October 2, 2000

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Customers Get Expanded Web-Hosting Options

Exodus and Bellsouth move to give users more managed and complex hosting features

By Bob Wallace

More on web hosting:

Web Hosting Heats Up (9/25/00) Internet Week: E-COMMERCE MANAGEMENT (9/25/00) Computer Reseller News: HEADING OVERSEAS (9/11/00)

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hen it comes to Web hosting, both the big fish and the guppies need to grow quickly. Customers are demanding more advanced offerings, more facilities, and greater geographic coverage. The need to accommodate them--fast--was illustrated last week when hosting kingpin Exodus Communications Inc. disclosed plans for a $6.5 billion merger with rival GlobalCenter Inc., and BellSouth Corp. said it would expand its hosting business through an alliance with Qwest Communications International Inc. and Sun Microsystems.

Low-level services such as Web-server co-location in a third-party hosting center are the most widely used services today. But Exodus and BellSouth are expanding so they can move users to higher-margin managed and complex hosting services, which include sophisticated features. "We plan to be the power in complex hosting services," says Exodus chairwoman and CEO Ellen Hancock.

The combined Exodus-GlobalCenter will have 32 hosting centers totaling 2.6 million square feet, almost 4,000 customers, additional personnel, more networking options, and greater geographic coverage, with an emphasis on Asia via a joint venture.

"This is fabulous because it brings Exodus additional hosting space, broader international reach, and additional customers, which should increase the company's value'' to us, says Camille Currim, VP of Web systems and services at Working Woman Net-work, whose WorkingWoman.com site uses Exodus' co-location service. "Merging with a big competitor will help it gain market share as well."

BellSouth, which offers limited hosting services, hopes to provide its customers with a broader array by partnering with Qwest and Sun. The regional telephone company has opened two hosting centers filled with Sun software, servers, and storage systems, and Sun personnel are available to provide professional services. The Atlanta and Miami centers were built with Qwest's help and are linked to its international hosting-center network. Four more BellSouth centers are due within two years, but the company wouldn't specify where they would be located within its nine-state territory .

Over the next year, BellSouth says, the centers will offer services such as custom hosting, managed storage, managed security, content delivery, caching, and disaster recovery. As part of the deal, Qwest gets hosting space in each BellSouth center to offer its own hosting services.

"There's really no differentiation of what they're offering coming out of the gate," says Jeanne Schaaf, a director at Forrester Research. "But they've aligned with strong partners, which will make it interesting to watch and see how they offer more sophisticated and managed services beyond bandwidth and data-center space."

Exodus is further along than BellSouth when it comes to Web hosting, which is projected to grow from a $1.4 billion business last year to a $20 billion market in 2004, according to Forrester. Exodus last week introduced two services designed to help the Web sites it hosts to prepare for and quickly respond to internal and external security threats, including distributed and denial-of-service attacks such as the kind that paralyzed big-name Web sites in February. Exodus also has an 800-person staff that provides professional services.

A wide range of companies--from chipmakers to telcos--are spending billions of dollars to build their Web-hosting capabilities. But the key to success, analysts say, is to offer more advanced Web-hosting services. NTT, Japan's giant telephone company, recently received U.S. government clearance to buy U.S. Web-hosting company Verio Inc. for $5.2 billion, and WorldCom last month disclosed plans to spend roughly $6 billion to buy Intermedia Communications Inc. and gain control of its Digex Inc. hosting unit.

"This is a market where scale is critical to success, so I would expect to see more consolidation going forward," says Joel Yaffe, a senior analyst at Giga Information Group. Basic services such as co-location make up a big part of hosting revenue, and those sales are vulnerable to new competition from telephone companies. "Exodus and its smaller rivals have to move customers up to managed and complex services, which could take quite a while," Yaffe says.

Hancock says 33% of her company's quarterly revenue comes from managed hosting services, but she won't say how much is from shared hosting and co-location services, acknowledging only that "Exodus has done very well at co-location service."

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