2003 Volume 6 Issue 2

IT MATTERS: Webhosting

IT MATTERS: Webhosting

Still a Viable Option but It is Critical to Know Where to Look and What to Look For

In the late 1990’s, the Web hosting industry, like most tech industries, was severely shaken. The result was that many Web hosting companies either were acquired or closed their doors due to overestimates of demand, excessive capital spending, inability to scale and lack of focus in operations. Consolidation swept through the small and medium-sized providers in addition to the large players. Therefore, many of the small and medium-sized enterprises that depended on the larger companies had to find new hosts and deal with new vendors.

Today, many companies facing the uncertainties of Web hosting are considering whether it might be wise to bring Web operations in-house or whether there is enough stability to continue outsourcing. If they decide to outsource, companies must then decide whether they should have a shared or dedicated arrangement. Managers also have to decide how to choose the most appropriate Web host.

First, we must note that the option of Web hosting is still viable (Table 1). There is a tight but growing market in this industry. Web hosts are cost effective because they provide services common to a number of customers (such as patch installations and hardware upgrades) that speed everything up and free a firm from having to maintain Web hosting expertise in-house. Furthermore, managers don’t have to deal with IT resource forecasting and all that goes with this (decisions related to bandwidth, storage, etc). However, the options must be looked at carefully in order to make an informed decision, particularly regarding the right arrangement.

For example, a shared arrangement is an option. In this option, web pages from multiple independent domains reside together on a shared host. This means that the cost is low because hardware, software, and support expenses are shared. The downside is often slow performance, especially for sites with a lot of graphics. In this type of arrangement, many firms complain about their server-mates “hogging the box”.

If your site anticipates heavy traffic, then it makes sense to have a dedicated host. This means you have the exclusive use of a web server and related software as well as a set amount of memory, storage and bandwidth. A dedicated host is much cheaper than in-house support because the Web host is responsible for network and security administration as well as other costs.

Does Web Hosting Fit Your Business?

Figure 1 shows a breakdown of the top decision factors in terms of outsourcing web-hosting. There are three types of companies for which web hosting makes the most sense. The first group is start-ups or other organizations that don’t have the resources for maintaining a web presence. The second group is any organization that predicts significant increases in web traffic, yet can’t afford the headache of scaling to meet demand. The third group is any organization that requires a 24/7 global presence in order to be viable. As you can see from this list, the outsourcing model fits best with small and medium-sized enterprises. For this segment of businesses, Web hosting remains an appealing viable option, particularly amid the current economic uncertainty.

How do I Choose a Web Host?

Recent events in the Web hosting industry (consolidation, etc.) have been a blessing for those currently deciding on selecting a Web host. This is true because the companies that have survived are stronger and more capable than those that didn’t, so consequently there are fewer Web hosts to choose from, thereby making the decisions somewhat less complicated.

This being said, due diligence is nevertheless critical. The first criterion that it is important to investigate is the company’s reputation in the marketplace. There are several places to do this, for example, Web Hosting Talk ( www.webhostingtalk.com) and Web Hosting Forums ( www.webhostingforums.com). There are also other places to look, but these sites offer straightforward experiences/references regarding specific Web hosts. The second criterion to investigate is financial viability. Such investigation includes examining such things as cash flow, cash on hand, debt history and long-term debt. The third criterion would be technical. Appropriate questions to ask would relate to uptime, redundancy, the number and type of Internet connections, backups, ability to scale, and ability to handle different volumes of traffic. These technical criteria should be judged based on your company’s specific requirements. Finally, always review the Service Level Agreements (SLAs) carefully. These documents spell out the technical requirements and expectations of both parties. All SLAs are negotiable based on your requirements. It is often good to negotiate an SLA that includes a rebate of fees in the event of outages or technical problems. Such deductions or returns can offset business losses, but it is best to go with a host that is reliable rather than run the risk of not examining the SLA.


We can see that while there is still a viable Web hosting market, consolidation and uncertainty have created a tighter market than was previously predicted. The key is to decide if this outsourcing option is best for you and if so, to choose a strong, reliable host. The good news is that deciding to outsource does not preclude bringing this function in-house if conditions for your company should change.

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Author of the article
Charla Griffy-Brown, PhD
Charla Griffy-Brown, PhD
Charla Griffy-Brown, PhD, is an associate professor of information systems at the Graziadio School of Business and Management. In 2004, Dr. Griffy-Brown received a research award from the International Association for the Management of Technology and was recognized as one of the most active and prolific researchers in the fields of technology management and innovation. A former researcher at the Foundation for Advanced Studies on International Development in Tokyo, she has also served as an associate professor at the Tokyo Institute of Technology. Dr. Griffy-Brown graduated from Harvard University, is a former Fulbright Scholar, and holds a PhD in technology management from Griffith University in Queensland, Australia. She has worked for NASA at the Kennedy Space Center and has taught innovation/technology management courses in Australia, Singapore, Indonesia, Malaysia, and Japan. She has also served as a consultant for the United Nation’s Global Environmental Facility and the European Commission.
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