They tend to be led by a small group of entrepreneurs who are very focused on the company mission and don't want to be distracted by technology issues, they usually need to have a Web site up and running in short order, and they don't have legacy systems that need to be integrated.

"We're a bunch of entrepreneurs with restaurant experience -- we don't know one thing about keeping a Unix environment up and running -- so we decided it would be prudent to outsource," says Mike Welsh, vice president of operations at TheSauce.com, in Chicago. The site handles back-end tasks such as payroll and ordering for independent restaurants.

Last fall, TheSauce.com evaluated several managed hosting companies, including Digex Inc., Exodus Communications Inc., MCI WorldCom Inc., and Concentrix Inc.

They narrowed down the candidates to Digex and Exodus and asked both service providers to come up with a managed hosting implementation plan that would take only 20 days. Digex won.

"Co-location is for when you're not quite ready to let go of the fact you can still go in and kick the machine -- it's outsourcing with training wheels. We wanted to outsource," Welsh says.

Filling in your talent gap

For Gazelle.com, a Web site launched in February that sells legwear, the issues at hand were finding and affording an engineering staff to manage its data center.

"Our concern came to be that we didn't want to have to staff engineers right near our servers," says Michael VanDercreek, director of Web infrastructure at Gazelle.com. "I've been in situations where we've rented a cage [from a Web hoster] just next to our servers and staffed engineers, but the cost is incredible and you hope they never have to do any work because that means there was a major outage."

Gazelle.com Inc., which is headquartered in Stamford, Connecticut, but houses VanDercreek and his team in San Francisco, also chose Digex as its managed hosting provider. For a monthly fee, Digex provides Gazelle.com with the necessary hardware, software, utilities, connectivity, and management.

"We had much experience [in previous jobs] in outsourcing to a traditional co-location company like Exodus. We went with Digex because we knew we wanted to find a new or different way to handle the break-fix aspects of our site," VanDercreek says.

Gazelle.com's small engineering team is responsible for certain management aspects of the site: Whereas Digex will perform maintenance, the company does the overall troubleshooting of the site on its own and must maintain any custom applications or programs that Digex doesn't support. But that still leaves Gazelle.com with a fraction of the maintenance headaches it would experience otherwise, VanDercreek says.

Built for growth

Managed hosting can also be a good solution for new sites because Web companies often have a hard time predicting what their Web site usage patterns will be and how quickly they will need to scale up their equipment to support site visitors.

"[Co-location] gets you nothing, really, except someone else's real estate, cold air, and a pipe," says Jeanne Schaaf, a senior analyst at Forrester Research, in Cambridge, Massachusetts. "With managed services, you can work with the hosters. They're very good at looking at an application to see how well it scales. Thoughtful hosters understand the challenges [facing a Web site] and what it will be like in six months vs. now."

It's also a lot easier for a brand-new company to dump the data-management responsibility into someone else's lap because there isn't the issue of compatibility with existing data -- a problem that established companies would have to grapple with.

Established companies "have more difficult problems than dot-coms, who come in with a blank sheet of paper. All they're worried about is scalability and marketing," Schaaf says. "These legacy companies have a ton of data in their basements that they need to integrate with every channel. It's a much more difficult problem to pull brick-and-mortar companies into the click-and-mortar world and make it seem like one business."

Holding the reins

Still, many dot-coms see data management as a function that must be performed by their own staff. Yodlee.com, a site that consolidates personal information from a range of devices and makes it available for access over the Internet, launched last September with Exodus hosting its data center. Although Exodus offers a range of management services in addition to hosting, Yodlee.com chose not to take advantage of them.

"Security and data privacy are of the utmost importance to us, so we built that expertise [internally]," says Matt Idema, vice president of operations at Yodlee.com, in Sunnyvale, California. "We wanted that expertise, but we wanted that expertise to work for us."

Although Idema says he understands why other sites would want to outsource data-center management considering the cost and difficulty of finding staff, his company felt that the management of the site had to be handled internally.

