Web Hosting Downtime Costly for UK Firms

• By The WHIR, March 20, 2002

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Web Hosting Downtime Costly for UK Firms Adam Eisner, theWHIR.com

March 20, 2002 --  (WEB HOST INDUSTRY REVIEW) -- Web site downtime cost UK businesses more than 500 million pounds in 2001, and will cost them even more in 2002, according to a new report from the Yankee Group.

The report, commissioned by Web services firm Worldport (worldport.com), says that UK businesses lost a total of £565 million because of downtime in 2001, and expects that number to rise by 26 per cent to £715 million in 2002.

While half a billion pounds might seem like a staggering loss due to downtime, it is only part of the picture. According to the report, the figure £565 million only takes direct costs like idle infrastructure and lost transactions in to account. Once indirect costs like reputation, potential market de-capitalization and future sales are factored in, that figure can potentially run in to the billions. One example the research firm uses to illustrate this point is what happened to eBay January 15, 2001, the day after it experienced an outage. The next day, the value of eBay's stock dropped 15 percent. The company also lost an estimated $500,000 in sales.

But according to the report, auction sites are not the only ones hit hard when downtime occurs. Leisure sites, comprised mainly of travel and "non-packaged" entertainment destinations (such as cinema and live show sites, but not book or movie stores), are also highly affected when downtime occurs. This is due to the sheer volume of traffic many of these sites receive and the constant updates they require.

When downtime does occur, the 12-page report cites two main culprits: physical failure and human error. Most instances of downtime related to physical failure can be traced back to issues like inadequate infrastructure, power and protection, while poor administration and configuration of crucial hardware and software by technicians is also a significant contributor.

As a result, the report recommends against companies taking their Web hosting needs in to their own hands. "No matter how skilled the technicians managing a Web site hosted in-house are, technology cooked up to a homemade recipe contain numerous points of failure at all levels of infrastructure," writes Scott Smith, Director of Yankee Group's Internet Strategies Europe division.

But as the United Kingdom's Web hosting market grows, it is clear that all hosts are not created equal. According to the Yankee Group, the UK is home to Western Europe's most competitive ISP market, and also leads Western Europe in total Web hosting expenditure. And according to the report, infrastructure and development services have become easier for the customer to select and compare. This means that as the UK's Web hosting market grows, companies that rely on smoke and mirrors to secure clientele will ultimately have a difficult time succeeding.

The companies that will succeed in the era of the educated buyer will be those that can back their services up with comprehensive Service Level Agreements. "The availability of SLAs that provide tailored guarantees on infrastructure provides greater protection for end users, and the advent of solution SLAs that guarantee integrity of application provides a better safety net for companies looking to tap the Web for opportunities," Smith writes.

Web hosting companies in the United Kingdom that can guarantee performance levels should therefore be able to not only secure many of the new customers in the UK's burgeoning Web hosting market, but also prevent them from contributing money to the pit created by downtime. With the number of UK businesses expected to open Web sites steadily increasing, there is a great opportunity for UK hosting firms to secure new clients - however, they must be sure they are able to deliver the goods.

Tags:  Europe  service level agreement  eBay  EDS  ETT  The Yankee Group  Worldport  Yankee Group 

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