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Today, many SMEs have IT services such as phones and utilities supplied by a third party IT expert. But what will work best for you and what do you need to consider?

If you’re an SME owner, the chances are that some form of hosted IT services will be on the menu for your business in the future. The question is less about whether you will use hosted services than which services you will buy and which you will retain in house.

Hosted services have been around for years and, if your business has a website, chances are you already use someone external to host it. The benefit is one of cost; instead of having to purchase and configure your own web server and ensure it is running 24/7, a hosting specialist does it for a number of businesses. The cost of providing the hardware, server software and applications, and support is spread across a number of businesses.

Many other hosting services work in a similar way where hardware or software is shared between a number of businesses but with each user operating in an environment which is transparent to the other users. If the software requirements are more specialised and complex and if integration with other business applications is required, a shared software solution may be replaced with a dedicated solution. While it is still hosted and may still be hosted on shared hardware, the software is provided for the business’ sole use so additional applications can developed which access the data, for example, for use in other business applications.

When a business needs better performance than can be provided by shared hardware, for example, it may purchase a hosted hardware solution dedicated to that business’ use. In this case it will no longer share the hardware with others but it will still be using hardware owned and managed by the hosting service.

Own or rent?
The question of whether your business should have a hosted solution is one to be assessed according to your business structure and its needs. An SME with staff that all work from the same office won’t benefit significantly from a hosted IT service, the cost of which would be significantly higher than owning and managing the equipment and software in-house. For a mid-size business with a heavy investment in existing IT infrastructure, the cost of moving to a hosted solution would likely outweigh any benefits of doing so.

However, for an SME with a mobile workforce or one with a number of small branch offices, a hosted solution offers significant benefits. Without a hosted solution, mobile workers would need high bandwidth VPN connections back to the company’s servers to be able to run core applications on the road. With a hosted service, everything can be done using a web browser and without the need for a high bandwidth connection.

In addition to providing access to core business data to a mobile workforce, hosted solutions also move the typical IT department tasks of technical support, back-up, maintenance and user support to the hosting service. So, potentially, an SME with a handful of mobile users and no IT department could still service those users with 24/7 support supplied by the hosting service. It is these economies of scale that make hosted services attractive to many SMEs as they can purchase essential business services for a fraction of the price of providing them in-house.

Hosting options
There is very little that cannot be purchased as a hosted service and the market is expanding as suppliers move from selling boxes of product to offering applications as a managed service. Microsoft, for example, recently launched a hosted version of its Exchange Server for email management. While this won’t be of interest to a business that already runs its own Exchange Server – it doesn’t offer the depth of features of that product – it is targeted towards a business which currently uses POP 3 or web-based email services like Hotmail. The attraction is that, in addition to basic email, these businesses will get access to a richer collection of features built around the basic email product. These include online calendar and scheduling features so that meetings can be scheduled and invitations and replies can be send and managed from the Exchange Server tool.

Hosted solutions are also permeating the market as a replacement for the personal computer in some situations. Users of the new Apple iPhone can access a monthly for fee service called MobileMe, which synchronises their iPhone with Apple data services to back up the iPhone data. Users can now protect their phone data without connecting to a computer to do so because Apple provides and manages the service for them.

The consideration of whether the business should contract for a hosted solution as an alternative to buying the hardware and software and running it in-house is not an either or choice. Most businesses opt for a stepped approach to implementing hosted solutions by buying the service for one aspect of the business’ IT needs. Often this is in an area where the business has no existing application and where it has identified a need for something to fill the gap. For example, a manufacturer or logistics business may identify sales as being an issue and investigate an SaaS (software as a service) solution like Salesforce.com. This can be implemented in isolation to the other business applications and can be run from the web with other business applications run locally.

In time, as the business identifies opportunities for using the data that it has in the hosted application within the applications it runs locally, specialist applications can be developed to integrate these two. In this way, the data generated using the hosted service can be made available throughout the business.

Security is an issue for every business and one advantage of hosted solutions is in providing the SME with better security than most already have. In a hosted environment using a reputable company which supports the use of best practices and which is regularly audited, data and back-ups will be more securely held than if the back-up tapes go home with the receptionist each night, for example. Where data is transferred between a business office and its servers residing in a data centre, this is typically encrypted and transmitted across secure DSL or fibre optic lines.

Analyse business needs
Like any business purchasing decision you need to investigate the company your business chooses to do business with. The hosted services industry isn’t without its share of rogue players and it behoves any business to exercise due diligence and investigate the bona fides of the service provider. Understand the SLA (service level agreement) being offered so you know the level of service the hosting service is guaranteeing to provide. Ensure that your data belongs to you and that if you terminate the contract you will get all your data back in a format that you can use and without having to jump through hoops. Reputable businesses will provide references on request and ask to speak to an ex-client too.

At the end of the day, you need a service provider who will provide you with what you have determined your business needs. This might be a hosted application, it might be a fully managed data service and it can be a long-term relationship with a provider that will help your business chart its IT future.

– Dave Stevens is managing director of Brennan IT (www.brennanit.com.au), a leading provider of telecommunications and IT services to the mid-market, with offices in Sydney, Melbourne and Brisbane.


  • Analyse your business needs and determine the solutions required to fill them
  • Identify IT systems required to implement the identified solutions
  • Determine whether IT requirements include additional hardware or software or both and write specifications for these
  • Determine the level of user support required and if this can be met in-house
  • Analyse whether to buy hardware and software outright or use a hosted solution
  • If a hosted solution is chosen:

– determine whether to use a shared or dedicated solution
– investigate suitable hosting solutions against list of business needs
– check hosting service’s references, SLA, contract and issues such as security and data ownership

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Dave Stevens

Dave Stevens

Dave Stevens is the founder and managing director of Brennan IT, an IT services business that provides a complete range of fully managed and secured IT and telecommunications solutions in Australia and New Zealand. Follow them on Twitter: <a href="http://twitter.com/#!/brennan_it">@brennan_it</a>

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