Organizations are always under pressure to keep costs down and one way to do that is to focus their limited resources on those capabilities that reflect their core competencies and market differentiators. Especially in uncertain economic times, it makes sense to look at all the various functions an IT department performs and ask whether each one is really strategic to the organization.

Consider the fundamental IT function of operating servers in a datacenter. The costs to perform this function are many, beginning with the infrastructure to support the servers – everything from network devices and wiring to power, cooling and rack systems. Datacenters also require plenty of IT staff, from IT managers to myriad administrators tasked with ensuring servers function properly, often on a 24-hour basis. Security is another concern, as companies must protect their servers against both Internet-borne attacks as well as physical harm, which means spending money to ensure only authorized personnel can enter the datacenter.

At the same time, it’s imperative that these datacenters function reliably and efficiently, which means organizations must ensure their business hosting systems are configured for maximum performance, spend money to ensure backup systems are in place, and deal with various time-consuming and expensive tasks such as maintenance, upgrades and licensing. Given that all companies seek continual growth, scalability is also imperative, meaning the ability to quickly grow the server environment to meet business demands. Pulling all of that off requires both effective management tools and the expertise to understand how to use those tools.

All of this, of course, creates capital expenses for all the hardware and software involved, as well as operational expenses for the required personnel. It makes sense to consider, then, whether the expenses are warranted. Is running a datacenter environment really a core competency for the company, something that differentiates its product or services? In most cases, the answer is no, because it’s the applications that run on top of the datacenter infrastructure that bring real value to the organization, not the infrastructure itself.

The next question to consider, then, is whether it makes sense to outsource business hosting and operational functions. Such a strategy reduces capital expenses by offloading many hardware and software expenses, replacing them with operational expenses that can be spread out over a greater period of time. The net effect is to reduce overall IT expenses. If companies then invest the resulting savings by refocusing IT resources on more strategic endeavors, they can increase revenue and bottom line profitability.

Assessing the Landscape in Business Hosting

In 2006, AFCOM’s Datacenter Institute, a think tank comprising datacenter managers, solution providers and industry leaders, published findings from a survey of its membership that pointed to serious questions about the ability of organizations to effectively run their datacenters. Those questions have only taken on more urgency today.

For example, the survey predicted that power and cooling issues would get more serious, to the point of halting datacenter operations at more than 90% of companies within 5 years. That prediction was based on the fact that 20% of survey respondents said they were exceeding 80% of the power capacity of their datacenter, nearly half were exceeding 50% and another 21% said demands were between 25% and 50%.

Given such issues, more than half of respondents expected to physically expand their datacenters within 10 years. Nearly a third expected to have to relocate their datacenters entirely. At the same time, 14% of respondents had already built new datacenters with additional capacity within the previous 5 years.

Such capacity constraints clearly put companies at risk of a disruption. And 40% of survey respondents said a business disruption would cost their companies between $250,000 to upwards of $5 million per hour of downtime. That’s not the kind of burden the typical IT executive wants to bear.

Datacenter Requirements

Yet the costs to run an effective, efficient datacenter are many, including investments in infrastructure, people and security. Demands are equally great, as companies seek to provide an environment that is at once agile and reliable while offering high performance. Let’s look at each in turn.

Business Hosting Infrastructure

Infrastructure investments include not only servers but spare parts as well, for the inevitable time when something goes wrong. That’s an area that many IT organizations neglect, as providing spare parts requires not only a significant investment, but an accurate inventory of the machines you have in place.

Additionally, infrastructure includes a fast, reliable network not only within the datacenter itself, but to connect the datacenter to the rest of the company. Real estate can be another significant investment, especially if the datacenter is located in an urban area. And providing proper power and cooling is something of a double-edged sword as datacenters grow, since more servers not only draw more power themselves, but require more cooling as well, further increasing power demands.

In each of these areas, scale matters. Managed hosting providers, given their economies of scale, can meet each of these demands at a lower cost per customer. For example, having multiple customers share a large datacenter reduces power and cooling costs by spreading the cost burden among more users. Similarly, the same inventory of spare parts goes further in a larger datacenter that has more machines of the same type.

People

While business hosting requirements and the size of your datacenter will determine the exact number of IT staff required to maintain it, at the very least you’ll need a number of system administrators with expertise in various areas, including databases, networks, security, help desk and the like. Increasingly, administrators are required on a 24-hour basis, as many companies have resources they can’t afford to lose for any length of time, no matter the time of day. websites often fall into that category as do critical resources in companies with global operations.

