When Your Own Host Goes Down

By Doug Kaye

From Web Hosting Monthly, July 2003 Edition

August 8, 2003 -- (WEB HOST INDUSTRY REVIEW) -- The recent announcement by Cable and Wireless that it is abandoning the U.S. market is a timely reminder that we all need to think about what might happen if our own vendors suddenly go out of business.

When negotiating Web hosting agreements, consider three related elements associated with unexpected vendor business changes: First, what are your rights; second, what compensation will be due to you; and third, what events trigger those rights and compensations? Pay particular attention to your termination rights. Do you have an "out" in case of a bankruptcy filing? You may not, since a vendor entering reorganization will likely want to show your contract as an asset, which it can do only if you're locked in or have expressed a willingness to stay. You may have rights in case of bankruptcy, but such rights aren't usually granted by default in these agreements. You've got to ask for them.

Even in the case of a simple change of ownership (usually more than 50%), your contract will be an asset to a company being acquired, but an acquisition in and of itself could be a reason you would want an option to switch vendors.

If you lease equipment from a Web hosting vendor in the U.S., you typically sign a Uniform Commercial Code (U.C.C) filing that gives the lessor a security interest in the leased equipment. Once again, your lease will appear as an asset on your vendor's books, so you may not be able to break it. Just because you have the right to cancel your hosting agreement doesn't necessarily mean you also have the right to get out of your equipment lease. Furthermore, your lease may not allow you to move the equipment to another vendor's facilities. You could well be stuck between a rock and a hard place. (Those who rent rather than lease their servers don't have this problem so long as they can walk away from the rental at the same time they leave the data center.)

And suppose your vendor shuts down your data center and wants to move your servers to another? For that matter, what happens if your vendor simply wants to reorganize the racks and cabinets in your current facility? What about your expenses and the downtime associated with even moving your servers from one cabinet to another within the same facility? Will you be reimbursed?

Your contract should spell out a specific number of days, weeks, or months of notice that your vendor must give you in advance of certain changes. This may not cover you in the case of bankruptcy filings, but it can help in all other cases. Even in the case of a bankruptcy, setting such service level expectations can help establish obligations that were or weren't met.

And finally, don't forget to review the provisions for force majeur. Unless it's spelled out to the contrary, you may find a vendor trying to make the case that any of the events I've described here are "beyond its control," and thus excluded from triggering compensation or releasing you from obligations.