Articles: Web Hosting essentials

Web Hosting Essentials

By Nick Wreden

Despite lackluster performance over the last few years, the Web hosting industry is still a practical option–if you know where to look.

Three years ago, the future at the web site featuring home improvement guru bob Vila was so bright that everyone involved had to wear welders’ goggles. Starting from a small site in 1996 and fueled by the popularity of Vila’s television programs, BobVila.com had exploded into a major destination, with millions of page views monthly from visitors who downloaded content and used interactive tools for home improvement. BobVila.com had colocated its site on infrastructure hosted by Exodus Communications, and was planning a major infrastructure upgrade that featured expensive content management software.

“Then everything seemed to implode at once,” remembers David Masher, vice president of development at the Boston-based Web site. A firestorm of dot-com failures raised doubts where there had only been dreams. Cracks began to show in Exodus’ support and infrastructure, harbingers of its eventual collapse from the weight of $3.5 billion of debt and other problems. And the colocation arrangement meant the IT staff at BobVila.com spent an inordinate amount of time ensuring that the applications and server stayed up and running.

“At that time, we stepped back and took a large reality check,” says Masher. “What did we really want to accomplish? Did it make sense to continue outsourcing or bring everything in-house?”

In fact, the entire Web hosting industry had to take a large reality check, and the aftershocks still reverberate today. In the mid- to late-’90s, Web hosting pioneers such as UUNET, Exodus, BBN Planet, and Loudcloud were either acquired or closed their doors. These companies suffered from overestimates of demand, excessive capital spending, inability to scale, and unfocused operations. The market was so punishing that even deep-pocketed firms like Intel had to exit the market.

Consolidation also swept through small to mid-sized providers. Businesses that had depended on such companies found themselves either scrambling to find new hosts or dealing with new, unknown vendors. For example, BargainBookStores.com, the e-commerce division of a discount bookseller based in Grand Rapids, Mich., found that its Web host HostPro had been acquired by emerging giant Interland. According to research firm The ebi Group, mergers or buyouts increased 83 percent in 2002 among small-business-focused hosts.

“A truly tumultuous time,” sums up Lew Moorman, vice president of strategy at Web host provider Rackspace in San Antonio. Today, many companies face the same issues that BobVila.com faced. Do the uncertainties of Web hosting make it wise to bring Web operations in-house, or is there enough stability to ensure future benefits? If we outsource, what’s the best arrangement—colocated, managed, or dedicated? How do we choose the right Web host? And what’s over the horizon? Will future trends make smart decisions today seem dumb tomorrow?

After looking at these issues, BobVila.com executives determined that Web hosting remained the best alternative. Outsourcing to Web host Rackspace enabled them to concentrate on key competencies, which included video production and content development. Outsourcing also eliminated the need for the internal staff to keep the site running. Says Halldor Utne, director of IT at BobVila.com, “I don’t have to get up at 2 a.m. to fix a server.”

Expertise is generally greater. Web hosts deal with issues common to a number of customers, which speeds everything from patch installations to hardware upgrades. And companies don’t have to deal with IT resource-forecasting. If more bandwidth, storage, or other resources are required, all it takes is a phone call to the provider for a service plan upgrade.

Today, BobVila.com supports 3 million page views and an average session length of about 17 minutes via its Web host. “When it is done right, Web hosting is a lot like the brakes on your car,” says Masher. “You don’t have to think about them working while you’re driving.” But the biggest advantage may be lower costs that are easier to predict. Analyst firm Insight Research estimates that Web hosting costs up to 60 percent less than comparable in-house capabilities. BobVila.com slashed its infrastructure costs in half after moving to Rackspace.

Companies can also budget more easily based on consistent Web hosting fees. “We’ve done the cost comparison a number of times, looking at everything from the internal costs of electricity and real estate to all the costs associated with outsourcing,” says Rich Williams, director of Internet systems at Reader’s Digest Association in Pleasantville, N.Y. “Each time, the numbers tilt in favor of outsourcing.”

Looking at Options
Web hosting encompasses several alternatives, including colocation and shared and dedicated hosting. Colocation is the IT equivalent of storage warehouses, where companies pay a monthly fee in exchange for power, bandwidth, and rack space within a secure data center. Almost overnight, public opinion of colocation plummeted. Host providers downplayed the service because of minimal profit margins, and companies still find themselves dealing with maintenance and upgrades. Some industry observers even predict the disappearance of colocation services.

Web pages from multiple independent domains reside on a shared host, which results in lower cost, since hardware, software, and support expenses are amortized among several companies. But lower performance can also occur, especially for sites with lots of graphics or CGI scripts to execute. And the risk of other sites “hogging the box,” or monopolizing resources, is a very real one. It’s also harder to scale for increased traffic.