At the same time, qualified datacenter managers are becoming harder to find – and keep. Nearly half of the respondents in the Datacenter Institute survey – 47% – said they expected it to get more difficult to find qualified senior-level employees in the next 5 years. Thirty-eight percent had unfilled positions in their datacenters and 15% said it takes six months or longer to fill open senior-level technical or management positions.

Given these IT professionals are so hard to find, it’s imperative that their talents be put to good use. It stands to reason that IT professionals would find more professional satisfaction working on strategic business projects that drive company revenue rather than the rather mundane task of tending to datacenter servers. Shifting IT pros to more challenging, fulfilling jobs provides a dual benefit: strategic projects get completed faster, helping to drive company revenue, and senior IT professionals stick with the company longer.

Business Hosting Security

Given the value of the information they house, companies must provide proper physical security for their datacenters. At a minimum this includes some form of entrance security, such as doors with ID card readers, and perhaps security cameras to help catch intruders. In some instances, it may also require security for the building itself, not just the datacenter. Some high-value datacenter buildings are located underground or within secure, fenced areas with guards that allow entrance only by authorized personnel.

Of course, business hosting infrastructure must also be protected from cyber attacks, both from outside the company and within. That requires effective use of tools such as firewalls and virtual private networks (VPNs), plus occasional vulnerability scans and, if necessary, remediation.

If providing that kind of security is not a core competency for your company, outsourcing your datacenter may be a good option.

Business Hosting Agility

All of the challenges noted above make it difficult for companies to scale their datacenters to keep up with the demands of a growing company. Consider what would happen if your organization launched a new online effort that took off in a big way, requiring you to add dozens or hundreds of servers in a matter of weeks or months. Could your infrastructure support that kind of growth? Do you have, or could you hire, the personnel to handle it?

With vast quantities of computing resources on hand, a quality hosting company can meet those kinds of demands within days if not hours. Access to those kinds of resources enables you to quickly answer “yes” with confidence when a business group asks if you can meet its growing demands for business hosting support.

Business Hosting Reliability

Of course standing up lots of servers doesn’t do much good if those servers aren’t functioning when you need them – which increasingly means pretty much all the time. To determine whether you may be able to benefit from outsourced managed hosting, ask yourself some hard questions:

• How reliable are your servers? Can you even say for sure? Do you have the metrics and reports to prove it?
• What happens when a server goes down? How quickly do you find out? Is there an automated failover system in place, or do your users notice before you do?
• How quickly can you get replacements parts to fix a broken server? Can you do it 24×7?

Reliability also extends to the network that connects your datacenter to the rest of your company and to your customers. Here again, a series of tough questions is in order:

• How many Internet connections do you have? If more than one, are they provided by different carriers? Do they take different physical routes, to protect against fiber cuts and other major outages?
• How reliable is your wide-area network? Is it a mesh configuration that can protect against failures? Does it provide adequate performance for your specific applications?

Business Hosting Performance

Closely related to reliability is the issue of performance monitoring in business hosting. The ability to have a window into the health and performance of your server and network infrastructure is crucial in determining when performance is degrading. That, in turn, gives you time to troubleshoot and, hopefully, fix problems before they result in outages.

A number of tools exist to help companies with network and server performance monitoring, but relatively few organizations make truly effective use of them. Even with appropriate tools, the task is not an easy one. It involves establishing a baseline for what constitutes normal performance for your network and for various applications, taking into account variables including time of day, day of week and time of year. Then you must monitor your servers and network on a routine basis to identify instances where performance varies significantly from that baseline. When you identify an issue, the next step is the ability to troubleshoot the problem, to identify its root cause and address it.

This kind of performance monitoring in business hosting is typically a core competency for managed hosting providers that provide a managed service offering. Here again, their economies of scale and deep expertise make it easier for them to provide the kind of performance monitoring and reliability that most organizations only aspire to.

The Cost Equation for Business Hosting

Where the outsourcing question in business hosting really gets interesting is when you start to look at the financial equations behind the decision.

Outsourcing datacenter infrastructure to a managed hosting provider means an immediate, dramatic savings in capital expenses. Companies realize those savings by avoiding investments in servers, datacenter racks and power and cooling systems.

