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A Winning Combination: Software-as-Services Plus Business Consulting and Process Services
By Laurie McCabe
January 30, 2004

Companies that operate and manage Internet data centers play a key role in the ASP value chain. They provide the physical facilities where businesses can host their web sites, databases and application servers. Collectively known as hosting service providers (HSPs), they have evolved into several different types, each with their own specialized skills and service options.

More on Hosting
For more information on trends in the hosting market, check out “Hosting Moves Up in the Value Chain.” Talk about today’s burning ASP issues at the ASPnews Discussion Forum
Colocation Providers
These are the most basic form of hosting provider, operating data centers divided up into padlocked cages, where customers bring in and maintain their own servers. But just because it’s basic, don’t imagine for a moment that it’s easy. Colocation providers specialize in providing the basic physical infrastructure of an Internet data center, known as “power, pipes and ping” in the trade. That means a protected electricity supply and high-speed telecoms connections to the Internet backbone, as well as the building itself, complete with military-grade security, air-conditioning and fire-proofing. It’s a competitive, highly capital-intensive business.

  • Pureplay colocation operators specialize in supplying the basics of premises, power and connectivity to the highest standards. They leverage economies of scale to provide absolute reliability at a commodity price. Those who operate several data centers — either across a region or even worldwide — usually operate their own network backbone to connect all the centers together with guaranteed high-bandwidth links.
  • Value-added colocation operators supplement the basic colocation offering with optional services such as accelerated content distribution, utility storage and security. This enhances their operating margins while providing the convenience of single-sourcing to their customers.
Web Hosting Providers
This long-established form of hosting provider specializes in hosting web site servers. They typically offer a choice of hosting options, ranging from low-cost, shared-server web site hosting, through to colocation and complex web server hosting for more sophisticated customers. Most operate their own data centers, though some also use the facilities of colocation providers.
  • Web hosting providers operate server farms that are dedicated to web site server hosting. They cater to mass-market hosting needs, offering a range of packaged hosting solutions, starting with shared-server or server appliance configurations, and scaling up to pre-configured, dedicated server offerings.
  • Complex Web Hosting Providers specialize in hosting sophisticated, high-volume web sites that combine e-commerce, database and high-end web application servers. Also known as managed hosting providers, they typically offer a range of sophisticated managed services, and often take responsibility for monitoring and managing server systems up to the application layer. But because their background is in web site hosting, most of them lack higher-level application management skills.
Computing Utility Providers
An emerging class of hosting provider specializes in offering specific basic computing functions, such as storage, as a utility service. They typically charge on a consumption basis (e.g., per megabyte of usage per month). Their services are often offered through other hosting providers, and may be based at a colocation provider’s facilities.
  • Storage service providers are the first major utility computing category to emerge. They provide managed storage services as a utility.
Beyond Web Hosting
Hosting providers that have moved into application hosting bring in additional skills suited to the specific demands of managing complex applications. Although some use their own hosting centers, many others use the services of colocation providers or web hosting providers so that they can focus on their core competence of application and infrastructure management. These providers fall under the mantle of infrastructure service providers and will form the subject of our next Industry Basics article.

The next installment of Industry Basics will appear on March 16. If you have an idea for a topic or want to share your own industry basics, visit the ASPnews Discussion Forum.


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