There are dozens of service providers willing to give you a hand to
get your e-business off the ground but how able are they? asks Nick
Booth
The computer industry is characterised by mixed messages. On one
hand, you're told that your IT strategy is the key to your
competitive edge. Later, the same people tell you that IT isn't
your core business, and that developing your own applications makes
no more sense than building a fleet of cars. There's no shortage of
firms that will run your e-business for you but how much
competitive edge do you lose by putting a third party in
control?
Outsourcing has never been more popular among suppliers. Only
these days it's not called outsourcing, but managed service
provision or business service provision or application service
provision (ASP). Every supplier these days, from Microsoft to your
local reseller, wants to run your systems for you. This probably
has a lot more to do with the disappearing profit margins on
hardware and software than any desire to see you gain the fabled
competitive advantage. You can see the motivation for the new
generation of service providers; service is where all the money is
these days.
There are a lot of variables to consider before outsourcing your
e-business, not least the extent to which you decide to do it. Some
companies, such as Virgin's e-commerce arm Biz.net, will build and host an entire e-commerce
system for a small- or medium-sized business. At the other extreme
there are companies that prefer to own the entire process, even
down to the purchase of bandwidth and hosting the application.
If you believe that your IT is the crucial differentiator
between you and the competition, then you should be involved with
the development of your e-business at every stage, advises David
Caruso, vice president of enterprise application strategy for AMR
Research. "The economies of outsourcing, for a supplier, are to
build something that can be sold again and again, without too much
extra work. For that model to work, you can't afford to do too much
differentiation," says Caruso.
If time is the greatest constraint, however, the new service
providers are well positioned to help. E-business, says Ovum
analyst Katy Ring, is the one application that the new generation
of ASPS can do justice to. "They'll get the system built in a
fraction of the time it takes to develop from scratch," says
Ring.
For a bricks-and-mortar company that is adding a Web presence to
its existing business, the business case for using an ASP isn't so
strong, however. Even more time-consuming than differentiating a
Web site is integrating it with the existing back-end systems.
"Integration is the really tricky part," says Caruso, "so that's
the part that's most likely to eat into the ASP's profits. But it's
also the most crucial part to the customer." When there's a
mismatch in objectives like this, he says, you are better off being
in on the project yourself.
Outsourcing a site-build is for the strictly short-termists,
agrees Ring. Even the argument about staff shortages doesn't seem
to stand up, since the experience of companies in the US is that by
using ASPs you can end up paying an even higher premium for
skills.
"The ASPs in the US have had to change their message, because
the argument that an ASP is cheaper isn't backed up by statistics,"
says Caruso, "you can end up paying a premium of 20%-30% for
skills."
When it comes to hosting the hardware and software that will run
an e-business, the quality of service you might get varies
dramatically.
One ISP sold Internet services on the strength of its high speed
connection to the Internet backbone. New small business customers
who signed up for the service did so on the understanding that they
were getting a 2Mbyte pipe into the Internet backbone. In fact,
what they were getting was a share of that connection. The problem
only came to light when a customer asked a service monitoring
company, Kenson Network Engineering, to monitor the level of
service it was getting. It turned out, says Kenson's managing
director Dave Cuthbertson, that 37 other companies were sharing
that link.
This highlights two of the actions you must take if you are to
risk getting a company to host your e-business. First of all, try
to make your contract as short-term as possible, certainly no more
than a year. If possible, insist on a trial period to satisfy
yourself, and your board of directors, that the ISP is providing
the level of service you require.
Which brings us to the next grey area: levels of service. First
of all you need to work out your service requirements. Since
Internet service provision is a relatively new business need, many
companies have no idea what to ask for. As happens in any sector of
business, there are service providers who won't offer you anything
you don't ask for. As director of the Network Outsourcing
Association, Cuthbertson provides some guidelines to what you
should ask for (see box, below right).
Performance levels
The next step is to determine whether this is the service you
are beingoffered. Beware the ISP that offers you its
ownperformancelevel reports, says Phil Tee, founder of ISP testing
expert Riversoft.
"I keep coming across these companies that have service level
agreements with ISPs that offer 99.999% reliability. They say they
know they get this level of serviceeverymonth because they get a
report. But guess who compiles the report - the supplier," Tee
says.
On average, according to Riversoft studies, ISPs in the UK offer
98.7% availability, which represents minutes of downtime every day.
Having said that, not alle-businesses need the premium levels of
performance.
Broadly speaking, there are four levels of ISP, from the
PlanetOnlinesand UUnets at Tier 1, tothesmall resellers of
bandwidth at the lowest level, Tier 4. It could well be that a
Level 4 supplier is sufficient for your needs, particularly if your
e-business presence doesn't involve too much in the way of graphics
and transaction processing. In which case, the price of a Tier 4
supplier will be a lot more attractive too.
