Canada not sold on Web hosting: report

It is popularly held that Canadians by nature are a relatively reserved and cautious culture, one that tends to be wary of change. A recent Canadian Market Strategies report entitled The Hosting Industry in Canada: Host Globally, Collocate Locally, conducted by Brockville, Ont.-based the Yankee Group in Canada, found this conception to be especially true when speaking of the Canadian Web-hosting industry.

Web-hosting centres (WHCs) are essentially large tracts of office space that allow companies to share the high costs of high-reliability Web operations to achieve a low per-user cost. According to the Yankee Group in Canada, in more sophisticated versions, various Web-hosting and networking services are provided. However, according to Mark Quigley, the telecommunications analyst who conducted the report, Canadians continue to have issues with outsourcing hosting responsibilities to those who operate WHCs.

“The primary issue is where hosting sits in the minds of businesses out there,” Quigley said. “If you take a look at the Canadian context, there is a fairly rich history in terms of outsourcing. But, for some reason, a lot of the opinion proffered was that it somehow did not extend into the Web hosting space.”

Quigley attributes this reserve to the risk involved with having someone else manage what may be mission-critical data. As opposed to the counterparts in the U.S., where Web hosting has been a viable alternative for several years, Canada has yet to be totally convinced. According to the report, “Canada has only a handful of major cities that are regional centres of commerce. Given a smaller population divided into fewer cities, there are simply fewer locations in which sufficient demand could exist for WHCs to be economically viable.”

“I think we certainly do experience that lag in terms of what happens between here and the U.S., but I think that we will see that Web-hosting services and centres are going to fairly quickly find their place in the Canadian context as well,” Quigley said.

For Canadian Web-hosting companies like Q9 Networks in Toronto, these findings reflect challenges that they have had to overcome.

“The Canadian marketplace has been lacking behind the U.S. really because there hasn’t been any good offerings in that sector,” said Osama Arafat, CEO of Q9 Networks. “Now that there are quality offerings, I think Canadians are less reluctant to outsource. There is a viable alternative to doing it in-house.”

Arafat noted that the main challenge Q9 faced when breaking into the Canadian Web-hosting industry last October was educating customers.

“It was difficult from an education perspective,” he said. “We had to go out and put the message out there that there (are) high-quality alternatives. Customers are reluctant to make changes to any IT infrastructure and the challenge is to educate them on the benefits of moving to a hosting centre.”

Quigley said that the big value proposition WHCs should focus on is offering managed services. He said that by taking the management of the Web site and the network out of the customer’s hands frees up resources internally. Security is another inhibiting factor in the popularity of WHCs.

“People still might be leery of having someone else control their mission-critical information,” Quigley said. “The idea that in order to get access to those servers – physical access for example – I have to go through hostage turnstiles, have an eye scan, a print scan etc.”

Q9 boasts a highly secure, fortress-like centre complete with biometric authentication, anti-hostage bullet-proof entrances and security officers, Arafat said, in order to ensure and maintain security of customer equipment.

“Really the picture is very simple,” Arafat said. “If you go and try to build (what companies like Q9 supply) on your own, it is going to cost you a lot more than outsourcing it. Our infrastructure costs are shared amongst all the tenants of the data centre and that becomes very affordable for anyone to get all those benefits. It is really a better quality of service because you have all those systems in place at a much lower cost.”

Details on the report can be found at Q9 Networks is on the Web at