Rather than facing the hassle of maintaining their own server, many businesses choose to use a web hosting for their internet presence.
But what costs are involved and how do you go about choosing the right kind of web hosting service? Angus Kidman reports.
For some businesses a website is just a useful addition to their operations, but for travel directory provider, TotalTravel, it’s the very heart and soul of the business. "TotalTravel is probably the largest site of its kind in Australia, offering around 300,000 pages of destination information," says global marketing manager, Paul Fisher. The company, based in Byron Bay, New South Wales, aims to provide a comprehensive directory of travel options in Australia, making its money by charging individual providers to advertise on its site and, for around 1,000 companies, helping them set up their own internet presence.
"The site gets up to 65,000 people on a busy day. An average month is around 1.5 million visitors. When you have that volume of content and a significant volume of suppliers, it’s a lot of moving parts," Fisher says. "Everyone talks about the internet being a level
playing field, but that’s not always the case. It’s hard to get some presence unless you’ve got some serious marketing dollars." TotalTravel has always used an external provider. "There are still a lot of companies that host for themselves, but we don’t think it’s
our core business. We wanted somebody who lived and breathed hosting." However, they originally chose one based solely on getting the cheapest overall price, and ended up with a hosting company based in Singapore, which proved increasingly less suitable as TotalTravel expanded.
"As the business grows, and we’ve grown very rapidly, particularly over the last two years, the stakes get higher—10,000 travel suppliers are now reliant on our business. Now we’ve got such a massive amount of traffic, we can’t afford to put a foot wrong in the area of hosting infrastructure." In February 2006, the company decided to start
looking for a new provider. They eventually settled on Macquarie Telecom, and in September signed a three-year contract with the company, which runs a dedicated hosting centre in Sydney. While the selection process was time-consuming, the actual transition was fairly fast, and the site moved to the new provider in October.
Reliability was the main driver in making the switch. "We can’t afford to have two minutes of downtime," says chief operating officer, Esther Parsons, who says it’s important to weigh up the cost of downtime to your business. "It can put a dark cloud on a business if the site’s down." Parsons says Macquarie’s record of no downtime for any of
its hosted sites played a major role in the decision, though she admitted the increased costs associated with this required careful consideration. "It’s been a massive increase in cost and the difference between the two is enough to give you a cardiac arrest. We’ve had to pay a lot more for it."
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Web Hosting Benefits and Risks
Perhaps fearing such a cost boom, many businesses seem reluctant to make a similar move. "While web hosting is a widely discussed option for the SME marketplace, the fact of the matter is that very few SMEs are relying on it," says Charles Tang, Asia–Pacific business and marketing director for CNET Direct. "We’ve recently conducted an intensive IT audit of approximately 2,000 SMEs across Australia and across multiple industries. This revealed that on an overall basis, only 7.8 percent of organisations in this sector are relying on outsourced web hosting or storage management." That decision is not particularly influenced by business size.
"If anything, larger organisations with more than 100 employees are less likely to outsource web hosting and storage and rely on their own IT resources," Tang says. "Generally, the feedback that we’ve received is that SMEs have still to be convinced of the benefits of external vendors regarding cost, efficiency and ROI." Despite that reluctance, there a number of clear indicators as to when a business should consider making the move to hosting. "The trigger event usually is a new application and how mission critical that is to people’s business," says Greg Thomson, executive director for hosting and security at Macquarie Telecom. "Why tie up cash and real estate and investment in building your own data centre?" "The main benefits are better access to security and larger connection pipes, as well as access to more reliable and better supported enterprise hardware and software," says Anoosh Manzoori, managing director of SmartyHost.
Ensuring security is one critical consideration. "The technology for hosting websites in-house is easily available and not expensive, but it is not necessarily a good idea," says Lisa Harvey of IT consultancy, Energetica. "Hosting your website means opening your server and network up to the internet. Unless you know what you are doing there is significant security risk in this." "Running your own setup means doing virus management and patch management, all of those things you’ve got to be very methodical about," Thomson says. "How do you get the right skill set for that? One of the big challenges in the IT space, still, is developing and training people. Technology is going to continue to change rapidly, and how you leverage specialist resources and focus on core competency to grow your own business will be critical." Reliability is also a major consideration. "Data centres are built specifically for hosting purposes and can afford several high-end backup solutions, whereas if you host internally you create a single point of failure," Manzoori says. "For example, even a simple power failure at 2am could kill your server, your data, and consequently your business."
Calculating R.O.I.
"Hosted services can remove a great deal of the cost, pain, and risk of managing IT in-house," Harvey says. "These services are usually based on a monthly fee, and can include software licensing. The cost will vary according to how much work you do yourself, what kind of service requirements you have, and how much work you are outsourcing."
Unsurprisingly, hosting providers argue that cost benefits apply regardless of size. "If a business is only after a place to host a brochure site, it is much more economical to host externally than to carry the cost of the servers in their own office," Manzoori says.
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Just how economical? "Basic hosting plans, which are the most common ones, should be less than $100 per year. If you have a website that is less than 100 pages then you should not be paying more than that." There’s no doubt, however, that features such as guaranteed uptime and ability to handle huge surges in visitor numbers will cost more. "Dedicated hosting solutions need to be scalable, and the more space the higher the price," Manzoori says. He suggests basic business-oriented hosting options at this level can range in price from $40 a month to hundreds or even thousands of dollars, especially if the site attracts lots of traffic.
While contracts for basic hosting often run month-to-month, larger operations usually seek a longer deal. This can have benefits, however. "The last thing people want to do is put their IT infrastructure into a hosted environment and then move it 12 months later," Thomson says. When choosing a provider, ensu
re you ask for references from existing customers, and information about the company’s qualifications. "Accreditations are of paramount importance," Thomson says. "You want to make sure the infrastructure is audited. You want to make sure that everything is tested." "A hosting provider should have very good data centre services behind them," Harvey says. "They should have proper licensing relationships with providers. They should understand what you want to achieve for your business and work with you in partnership to deliver it."
Calculating overall return on investment is also a vital step when selecting a hosting provider, but the calculation isn’t always as obvious as it may seem. "To calculate the ROI you must understand how much you are spending on IT, not just hardware, software and support, but also upgrades, backups, risk management and security," Harvey explains. "Start by identifying the objectives of what you are hosting," Manzoori advises. "Work out what the objectives will save your business or generate in sales, and link this to a dollar amount. Then, identify what the cost of hosting your website is. Finally, compare the cost of hosting to the estimated generated sales or cost-saving amount, and you should get an estimated ROI." Hosting brings some immediate accounting benefits. "One of the things we do through the managed environment is spread the capital cost over the life of the contract," Thomson says. "It all becomes an operational expense cost as opposed to a capital cost. It’s relatively easy to do the ROI."
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