Web hosting firms step up services
Jennifer Mears


Customers want data backup, security, storage and application management.

At Cotyshop.com sales are going like gangbusters. Since Coty revamped its online consumer site a year ago, executives say revenues have increased 80%. The global marketer and manufacturer of men's and women's fragrances, skin-care products and cosmetics has had a Web presence for five years, starting with brochure-type sites and a corporate home page. It outsourced those sites from the beginning, going with small Web developers or ISPs to handle the online headaches.

"We made a very clear decision early on that we would not host any Internet sites internally," says Barbara McSpedon, director of global communications for Coty.

So when Coty decided to launch a transaction-based e-commerce site two years ago, the question wasn't whether to outsource it, it was with which company. McSpedon knew that not just any Web hosting firm would do. She wanted a fully managed service - something that is becoming increasingly popular as more businesses go online, either with e-commerce ventures or with hosted applications that keep employees scattered across the globe connected.

Web hosting companies are responding to the complex needs of larger businesses. These hosting firms are developing standardized configurations so they can launch more services, more quickly, at a lower cost than businesses could on their own. In addition, special services such as round-the-clock monitoring, caching and security mean many businesses can get better performance from a Web hosting company than they could if they implemented and maintained the network themselves.

"Really, the hard part isn't even trying to construct it, as much as they don't even have the skills for all those pieces," says Andy Hunn, senior director of business development for Web hosting firm Digex. "Most companies don't have a massive technical organization that is highly skilled in Internet technologies."

Although the move into the Web hosting data center market has been slow, market research firm IDC predicts the trend to pick up quickly, increasing sixfold from $4 billion in revenue in 2000 to more than $24 billion by 2004.

"A lot of companies are asking their providers to do more stuff, not just provide floor space to stick all the company's equipment in," says Melanie Posey, an IDC analyst who authored a Web hosting services report. "They're saying, `We don't even want to deal with this at all - you do it.'"

That's the approach Cory took, leaving its e-commerce site - and its Web-related worries - in the hands of IBM Global Services.

Higher-level services

No longer are raised floors, diesel generator backup and ventilation systems enough. As large organizations move their applications and Internet ventures into data centers, they are looking for services such as data backup, security and storage services, application management, load balancing and real-time network monitoring.

Web hosting companies are responding to the demand, and corporate network managers can expect to see yesterday's Web hosting company morph into a combination network, application and professional services provider. Analysts expect to see partnerships and strategic alliances as Web hosting companies expand their services.

Consider the deals during the past year: WorldCom/UUNET acquired Digex through the service provider's proposed merger with Digex parent Intermedia, expanding Digex's reach and network backbone; Web hoster Exodus acquired GlobalCenter, the hosting subsidiary of network service provider Global Crossing, enhancing its managed services capabilities; and hosting company Verio was acquired by NTT Communications, the long-distance and Internet operations division of Japanese carrier Nippon Telegraph and Telephone, widening Verio's reach and helping to lift it into the managed services market.

Collocation remains an important part of the Web hosting market. Many companies still want basic real estate, which means a highly secure, well-maintained place to put their servers. Others, however, will want more.

Take Coty, for example. The firm reported $1.8 billion in sales for the year ended June 30, 2000, and employs more than 8,000 people in 29 countries. Why would a company with such deep resources choose to outsource its Web-related ventures - from static corporate sites to dynamic e-commerce Web shops?

The answer, McSpedon says, is that Coty decided that its focus was on making and selling products, not running Web sites. In addition, she says, finding top IT talent wasn't easy and the cost of launching and supporting Web ventures in-house just didn't make sense.

"We made the decision not to build an internal organization to support this," she says. "Like most companies, we're looking at this conservatively, and looking at it to see where everything is going. So instead of making a big investment, we're selectively bringing up sites and outsourcing into facilities like IBM so we can capitalize on the very large infrastructure they have in place."

Perhaps most importantly, McSpedon says Coty wanted to make sure its e-commerce site had the 99.9% availability demanded in the marketplace and an international reach - all of which IBM could provide with its menu of managed services. "We look at them as an extension of our team on the Web side," she says.

For IBM's part, its Global Services division is using decades of know-how to offer a fully managed Web hosting service that customers can feel comfortable using. When it comes to managed services, "we just have it in our DNA," says Rusine Mitchell-Sinclair, general manager, managed e-busi- ness services for IBM Global Services. "We're not growing up to the managed services, that's where we started. We actually came down the continuum by doing collocation."

Digex is another Web hosting company that has been offering fully managed services from the beginning - in Digex's case, since 1996.

Both IBM and Digex offer standard, preconfigured platforms, meaning the companies claim they can get customers up and running in days instead of months.

Digex's Hunn says his firm is committed to responding to the higher-end needs of customers who want a fully managed service. Earlier this year, for exampie, Digex launched a client portal created with partners Compaq and Microsoft that gives customers real-time access to billing information, trouble tickets and other data associated with their accounts.

Exodus, which started as a collocation provider, is expanding into managed services. Dave Asprey, director of strategic planning, says the firm started focusing on managed services in 1999 because it realized the enterprise market would have more complicated needs. Exodus also offers standard network and server infrastructure to speed deployments and recently announced partnerships to expand its content distribution and storage capabilities.

Verio, which has targeted mostly small and midsize companies, is also moving into the managed services arena. Doug Schneider, president of Web services for Verio, says the company is offering its managed services on an a la carte basis, so companies can choose what they need.

Hosting firm NaviSite last year began offering streaming media services, another area hosting firms predict will become more in demand. Other areas where hosting firms plan to launch new or enhanced services include application management, leading to partnerships with application service providers and software vendors; storage-area networks, giving customers access to storage on demand; wireless services, making data accessible anytime and from anywhere; and servicelevel agreements that go beyond infrastructure to detail business services.

Here to stay

"A lot of people have been saying that, `Oh, well all the dotcoms are dead so therefore the brick-and-mortar companies can stop spending on their Web initiatives because the dot- coms aren't going to eat their lunch after all," IDC analyst Posey says.

"But that's just stupid, because a lot of the dot-coms are gone, but the Internet is still there. So [companies] still have to do something," she adds.

Yankee Group analyst Carrie Lewis agrees, and says managed services will be the key to bringing firms into Web hosting companies' data centers.

"As these hosting providers become more sophisticated and offer more services, I think the enterprise customers are going to look up and say, OK, this is something we should look at now," she says.