Intel Online Services has demonstrated that it is serious about penetrating the Web hosting market with the recent announcement of a heavy-duty server farm in the US.
The company is to devote 73,000sqft to more than 8,000 servers running its customers' Web sites. In addition to the US server farm, Intel will next month announce the creation of an English site hosting 10,000 servers.
Other large suppliers have caught the Web hosting bug too. IBM has announced a 10-year agreement with Internet connectivity provider KPNQwest to produce a network of Web hosting centres, called KPNQwest Cybercentres. Last month also saw AT&T sign a deal with BT to provide e-commerce services through a network of datacentres.
Web hosting offers much more than Internet service provision, said Rob Karmelle, marketing director for Intel Online Services in the US. He argues that, unlike many ISPs, Intel has a core competency in software and hardware management, which means it can offer a high level of reliability for its customers.
"The stable environment that we have as a second generation hosting company provides a reliable environment to customers and their sites," said Karmelle. "The second benefit is the time to market."
His rationale is that if you are designing a site to run within a stable environment you can roll it out more quickly.
The IBM/KPNQwest deal is similarly ambitious. IBM Global Services will build and support up to 18 centres that will hook into KPNQwest's European fibre optic network.
The centres will each cover roughly 110,000sqft. They are designed to appeal to everyone from large ISPs to small companies.
The launch of the alliance at the start of last month was complemented a couple of weeks later by the announcement of a deal between IBM and UK-based portal Scoot. The five-year deal provides Web hosting and IT support for Scoot as it rolls its services out across Europe.
There are certainly advantages to outsourcing your Internet operation to someone else. For smaller companies, there may be little alternative due to a lack of expertise and resources.
Building an IT room for equipment that can cope with the reliability and performance requirements of Internet users is no mean feat, according to Robin Duke-Woolley, senior anaylist at Schema Research.
The temperature must be constant, you should install a fire protection system that will not ruin your hardware, and multiple carriers should be used to ensure that if one link goes down, your connection to the Internet does not suffer, he explained.
The other obvious issue is bandwidth. Running a system completely at your own site makes it difficult to scale the link between your system and the Internet. Wide area network bandwidth is expensive, but if your site is hosted by a large player it will be much easier to buy extra bandwidth at times when you know that demand on your site will increase.
Nevertheless, hosting agreements are not without flaws. While many suppliers guarantee a certain level of reliability and minimum up time as part of the deal, it is very difficult to get them to sign on the dotted line when it comes to application performance. "It's something we're definitely striving for, to get to that level. There is a lot underlying that. There are so many variables," said Karmelle.
Despite the unpredictable nature of the Internet, hosting companies will not even provide an application response time service level agreement for measurement inside their datacentres. "Today, if you're having your system hosted, you are just getting a guarantee on your network connectivity," Karmelle explained.
In addition, IT managers will need to consider their own role in the operation. Will they feel redundant if they farm out the lion's share of their new e-commerce development to a third-party?
Duke-Woolley suggested IT managers can implement a co-location agreement, rather than outsourcing the entire Internet operation. Instead of handing everything off to a third-party, simply putting your servers into a facility house with a high-speed link can help you retain more control over your Internet system. Intel devotes roughly 25% of its service centre space to co-location customers.
One final thing to consider is the structure of your application. Many bricks-and-mortar companies wanting to build an e-commerce strategy may need to connect their middle tier hosted applications to their line of business software, which will often be running on legacy systems. Intel will consider hosting legacy systems on a case-by-case basis, but it may not be the most appropriate solution, especially given the lack of a performance SLA.
Another option is to design a component-based e-commerce application and adapt your legacy software into component form, enabling them to work together in a distributed manner. This option is likely to push up your development costs.
Third-party Web hosting can potentially reduce your Internet headaches, but it is not a cure-all. Go into such agreements with your eyes wide open, and be sure that your Internet business model is compatible with the solution you choose.