Dell Launches Program to Host Web Sites for Small Business
By GARY MCWILLIAMS
Staff Reporter of THE WALL STREET JOURNAL
February 22, 2000
Dell Computer Corp., in a move to expand the services it offers online and reignite revenue growth, is launching a Web-site-hosting operation for small businesses.
The personal-computer maker's Dellhost.com site is expected to be announced Tuesday. Information on the service appeared on the company's Web site late Friday as part of a test of customer use, a Dell spokesman confirmed.
Dell's move into the fiercely competitive, low-margin business comes as some small businesses turn to providers of Web site hosting and of electronic-commerce Internet service, instead of buying their own computers for these jobs.
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In an interview, Chief Executive Michael S. Dell called the new business "a natural extension" of its PC sales to small and medium-size businesses. He said Dell recognizes the rapid embrace of Web hosting by customers who might otherwise have purchased Dell gear "is a shift we must play a role in."
Dell's move, however, puts it on a collision course with some of the very dot-coms it recently began courting. Two weeks ago, it formed a unit to sell its servers and disk-storage equipment to companies that host Web computers and provide Internet service.
"That's the big gotcha," said Summit Strategies Inc. analyst Laurie McCabe. While Internet-service companies that now compete with Dell may shun its computers, there are a number of computer makers offering or exploring Web-hosting services, including International Business Machines Corp., Hewlett-Packard Co. and Gateway Inc., she said.
Mr. Dell said conflict between product sales and Web-hosting services is part of the business today. "There's lots of cooperation and competition here," he said. Dell hopes to lessen the conflict by reselling the Web-hosting services of companies such as Interliant Inc. that buy its computer servers.
Mr. Dell said the overall Web-hosting market is expected to grow to $17 billion in annual revenue by 2003 from $2 billion last year. He estimated that only 26% of small and medium-size businesses now have a Web site, and that only 15% have an online store.
Still, revenue from Web hosting could be small, unless Dell can persuade customers to buy a server, or until it offers related services, such as software applications and messaging. Mr. Dell declined to comment on whether reselling Web-hosting services would lower its corporate profit margin, now dominated by equipment sales. "It's not clear to us this is a lower-margin business," he said.
Dell's hosting service is being provided through Interliant, a Purchase, N.Y., company in which Dell holds a minority stake. Interliant's Web-hosting customers pay an average of $22 a month to share a computer that serves up Web pages. According to information posted on its Dellhost.com site, the company is offering Web-site hosting for $18 to $300 a month depending on equipment and usage. The company also charges one-time setup fees starting at $50.
The hosting initiative is part of a broader online-services push, called Dell E-Works, that will see the company sell procurement, job-recruiting and direct-mail services.
In addition to the hosting service, Dell also launched an online office-supplies store called OfficebyDell.com, a business-oriented version of its consumer-oriented Gigabuys.com retail Web site.
The hosting service also uses software provided by Trellix Corp., a Waltham, Mass., maker of Web-site-design software, and Mercantec Inc., a Naperville, Ill., a developer of e-commerce software. Other services on the site include Dun & Bradstreet Corp.'s business-credit reports and GetThere.com Inc.'s travel bookings.
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