Sites with heavy traffic require a dedicated host, which delivers the exclusive use of a Web server and related software. Even dedicated hosts are less expensive than in-house alternatives, since Internet, security, network administration, and other costs are spread among multiple companies. Dedicated servers typically provide a set amount of memory, storage, and bandwidth, or the gigabytes of data that can be delivered each month.

Both shared and dedicated hosts can be managed, meaning that customers get assistance in configuring or administering the server. But “managed” has a host of meanings, which range from “we’ll do whatever it takes to keep you going” to “you’re on your own,” even for bits of esoterica such as kernel upgrades.

A recent wrinkle is reseller hosting. Specialized companies combine services from a Web host with their own offerings, usually Web site design and management. It’s estimated that major providers such as Interland and Verio get about half their customers through resellers. Today, there are thousands of companies in each category. These companies range from basement providers with a T1 to a local ISP to highly sophisticated operations such as Sprint and Verio, each with a variety of service plans. Costs range from zero to thousands of dollars monthly. Free Web hosts like Terrashare or Geocities have such limitations as less than 25 MB of storage on a shared basis and may be served with ads. A new entrant, ServerBeach, has made a splash with its offer of $99 per month for a dedicated server.

Matching Your Business
Web hosting makes the most sense for three types of companies, according to industry executives. The first group are start-ups and other companies that can’t afford the capital or personnel investments for establishing and maintaining a Web presence in-house. For example, BargainBookStores.com was a two-person operation when it began in 2001. “We put up a Web site with full e-commerce capabilities for $200 a month,” says Ralf Scharnowski, general manager. “Buying the equipment alone would have cost $6,000, plus monthly charges for colocation or a T1 line. Hosting was a no-brainer.”

Another group is comprised of companies that foresee rapid growth in Web traffic, and don’t want the expense and headache of scaling to meet demand or finding solutions to other issues. Eventually, BargainBookStores.com migrated from a shared to a dedicated arrangement to benefit from increased reliability and improved customer service. “On a shared plan, it took 30 minutes to talk to a customer support representative; now, we reach someone in a minute or less,” says Scharnowski.

The last group for which Web hosting is ideal includes companies such as global publisher and direct marketer Reader’s Digest, which requires a 24/7 global presence. Reader’s Digest is consolidating 30 international Web sites onto a single platform maintained by Digex. In addition to improved consistency and control, the consolidation will improve user experience. Because of local bottlenecks, Brazilian users enjoy faster downloads from a U.S.-based server than from a local one, according to Williams.

The classic advantages of outsourcing and expanded Internet usage among small and medium enterprises (SME) means the outlook for Web hosting remains bright, despite recent turmoil. That’s why companies such as Internet portal operator Yahoo! have recently introduced shared hosting solutions for SME customers. Even CompUSA is offering hosting plans within retail stores.

Depending on the definition, there are 6 million to 10 million small businesses that are prime targets for outsourcing, since only 17 percent have “serious” Web sites, according to CIBC World Markets. Additionally, research firm Tier 1 Research estimates that 97 percent of all IT systems are maintained in-house, which could create a huge demand. As a result, research firm IDC predicts an annual market growth rate of more than 35 percent, reaching $16.2 billion by 2005.

Shopping for Hosts
The consolidation that blitzed the industry the past three years has actually been a blessing in disguise. The survivors are stronger and less likely to let promises exceed performance. “Our business has grown exponentially over the last three years and we continue to see increasing demand for our services,” says Robb Allen, CEO of DataPipe, a Web hosting company. “Our philosophy has always been consistent: provide immediate expert support backed by a rock-solid, reliable network.”

But choosing the right Web host remains an exercise in due diligence. A good first step is to check out market reputations. Start by visiting Web Hosting Talk (www.webhostingtalk.com) or Web Hosting Forums (www.webhostingforums.com). These and many other sites offer unvarnished opinions on providers. They also allow users to post questions to a community of experts.

Today, the main criterion for selection is financial viability. Other criteria include operating cash flow, cash on hand, and amount of long-term debt. Another financial benchmark, used by Tier 1 Research, is “revenue per server unit,” and the higher it is, the better. If companies are reluctant to open their books, check if their records have been evaluated by a third party.

