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October 12, 1998

Off-Site Web Sites

Illustration by Hank Osuna

Companies turn to outsourcers to save time and money

By Jeff Ubois

s the internet becomes a more important medium for doing business, corporate IT departments are finding that managing a Web site can be costly and time-consuming. But a new breed of companies is springing up to provide outsourcing services that reduce expenses and eliminate many of the headaches associated with running a large Web site.

Internet service providers have hosted corporate Web sites for years. But the new generation of high-end co-location companies provide capacity on demand, highly reliable service through redundancies and backup equipment, and other services such as hardware maintenance and database administration.

E! Entertainment Television recently opted to outsource its Web site to Exodus Communications Inc. rather than expand its existing facilities. "It was largely an economic decision," says Jeff Mayzurk, manager of systems and network engineering for E! Online in San Francisco. "Our in-house data center was reaching capacity, and to expand it would have required a significant capital investment."

Moving to Exodus' co-location facility made handling sudden traffic increases easier and eliminated the long wait for new T3 circuits. "It's hard to keep 200 Mbps of capacity ready and waiting at your data center when you only need it 10% of the time," Mayzurk says.

A company hosting its own Web site typically pays $1,000 a month or more to run a 1.5-Mbps T1 line to its Web server. A large site generating a lot of traffic may require a 45-Mbps T3 line, which can cost tens of thousands of dollars a month. Even if those fees can be justified by the volume of business coming through the site, it can take weeks to install additional lines, and the company could wind up paying for capacity it doesn't need most of the time.

IT departments choosing to outsource their Web sites can install their own servers at the co-location company's facility or rent time on the provider's servers. For a fee, the co-location company typically provides some of the networking hardware and offers some administration services. It can even provide faster access to a Web site by shortening the distance data packets must travel. Companies save on hardware and telecom charges, and their IT workers are freed up from management tasks, such as balancing the load between several T1 lines, and can concentrate on developing the site's content.

Apps On The Move
The market for co-location services was about $200 million in 1997, according to Jim Freeze, a senior analyst with Forrester Research Inc. But Freeze expects it to grow to $8 billion by 2002 because the need to provide enough capacity and have sites up 24 hours a day year-round will encourage many companies to outsource their critical Internet applications.

"A lot of what's being done today is not truly mission-critical, but that will change," Freeze says. "The Web outsourcers will improve service levels dramatically, and they will become public computing utilities as reliable as the power companies are today."

There's no shortage of companies providing co-location services (for a list of some of the leading companies, dowload the PDF file, "Selected Web Service Provider"). Exodus' success on Wall Street--the company's share price surged to nearly $50 before falling back to $22 last week--has encouraged other companies to get into the market. Among the major players in the field are Above.net, Digex, Frontier GlobalCenter, InterNAP Network Services, and CMG Information Technology's NaviSite.

For many corporate IT departments outsourcing their Web sites, money is the key factor. J. Crew, a New York catalog retailer, sells several million dollars worth of sportswear yearly through its Web site. The company chose to locate at Digex's facility in Beltsville, Md., because it preferred paying a co-location fee of about $2,000 a month to paying $30,000 in monthly telecommunications fees, according to Marc Hansen, VP of system architecture at J. Crew. "The overwhelming reason for co-locating is what it saves in outrageous telecom charges," Hansen says.

But there were other benefits, such as the availability of additional bandwidth on an as-needed basis. J. Crew typically requires about 10 Mbps of capacity, but that jumps to 30 Mbps during the Christmas shopping season. To have that level of service on the company's premises would require not only a 45-Mbps T3 line, but a second T3 line for redundancy. "As revenue from our site has increased, so have our concerns about fault tolerance," says Hansen.

Moreover, the company would have to use a different ISP for the second T3 line to ensure that service would be continuous even if one ISP's network crashed. That means J. Crew's IT staff would have to configure network-management software, including the Border Gateway Protocol, to balance the load between the two services. Since staffers didn't possess that skill, the company would have had to hire a well-paid expert.

J. Crew uses Sun Solaris servers located at the Digex facility, and hasn't had any problems managing and maintaining the equipment remotely, Hansen says. "We thought it through and carefully designed the hardware to be remotely managed," he says. "We haven't been back to the equipment since it was installed, though we've done several upgrades and even fixed hardware problems. We've shipped new stuff to Digex and had Sun or Digex staff install it."

Hansen says it's critical to select the right vendor initially, because moving a Web site is prohibitively expensive because of the need to duplicate resources during the transition and because of the possibility of lost revenue if the site is down for any period of time.

