To host or not to host?
My company is thinking about developing a commercial Web site. When developing a commercial site, is hosting in-house a wise thing to do, or should we consider co-locating with an ISP, or outsource as much as possible? And if we do go in-house, what are the costs of providing adequate bandwidth?
Select an "A Team" provider
Arthur Andersen, partner in technology risk consulting
The amount of work involved in developing a commercial Web site depends largely on the nature of the site and the complexity and anticipated volumes of the business transactions that are envisaged. There will also be a need for high levels of security, as well as potentially much higher demands on availability and capacity.
More complex change management may also be required because of integration to back-office systems and the need to make changes while the site remains online. If your business wishes to rely heavily on this channel there is no alternative but to build and maintain such a site properly.
Outsourcing is often a very attractive proposition, because skills and infrastructures can be acquired "off the shelf" rather than having to build them up from scratch. Should outsourcing be the choice, it is best to select an "A Team" provider - in other words, one who will provide high levels of service. Even if the price may seem higher, the ultimate costs over time may well be lower. The cost of providing high levels of "bandwidth" internally can be higher than initially anticipated.
Upgrading all of this can be very expensive to do internally, but as outsourcers will already own such an infrastructure the add-on costs may be quite reasonable, particularly as the cost of providing raw bandwidth is falling all the time.
Build up knowledge for flexibility
Many organisations will need to use an ISP in the short- to medium-term while they begin to understand e-business. However, it is perfectly reasonable for a corporate to host its own Web site - the main downsides tend to be diverse access, management, cost of running a limited number of specialised machines and an over-rigid IS management structures. A full outsource is unlikely to provide flexibility for patches, security updates, or changes in direction - and these will happen.
The key thing is to ensure that internally you build up knowledge to allow flexibility in the future and to properly manage suppliers.
The two issues to be realistic about are: can you supply in-house 24-hours-a-day, 365-days-a-year support; and are monitoring systems and procedures able to guarantee immediate action when an alert is raised? If no, then the resources to guarantee service levels will not be available and a hosted option will be cheaper and less risky.
Procuring bandwidth should not be a problem as competition is fierce and costs are falling: 2 megabit per second (mbps) Internet links are now less than 256 kilobit per second ones were a year ago. And a final word of warning - never outsource a problem and expect to save money.
Don't succeed yourself into failure
There are three ways for a company to operate a Web site: host it on its own server in-house; contract out the operation of the server to an outsourcing service; or have the Web site hosted on a server owned and operated by an ISP. Of these, the third is much to be preferred, and the smaller the company, the stronger the argument for using an ISP. Indeed, a company should only host its own Web site if it is large enough to possess the expertise and financial resources to provide the required levels of access, security and scalability. In e-business your system is your brand: the performance of your Web site will communicate to the Net world what sort of a company you are. You must be able to offer:
This all requires specialist skills and lots of money. Creating the Web site is the easy bit; any half-decent project manager with the support of an experienced HTML programmer should be able to do that on time and within budget, although the results may not be very impressive. The difficulties arise when the world flocks to your door. The Internet is possibly the only place where you can succeed yourself into failure, as Britannica and Egg discovered to their cost.
The cost of bandwidth depends on the capacity provided. It ranges from about £5,000 a year for a slow line up to perhaps £25,000 for a 1mbps line.
Costs fall as bandwidth rises
CEO, Bloor Research
This question is unavoidably contextual - but the answer will most likely be to outsource as much as possible.
A general set of principles apply here. First you have to work out what service level you intend the Web site to provide and how much traffic you are expecting to visit the site regularly. But please note, most people get this wrong. If you estimate the service level too low then you have no choice but to throw money at incrementing it if it causes problems to your business, and a low service level on a Web site always does.
So the intelligent solution is to outsource to a large-scale provider that can simply increase the service level to suit the business requirement and the traffic level. There are a number of such ISPs. It is, of course, possible that your site is as large as that of such providers and that you have the same operational capability as a large ISP. In which case keeping it in-house becomes an option.
As regards the question of adequate bandwidth costs, the question needs to be rephrased from its how-long-is-a-piece-of-string format. In general, the unit costs fall as the bandwidth rises, but this can depend on your precise geographical situation.
My company has expanded its global operation over the past year with several acquisitions overseas. As we get bigger, I must come up with an IT/e-business strategy that sits as comfortably in the UK as it does in Thailand and Spain, for example. Can you suggest areas that I should concentrate on? Will I encounter problems trying to work around all the regional laws that exist? Should I follow a laissez -faire policy that embraces all cultures?
This was first published in September 2000