Technical criteria include reliability or uptime; redundancy, including number and types of Internet connections; ability to handle peak traffic; scalability; and frequency and types of backups. Judge the capabilities from the perspective of your requirements. Many promise abundant storage since it’s cheap, but a more important requirement may be processing power, especially if substantial traffic is anticipated. Also look for focus, such as dedication to Linux or Unix platforms via “standardized solution portfolios.” Andy Schroepfer, president of Tier 1 Research, says many Web hosts have learned from earlier mistakes, where companies went out of business because they answered “yes” too many times to the customized concerns of customers. And ask about churn, which may indicate customer satisfaction. At some hosting providers, it’s as high as 30 percent. But take the number with a grain of salt. Many customers leave for a lower price, returning when the service or uptime at another host does not meet expectations. Smaller firms may be interested in tools that ease the development and deployment of Web sites. Recognizing this need, Interland acquired Trellix, a well-known developer of Web site building and management tools. Ready-Set-Web rents complete Web sites, including graphics, text, and programming for less than $10 per month.

Simplicity was the primary driver for Pieter VanSpronsen, a principal at HomeLand Group in Tampa, Fla., which specializes in security and fire alarm installation. Needing a way to easily communicate price and product changes among four branches, VanSpronsen first bought a Web-design package. “My next questions were, ‘How do I get this on the Web? What is this FTP stuff?’” He eventually called FatCow, which offers a shared hosting plan for $99 a year. Support staff walked him through the process of uploading a site. “One morning I called support three or four times,” he says. Another key step, especially for larger organizations, is meeting with the support team. As Williams points out, MSCE (Microsoft Systems Certified Engineer) or CCNA (Cisco Certified Network Associate) certification, a common selling point for Web hosts, “is only a piece of paper.” It’s more important, he says, to understand their hands-on knowledge and check out their compatibility with in-house staff. Also, test support capabilities. “In the middle of the night, [call] and ask a technical question,” challenges Rackspace’s Moorman. Another research firm, the Aberdeen Group, suggests the ratio of headcount to managed servers should be greater than 1:6.

Review SLAs (service level agreements), which spell out such variables as uptime, levels of support, backup-and-restore times, escalation procedures, and storage. Providers have their own SLAs, but these are only negotiation starting points. Seek an SLA that will offer a rebate of fees in case of outages or other difficulties. However, such rebates pale in comparison to potential revenue and other losses that can occur when corporate sites go down. The industry is still in flux, so avoid long-term deals.

Melanie Posey, Web hosting analyst at IDC, believes that an emerging requirement is improved Web-based management tools that show site performance, availability, and transaction completion. These tools also enable such account controls as password changes and additions. “Companies don’t like seeing control of their Web sites disappear into a black hole,” she says.

Finally, review any specialized requirements. One reason BobVila.com turned to Rackspace was its ability to support video streaming and “burstable bandwidth,” which handles traffic spikes after a Bob Vila show. Reader’s Digest picked Digex to support ChangeOne.com, a fee-based weight-loss site, mainly because uptime is even more critical with a premium site.

The same criteria apply if a current provider is acquired. When Interland acquired HostPro, BargainBookStores.com considered switching, especially since Interland’s proposed plan did not match HostPro’s. “But it would have been a lot of work to switch providers, plus there would have been unknowns,” says BargainBookStores.com’s Scharnowski. “Interland had a good reputation, so we stayed with them.” If a move from one provider to another is required, have a migration plan, or a checklist of the details needed to ensure a successful move. This checklist should include shopping cart configuration, e-mail migration, and domain pointers. Most providers are more than willing to assist with the transfer.

Even if a Web host meets today’s imperatives, it’s still possible to bring capabilities in-house in the future. BargainBookStores.com will look more closely at an in-house solution when server utilization hits 70 percent to 80 percent. Even VanSpronsen foresees a day when he will bring hosting in-house.

According to research firm META Group, larger Web hosts will move away from providing organizational Web capabilities to implementing supply chain portals based on Web services, or interoperable Web components. Larger hosting organizations such as IBM or EDS will even get involved in the interoperability of business processes, both within and outside the client organization.

Kenny Wyatt, director of marketing at Sprint Business, predicts the move to Web services will even accelerate Web hosting, especially for larger organizations. “One reason companies in-source is because application integration is so difficult and complex,” he says. “But as we move into Web services, applications can talk to one another dynamically, which will make it easier for them to be moved elsewhere.” Wyatt also expects that the ability to integrate wireless into hosting capabilities will become a major issue.

Web hosting may also evolve into what IBM calls “e-business on demand” and HP terms “adaptive infrastructure.” Essentially, this means that IT infrastructure and services are offered as a “pay-as-you-go” utility which expands or shrinks depending on immediate business needs, such as auctions or procurement.

The blinders are off as brutal consolidation and competition dim the too-bright prospects of the Web hosting market. But Web hosting still presents a viable opportunity for companies wanting to avoid the expense and headaches of in-house solutions. The key is first determining what you want to do on the Web, then closely examining what Web hosts can do for you.