Web-hosting firms defy recession

Firms continue to build new data centers, although at a slower pace than a few years ago

Customer feedback

Cost savings is what prompted Availity to select Savvis as its managed Web-hosting provider in 2008. Previously, the healthcare SaaS provider used IBM's data centers. Availity hosts its application -- which is used by 50,000 healthcare providers -- at Savvis data centers in Dallas and Atlanta.

"It's so critical to be up all the time when you have an Internet-facing portal application like ours," explains Jon McBride, CIO of Availity. "If you look at the cost of building a first-class data center that will be millions of dollars, and that's not our core business or our core strength. We were looking for someone to take care of all the pipes and pings and all that...We would rather spend our resources on our application."

McBride says Availity's 100-person IT shop focuses on adding new features to its software, which has doubled its user base in the last year.

"We do 600 million transactions annually," McBride says. "We need very high uptime and great performance....The other thing we get with Savvis is the ability to have geographic redundancy."

Dave Banks, CTO with Propertyroom.com, says the police auction Web site can handle bursty traffic because it runs on Savvis' cloud computing infrastructure.

"They manage the hardware, they manage the OS, the patching, the firewalls, the load balancing, all the network hardware and the infrastructure for us, and we have our software running on top of it," Banks says.

Banks says Propertyroom.com runs its application on seven virtualized servers at Savvis' Chicago data center. "I've never even seen the servers," he adds.

Doerr says CIOs like Banks and McBride are looking for ways to focus their internal resources on mission-critical applications while offloading rudimentary IT operations.

"Where [CIOs] add value is as a change agent for the business, as they incorporate technology and evolve the business for opportunities provided by technology," Doerr says. "None of that is dependent on how well they operate a data center facility, or operate a server, or patch a server or operate a firewall."

Salesforce.com, for example, is running its entire IT infrastructure on three Equinix data centers, while Bechtel is using Equinix data centers to support its push to a private SaaS model.

Equinix says the main reason companies such as Bechtel and Salesforce chose its data centers is because they are carrier-neutral and allow for reduced latency on applications that run across many networks.

Equinix provides "a network aggregation opportunity for the enterprise," Starr says. "The savings [customers] get by having access to all of these networks under one roof can offset what they are spending with Equinix."

Whether the demand for Web-hosting services is a stop-gap measure for enterprises until the economy recovers or a permanent trend remains to be seen. Web-hosting firms report that once they get an enterprise customer to outsource an application to one of their data centers, the customer tends to off-load more applications and add more managed services over time.

"A CIO running out of data center space will look across the portfolio of applications and take those that are the most modular, most standard, lowest overhead from a risk perspective and move them out of the data center into a relationship with a service provider, freeing up power and space in the primary data center for critical applications," Doerr says. "Once they get experience with a service provider...they reach deeper into the data center" and offload additional applications.

Starr says it's very difficult to take an application out of an Equinix data center and bring it back in-house. "It's a very sticky business model," he adds.

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