Gone are the days when companies relied on managed service providers to host static, single-server sites. With Web sites becoming more sophisticated, companies are now asking their outsourcers to monitor and manage a slew of complex, real-time transaction-processing activities running across multiple sites and servers. And with financial turmoil in the Web outsourcing market, these customers want to know more about their vendors’ financial records, business models, operational strategies and future plans.
In fact, concern over vendor viability is causing many users to buy outright the equipment supporting their Web operations or to pull their managed Web equipment back in-house, says Andrew Schroepfer, an analyst at Tier One Research Inc. in Plymouth, Minn.
“[Users are] looking for more than just someone with a good data centre and nice connectivity,” he says. “They are looking for someone who can help them cost-effectively manage and monitor their Web applications.”
Here’s what some companies are doing to get the most from their relationships with Web outsourcers.
When GolfServ.com, a Web site owned by Chicago-based SirenServ Inc., was launched in 1999, the site attracted a few thousand visitors every month. It easily ran on two small Web servers hosted by an external service provider.
Today the site is one of the premier online destinations for golf fans, attracting hundreds of thousands of customers every month. Its content is licensed to companies such as AOL Time Warner Inc., CNN/Sports Illustrated and The New York Times Co., and visitors to the site can do everything from catch up on the latest golfing news to track their own handicaps.
Along the way, the task of managing the site has become a lot more complex for Englewood, Colo.-based Verio Inc., GolfServ’s managed services provider.
“The nature of the applications that are being hosted has changed,” says Michael Caspar, chief technology officer at GolfServ.com. “It takes a lot more horsepower to host some of today’s dynamic Web applications compared to before.”
For one thing, the GolfServ.com site now runs on seven large Web servers that have to be mirrored and fully load-balanced for high availability. The networks have to be fully redundant for the same reason. Verio provides round-the-clock firewall and intrusion monitoring services and is contractually obligated to guarantee over 99.99 per cent network uptime.
“We’re in the major leagues these days, so we need near-100 per cent uptime,” Caspar says. “We sat down with Verio a couple of months ago and told them about our new requirements and what we needed from them.”
Off-loading the Liability
Monster Commerce Inc. in Calabasas, Calif., is another company that expects its service provider to do more than just host its Web operations. Monster builds and runs e-commerce-enabled Web sites for small- to mid-sized companies and uses Rackspace Inc. in San Antonio, Tex. to host more than 1,500 such sites. All of the Web sites are hosted on equipment that’s owned, operated, supported and maintained by Rackspace.
The deal Monster has with Rackspace is different from two previous hosting contracts, one of which was a collocation deal where Monster owned and maintained its own equipment; the other was a shared services arrangement where Monster’s Web site shared servers that were being used by other customers.
With Rackspace, Monster pays a monthly fee that includes the cost of renting equipment as well as round-the-clock network services and support. Because Rackspace’s infrastructure is built up using proven, pre-packaged components, deployment times are reduced and technical challenges are easier to manage, says Nick Matina, director of infrastructure operations.
As a result, the return on investment has been “the speed at which we can grow, and the release from the liability and overhead that comes from maintaining your own hardware and software,” Matina says.
Weighing the Risk
Companies are also being careful about which outsourcing vendor they choose. When XM Satellite Radio Inc. in Washington recently renewed its contract with hosting vendor NaviSite Inc. in Andover, Mass., the station made sure it first carefully scrutinized the vendor’s financial condition and its business plans.
“We wanted to make sure that NaviSite was doing what it takes strategically to remain in business,” says Mark Kramer, XM Satellite’s manager of e-business applications.
The station, whose partners include cable TV channels MTV, VH-1 and ESPN, has more than 100 music and talk channels and will soon offer a digital audio subscription service to owners of cars from several companies, including General Motors Corp., Volkswagen AG and Audi AG. NaviSite hosts XM’s Web site in a clustered high-availability configuration, and its services include application back-up and restore.
Even after satisfying itself that NaviSite was stable enough for its purposes, XM Radio is taking no chances and is fully prepared to bring its Web operations back in-house quickly if needed.
“It would obviously add more work for everybody, but we have the environment set up here that would allow us to bring it back,” Kramer says.
Meanwhile, the near-desperate quest to find higher margins is pushing hosting companies – most of which are reeling from the current economic slowdown – to offer a broader portfolio of services. This has created more of an emphasis on value-added infrastructure management and layered services around monitoring, high availability, business continuity, scalability and service assurance.
Having a broader services capability gives hosting companies opportunities for higher margins, particularly during tough economic times, says Craig Schlagbaum, vice-president of channel sales at Verio Inc.
Verio, which is owned by telecommunications giant NTT Communications in Japan, is moving rapidly away from a pure co-location business model to more managed-services offerings such as application backup and recovery, firewall and intrusion monitoring, and managing applications at customer locations.
“Our customers are looking for more one-stop-shopping capabilities from their providers,” Schlagbaum says.
“Providing uptime and high-bandwidth connectivity is easy and has become a commodity game these days,” says Lew Moorman, vice-president of business development at Rackspace. The value-add comes from “the expertise and responsiveness, particularly around core server and operating system environments, applications and Web server security,” he says.