This story appeared in the June 2004 issue of Web Host Industry Review magazine. Click here to subscribe for free.
June 18, 2004 -- (WEB HOST INDUSTRY REVIEW) -- Welcome to the brave new world of Web hosting. After a frenetic start and near-fatal shakeout as part of the Internet boom and bust days, the Web hosting industry has emerged from whatGartner Inc. refers to as the "Trough of Disillusionment" on its hype-cycle and is slowly moving up the "Slope of Enlightenment" toward the "Plateau of Productivity." In short, the Web hosting business may no longer be sexy, but it is definitely on a more stable course for long-term success. And it may be an important building block within one of the latest information technology industry trends: on-demand, utility computing.
As any reader of this publication probably knows, the Web hosting industry was born out of the extraordinary demands of the .com era. As the pressure upon corporations and others to get online intensified, many turned to Web hosting companies to provide a quicker path to the technology, skills and services they needed to keep pace with their peers.
A myriad of new Web hosting companies were created to capitalize on this need. Encouraged by "free money" from VCs and investors, the hosting companies plunged into a wild land-grab and rapid build-out of massive hosting centers powered by the latest in technology. The bet was that if the hosting companies built it, the customers would come.
It is too painful to rehash what really happened. In short, as the hype of the Internet economy subsided and the cost of technology shrank, most of the major hosting companies collapsed under the weight of their under-subscribed capital investments.
With the demise of many of its biggest names, such as Exodus, the Web hosting industry suffered a public relations debacle that threatened to discredit the fundamental value proposition of Web hosting — cost-effective access to specialized technology, skills and services.
Fortunately, a growing number of enterprises are not only returning to Web hosting services as a part of their current IT management strategies, but are looking at Web hosting as an essential ingredient in their future utility computing plans.
Utility computing is one of those terms that means different things to different people. THINKstrategies's definition of utility computing is the automated deployment and management of computing power and applications on an on-demand basis. The deployment of a utility computing strategy encompasses a combination of hardware, operating systems, processes and skills.
Others in the IT industry dwell on the new enabling technologies that permit utility computing to occur, such as grid computing, virtualization and blade servers.
THINKstrategies believes that utility computing has become a service-led, rather than a technology-centric, business. Today's utility computing technologies are still too embryonic and the models for success are still too uncertain for most enterprises to take on this initiative alone. Instead, they are enlisting a variety of IT service providers, including Web hosting companies, to help them build utility computing environments.
The CTO of USA Today, for example, recently spoke at a utility computing conference about how the publication teamed with LoudCloud (now Opsware) and transitioned to EDS to build a unique on-demand Web site capability that not only saves the company development and operating costs, but also has permitted USA Today to create new Web-based services for its advertisers and readers. This CTO identified the company's Web hosting arrangement as a pivotal to its utility computing strategies.
Today's on-demand world has created renewed interest in Web hosting from the enterprise perspective. The more favorable economics of running a Web hosting operation has also pumped new life into this industry.
However, many Web hosting companies today are focused on providing low-cost, low-value, rack-and-stack services. These companies that attempt to compete on price are battling for survival in a highly competitive, price-sensitive, commodity marketplace. Enterprise interest in value-added services such as content, messaging, security, storage and other forms of managed services represents a new opportunity for Web hosting companies to differentiate themselves.
The key for Web hosting companies to succeed in this new era of opportunity will be to focus on the strategic business value of their services, rather than on the cost-savings they can generate.
About the Author:
Jeffrey M. Kaplan is managing director of IT strategy consultancy THINKstrategies. He can be reached at jkaplan@thinkstrategies.com.
