April 19, 2004 — (WEB HOST INDUSTRY REVIEW) — Qwest Communications International Inc. (qwest.com) overhauled its managed hosting services product line last year to breathe new life into a business division that had languished in the shadows of the company’s profitable mainstay of connectivity.
The Denver, Colorado-based company already boasted a voice, video and data services customer base of 25 million, but its hosting portfolio wasn’t as complete as executive management thought it should be. So, prodded by Richard C. Notebaert, chairman and CEO, the managed hosting offerings were revitalized with a “Spirit of Service” focus on meeting customer needs.
A key element in the re-launch was the establishment of a designated customer service manager program.
“There was a strong need to have a single point of reference for customers to go to rather than just calling an 800 number and getting a different person each time. We decided to establish these customer service managers so that every managed services customer will have one person, one number to call,” says Martin Prazak, group manager, hosting product management.
Customer service managers routinely contact a new customer within 30 days of implementation to make sure the services, including billing, are meeting the customers’ expectations. Then quarterly meetings are held for standard service reviews.
“If there is an outage of any kind, or if we are seeing that the utilization on a server has exceeded the threshold we’ve established, we would call the customer to let them know about the situation and assist them in coming to a resolution about what to do,” Prazak says.
The revitalization of Qwest’s managed hosting services included abandoning pre-packaged service bundles in favor of an a la carte-style menu where customers can pick and choose the services that best fit their needs.
“We felt like our services were not flexible enough to meet the opportunities that we were facing in the market. We knew we had to make some changes to make our offering simpler and more flexible versus creating bundles that the customer has to fit into,” Prazak says.
Included in the adaptable offerings are three disaster recovery options and business continuity consulting.
The three disaster recovery packages include a plan to restore a business’s data within 168 hours (one week) after a catastrophic failure; a 72-hour plan for those with more pressing needs; and a 24-hour recovery option for companies where downtime would pose an economic and/or public relations nightmare.
Consulting for business continuity involves Qwest engineers developing a business continuity-disaster recovery plan for a customer based on an assessment of the type of data in the enterprise and how critical that data is to a business operation.
Improving service level agreements is another area that Qwest changed. “We’ve always had implementation SLAs, but now we have even tighter implementation SLAs,” Prazak says.
The typical customer that Qwest targets for hosting is the medium-sized business, although it has some very large Fortune 500 clients. The company defines its target market as businesses with 100 to 1,000 employees with annual revenue between $20 million and $100 million.
Ted Chamberlin, an analyst with Gartner, Inc. (gartner), of Stamford, Connecticut, says the changes made by Qwest were needed, but the company still faces challenges as a result of its past actions or inactions.
Qwest has long had the foundation of hosting and its six CyberCenters are some of the best in the industry. While it had built up a modest but solid colocation business, hosting was a “loosely organized division that never got a lot of executive support buy-in” despite having a lot of government clients, Chamberlin says.
“That legacy of not focusing on managed hosting really hurt them for awhile. When the demand for hosting waned, Qwest did not fare very well,” he says.
In the past year, however, Qwest has had a much better focus on offering managed services. They will provide the pipe, power and ping and manage the Web servers, but they know they don’t have a lot of homegrown application management talent so they will outsource that to a third party, he says.
“They are on the right track of piecing together a hosting offering that really goes above just managing the infrastructure. They are really into the cream of it, but the one thing is they have a public image issue and that really affects their business. A lot of clients I speak to don’t consider them a serious contender because of that public perception,” Chamberlin says.
The company has gone a long way in building credibility in the market and has grown financially stronger. It shut down some of its network operations last year in an efficiency and cost-cutting move. “Everyone knows that right sizing and making sure you have only enough raised floor space to run the business is the proper thing to do, but the public doesn’t see that the same way. The public sees that as a business failing,” Chamberlin says.
While Chamberlin believes Qwest is making strides in delivering a wider portfolio of managed services and its visibility in the market is growing, he has some advice to improve the operation.
“They have to get a better handle on their pricing structure. They tend to be very low in a lot of fields; they tend to compete on price, and the managed hosting business is not a business that can compete on price. It’s a value add serviceĀ The guys at Qwest have to stop thinking purely like network guys and think a little bit farther up the stack like outsourcers,” he says.
The Web hosting industry has been like a prizefighter who “took a set of blows to the head and was staggering for a while, but never hit the mat,” Chamberlin says. That fighter is coming back and the demand for hosting services will grow with a shift away from just Web services to applications. “That is going to be the driving force in hosting.”
The North American Web hosting market is projected to grow from $5.8 billion in 2002 to $20 billion in 2007, according to a forecast by Lydia Leong of Gartner Dataquest. Managed services and colocation will account for 85 percent of that growth.
With such a sizable market looming as the prize, Qwest has struck a new pose in the industry.
Says Prazak: “Everything that we do now is focusing on making sure our existing customers are happy and that as we bring new customers in they are going to be satisfied with the service that we provide them.”