"Those are all valid points, but when we first got started, we knew that the security, the performance, and the reliability of the service we provide would have to be unlike anything else on the Web," Idema says.

Yodlee.com's engineering staff does most of the data-center management remotely over a private network connection from the company's offices, and occasionally visits nearby Exodus' Santa Clara, California, data center for on-site maintenance.

Choosing the right partner

Whether choosing a company to partner with for Web co-location or managed hosting services, Web executives and experts agree that securing a premier hosting company is paramount.

"Know your partners -- you've got to know who you're jumping in bed with," says TheSauce.com's Welsh.

"New dot-coms want to concentrate on the conceptual piece of their business, but you have to have a pretty good hoster [because] they have to be so tight with what you're trying to accomplish," echoes Forrester's Schaaf. "You've got to have top-notch support and be sure that your partner is as committed as you are to your business."

For ASP (application service provider) Ultimate Software, having a strong hosting company behind its Web ASP business has helped the company win customers, according to Marc Scherr, vice chairman of the Fort Lauderdale, Florida-based company. When Ultimate, which publishes human resources and payroll software, decided last summer to try out the ASP model and offer its software as a service over the Web, the company went straight to IBM Corp. to host and manage the service.

"You have to look for someone who has the company assets and the backing to handle [hosting]. We wanted to go to a very established player, and IBM has a long history in outsourcing," Scherr says. "For [our] clients who might be nervous [about using an ASP], it helps to say that IBM is behind it."

Send comments on this article to Cara Cunningham (cara_cunningham@yahoo.com).

Cunningham is a free-lance writer and former InfoWorld news editor who is based in Washington and covers IT trends and management issues.

The devil is in the contract details

If you've made the decision to outsource the management of your Web site's data center, your decision-making has really only just begun. Signing up with a managed hosting company requires some serious homework, as well as some tea-leaf reading, in order come up with a contract that will suit your Web site's needs without blowing your budget.

Web executives who have made the outsourcing decision warn that it's not the cheapest way to go, but it is the best for them for a variety of reasons.

"We are getting a fair [price], but we are paying a premium," says Michael VanDercreek, director of Web infrastructure at Gazelle.com, a San Francisco-based e-business that sells legwear. "However, if you factor in the salaries that we're not paying [for staff engineers], we are spending our money very wisely."

"There's been a lot of research done, and some say it actually costs more [to outsource a data center than to host and manage it internally], and some of that makes sense," says David Tapper, a research analyst at IDC, in Framingham, Massachusetts. "But if you look at the return on costs, that's different. If my core competency isn't managing IT systems but shipping shoes, even if it costs more [to outsource], I can dedicate more of my staff to selling shoes -- then you've got a good deal there."

Web executives who have signed up with managed hosting companies say there are two key steps to take before sealing a deal: predict how much uptime your site will require and get a sense of what kind of performance it will need.

Both of these factors translate directly into dollars: The more uptime and capacity you need, the more equipment and management the hosting company has to put into your Web site, and the more the host charges you.

"There's a difference between 99.99 and 99.9 percent uptime. It's a significant amount of time [when stretched out] over a year, and there's a huge difference in cost," VanDercreek says.

System redundancy at multiple levels is crucial for mission-critical Web sites, but a new site may not need that much hardware and software when first starting out.

"I think we did it a little too early; we intended to be a mission-critical environment, but we're not in that situation yet," says Mike Welsh, vice president of operations at TheSauce.com, a Chicago e-business that handles back-end tasks such as payroll and ordering for independent restaurants. "We took the sledgehammer for a flea approach."

Spending some time up front going through the service-level agreement that you're forming with your hosting partner can help avoid unnecessary costs, Welsh adds. Such scrutiny will also help you quantify what you're getting for your money.

"I think it's critical not only to understand [the performance that hosting companies] can measure, but also to know what sort of benchmarks they should live up to," Welsh says.

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