............The "Story" becomes a bit clearer.
See the following from Oct 12 1998 InformationWeek. Think "Outsourcing to save time and money" think "Co-location services".
Off-Site Web Sites
Companies turn to outsourcers to save time and money
By Jeff Ubois
As 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 provids 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."
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. |