"Co-location vendors come in here and say they have a great deal, and I have to tell them that even if their service were free, the price differential wouldn't be enough incentive for us to move," Hansen says. "It kind of depresses the companies trying to get into the game now."

Though J. Crew's site is comparatively large, Hansen says co-location is also viable for smaller sites. "I'd have a hard time recommending against co-location," he says. "If all you have is static HTML with CGI rather than a complex site, it makes sense to have someone manage it for you."

Up All Night
For PlanetAll, the reliability offered by co-location companies overcame the contact-management service company's initial skepticism about their ability to manage its site, which runs on 20-plus servers in a complex configuration.

"When I heard 'co-location' I was skeptical, but a number of things drove us to outsource," says Brian Robertson, PlanetAll's chief technology officer. "We're contractually obligated to be up almost 100% of the time. To do that, we had a staff of eight maintaining a 7-by-24 operations center. Co-location has taken a huge burden off us from a management and staffing point of view."

Also, PlanetAll's offices weren't as well-protected from fire, flood, power outages, and other problems as the data centers of co-location services. Robertson was surprised to find services provide more than simple co-location. "There's now a class of vendors specializing in high-traffic, hard-to-maintain Web sites with multiple servers," Robertson says.

After moving the company into an area served by Nynex, PlanetAll was informed that it could take several months to get a T1 line installed. "That was horrible," Robertson says. "Suppose we were signing a deal with Yahoo and had to wait three or four months to get another T3 put in?"

Competitive Advantages
Large co-location services are rapidly evolving into exchange points where various ISPs meet and pass traffic to one another. Peering arrangements among the co-location companies let them reduce the number of hops between end users and their clients' Web sites.

Some co-location companies are using this as a competitive advantage. InterNAP, for example, is leveraging peering agreements with service providers, including UUNet, MCI, and GTE/BBN. "We're not pushing transit across their backbones," says InterNAP founder Tony Naughtin, "but we provide the most direct path for packets." Similarly, Above.net has about 170 peering agreements with ISPs, says Sherman Tuan, the company's founder and CEO.

This type of efficiency is a hit with customers. "If the purpose of a site is to reach a mass audience, then reducing the number of router hops by using a provider with good peering arrangements is crucial," says Ben Chen, CIO for IXL, a large Web design agency that uses Above.net's services both for its clients--including Blue Cross Blue Shield, Deloitte & Touche, and the Home Depot--and for its own intranet.

High-end vendors are also building multiple data centers and letting clients automatically replicate their content to each one. Many are using technologies such as Cisco Systems' Distributed Director, which makes it possible to automatically route HTTP requests to the nearest server. This not only improves reliability, but also supports bandwidth-hogging multimedia applications. The only way to serve thousands of users simultaneously is to run multiple servers, and it makes more sense if they can all access servers close to home.

Pricing schemes are becoming more complex as co-location companies try to win new clients. Many are charging a mix of monthly fees with pricing tiers for different levels of usage. Digital Island in Honolulu has taken that one step further by introducing pricing based on usage. It charges $50 for each gigabyte of data transmitted from a company's servers. It also offers discounts for high-volume sites.

Before shopping for co-location services, companies should consider whether their existing IS staff is able to handle the latest Web applications, ensure reliable performance, address spikes in bandwidth demand, and allocate additional hardware as needed. Large companies should also ask whether there is a less-costly way to put the company on the Internet, such as using existing resources.

If the resources aren't there to support a Web site that will be an important part of the company's business, then Freeze suggests the IT department issue a request for proposals (RFP) to several vendors. For a site that is truly critical, the company may also need to duplicate the applications and resources of a hosting company in-house to ensure reliability and security.

PlanetAll issued an request for proposal to more than a dozen vendors, including Exodus, NaviSite, and Digex, before selecting NaviSite. "Most vendors are willing to be very competitive to win new customers because they realize that once you move in, there's a huge moving cost to leave," Robertson says. "I'd strongly recommend using an RFP, because then you can let the competitors battle it out."

Joan Scoll

Once a company does choose a provider, its job isn't done. It has to build relationships with engineers and staff at the co-location site. "The success of moving to an outsourcing vendor depends onhow much time you spend training their operations staff," Robertson says. "The more training you do up front, the better off you'll be down the road."

Joan Scoll, an IS director for Adobe Systems, which has co-located a service with InterNAP Network Services, agrees. "You're extending your operations staff, so you should go to the site, meet the people, and test something that's not mission-critical," she says. "After you gain some experience, and as it makes sense from a business perspective, expand your use of the service."

Co-location services have already changed the traffic patterns on the Internet. Because of the benefits and savings they offer, analysts say, they will likely also change the buying habits of IS managers.