When companies pay a hosting provider to take on datacenter functions, the payment is funded out of the operating expense budget – the money required to run the business day to day. “Opex enables more flexibility over time because you don’t have that capital tied up,” says Rebecca Wetteman, VP Research at the consulting firm Nucleus Research Inc. “You may be able to reallocate operational funds more flexibly as your needs change. If the money is up in a big capital expense, you’re stuck.”

In effect, reducing capital expenses and instead streaming payments out over time from the operational budget reduces both costs and risk, Wetteman says. “It’s all about payback. How long does it take to get my money back? You can get your money back with servers, but it tends to be longer payback period. That means you have capital tied up that you can’t use somewhere else.”

Companies that invest the resulting savings back into the business, such as by reassigning datacenter IT staff to focus on strategic projects intended to increase revenue, get a double benefit: reduced expenses and increased revenue, resulting in more profit.

Choosing a Business Hosting Provider

Of course those savings won’t mean much if the managed hosting provider you choose doesn’t live up to your expectations. You can protect yourself, however, by keeping in mind a handful of criteria as you assess your provider options:

Network Quality

The best infrastructure in the world won’t do you any good if you can’t get to it and that comes down to having a quality network connection. Ask potential managed hosting providers how their facilities are connected to the Internet. Ideally they will have multiple high-speed connections, following diverse paths, to providers that are high up on the Internet food chain. Connections to Tier 1 Internet service providers are ideal. The number of peering relationships the provider has with other network providers is another important consideration. Peering is a practice where network providers give each other access to their respective networks to ferry traffic, rather than each paying for the distance it travels on another’s network. More peering agreements extends a provider’s reach, improves performance by providing multiple routes for traffic, and reduces costs.

Multiple Datacenters

Ideally your managed hosting provider will offer service from more than one datacenter, enabling you to offer a distributed presence to customers and partners. Managed hosting providers with multiple datacenters around the country (or the world) are ideal, especially if you need service in more than one geographic region.

Management Tools

Your managed hosting provider should offer a portal that gives you the ability to monitor and manage your server environment. The portal should make it simple for you to perform functions such as remote reboots, emergency restores and DNS management, while enabling you to easily get reports on billing, usage and the like.

Multiple Levels of Business Hosting Offerings

Many managed hosting providers offer different sorts of offerings to meet varying requirements. These can range from simple collocation, where you bring in your own servers to the provider’s facility and manage them yourself, to full-fledged managed hosting, where the provider owns and manages all infrastructure. Having a range of options gives you flexibility to start slow and add services as your business hosting needs change and as you get more comfortable with the provider.

Expertise

You may need guidance in determining how your business hosting needs are changing and what kind of services you need. A quality managed hosting provider will have experts on hand who understand your business requirements and can help you map out a plan to meet them today and over time, scaling up your environment along the way as necessary.

An Established Player

Of course your datacenter infrastructure is too important to trust to just anyone. You’ll also want to make sure your managed hosting provider is an established player in the business, one that you can be sure will be around for the long haul. Don’t be afraid to ask probing questions about how well the business is doing, to check financials and ask for references.

Conclusion

If outsourcing your datacenter infrastructure sounds like it may make sense for your organization, be sure to check out PEER 1.

From 20 state-of-the-art datacenters across North America and Europe, PEER 1 provides a range of hosting services to over 13,000 customers worldwide. Whether you want simple Colocation, a full-fledged Managed Hosting service or something in between, PEER 1 has an option that’s right for you today and into the future.

PEER 1 has the experience to work with you to meet your needs, whether you’re already an enterprise-level company or a smaller business with big aspirations. We like nothing better than helping businesses grow, as we did for a little company called YouTube that started with a single server in our dedicated hosting offering, ServerBeach. YouTube remains a PEER 1 customer today, although it now has hundreds of servers and several gigabits of bandwidth.

Like YouTube, you can benefit from PEER 1’s 100% uptime guarantee. Simply put, we guarantee your Internet connection will never be down. We can offer that kind of service level agreement because we have connections to multiple Tier 1 ISPs and a 10GB / OC-192 FastFiber Network™ backbone connecting all of our datacenters. Additionally, we have peering connections with some 500 providers, ensuring a reliable, least-cost route for your traffic to most anywhere in the world.

Outsourcing your datacenter infrastructure to PEER 1 can give you the peace of mind that comes with knowing you are getting top notch service along with the freedom to invest your IT dollars in the kind of strategic endeavors that will drive business hosting success.