Any business that needs a half decent response time and expects
to draw customers from a diverse base would do well to make sure
they sign up to an ISP that is a member of Linx (the London
Internet Exchange). The 100 ISPs that belong to this group all have
good peering arrangements (fast links between their servers) which
means that a customer/end user whose account is with ISP A will not
spend ages trying to get information from an e-business which is
served by ISP B, a fellow Linx member.
Zona Research has estimated the attention span of an e-commerce
customer in the US is eight seconds, so it pays to take any steps
possible to ensure fast access.
The cheaper option and a sort of halfway house between hosting
and in-house management is co-location. Typically, an e-business
would site its Web server and comms equipment in the premises of an
ISP, which gives them greater proximity to the fast pipes the ISP
has running into the Internet backbone.
The question to ask here is how much support the service
provider's staff are prepared to offer. Some will only allow their
staff to re-boot your server if there is a problem. Others have
technicians on hand, ready to earn a premium for nursing your
system back into action.
It was the lack of control that persuaded City of London legal
firm Withers to run its own Internet service. The purchase of
bandwidth isn't rocket science, says spokesmanRiccardo Abbate, and
you should consult Web designers on system requirements. Abbate
says www.withers.co.uk is a mere physical extension
of the IT infrastructure the 50 partner law firm uses
already.
The only things you might need to farm out to third parties are
secure payment systems (to someone like Baltimore or ActiveCard)
and someone to deal with credit card transactions.
No expert advice, then? No need to find a third party to test
the performance of the system? Withers has got by without them,
says the solicitor. "You only need to log into your system to see
how it's performing," he says. The main consideration, says the
solicitorturnedInternet access expert, is making sure you don't
have big graphics files.
It all comes down to trust, says Abbate. Even if you are one of
those people who need an ISP to host your service, the ISP can
provide you with charts to see show how well it is performing, he
says.
It's difficult, without knowing the circumstances of companies
entering e-business, to advise whether they should host themselves,
co-locate or trust an ISP entirely, or indeed which type of ISP to
go for. Computer Weekly would like to have judged how well self
hosting was working for Withers but, sadly, at the time of going to
press, the site wasn't available.
The four levels of Internet service provider
Tier 1. Characteristics: These are spin-offs of telcos,
and so enjoy global reach. Eg Uunet, (owned by MCI) Planet Online
(Energis)
- Pros: Fastest connections to the Internet. These companies have
the clout to dig up the road and lay fibre, or even launch
satellites, to strengthen their part of the Internet backbone.
Comprehensive range of management services (service reports, hits
on site etc)
- Cons: Reassuringly expensive, but tariffs may be cripplingly
expensive for dotcom start-ups.
Tier 2. Characteristics: Companies that own networks but
operate locally (PSINet, GX Networks, Demon)
- Pros: Tier 2 pricing. Members of London Internet Exchange, so
good peering arrangements with all major UK ISPs
- Cons: No guarantee on global levels of service in other
countries. Could be a drawback if you sell overseas
Tier 3. Characteristics: The smaller ISPs that buy
another company's bandwidth and resell it. Eg Atlas, Astra.
- Pros: Cheap. Fits the bill for undemanding applications, like
static Web sites.
- Cons: No guarantees on service, your bandwidth allocation may
be oversold. Unlikely to be in Linx, so second-class access to
major ISPs. Can be a disaster if used for trading, especially
globally
Tier 4. Characteristics: A new category of 'virtual ISP'.
These companies resell the bandwidth of companies like Uunet at
discounts, and make their profits from the services they add. Eg
Mitech.
- Pros: Cheaper than UUnet, whose bandwidth they resell. Can
offer service level agreements
- Cons: Once UUnet's capacity is more heavily subscribed, it will
be hard to keep offering same levels of service
Another option to consider is co-location.
- Characteristics: Your own equipment is hosted in an ISP's
premises
- Pros: Allows you to run applications and scripts that would not
be tolerated on a shared environment. Guarantees you greater
control over processing power to drive the system
- Cons: Involves more support. ISPs will expect you to
troubleshoot the system
What your contract with an ISP should cover
- Negotiate a trial period, during which performance is
monitored, before entering into a contract
- Never sign more than a one-year contract. Prices change so
quickly your bargain two-year deal will seem ludicrously expensive
in 12 months
- Insist on an independent ISP tester to monitor your
site
- Aim for Web pages that are downloadable within five
seconds
- If the host produces your Web pages, insist that new pages can
be produced within three days
- Make sure that the ISP is responsible for registering the site,
and any new pages, with search engines on the day they are
nominated
- Links to other web sites should be checked by the ISP every two
weeks
- The ISP should provide a report on the web space every
month
- The number of hits on each page should be reported
Are you in the right ballpark?