March 2007

Choosing your hosting services provider

The impact of this year's industry shake-up under the new regime imposed by the Telecommunications Amendment Act won't be confined just to the telco sector. The ripples from Parliament's move, late last year, to split Telecom into three separate divisions are expected to slosh across the wider pond of New Zealand business - after all, that was what the politicians were aiming to achieve.

Among those peripheral sectors poised for a shake-up is the burgeoning data hosting industry, which is hoping stronger competition on price and service amongst carriers will translate into growth opportunities under the new regulatory environment. Data hosting is already on a roll with a number of factors combining to encourage businesses to make increasing use of outsourced storage and application services.
 
The amount of data looking for a storage home is growing exponentially. Developments such as the uptake of corporate instant messaging mean businesses are both generating more data and deciding that, for governance and compliance reasons, more of that information needs to be kept.
 
Disaster recovery is also increasingly top-of-mind for IT managers, chief executives and their boards. Scenarios like the bird flu threat have focused companies on the hard questions of business survival during and after a catastrophe.
 
Business continuity management
Developing a strategy to keep a business running even if corporate HQ is out of action means the option of an off-site secure data storage solution is increasingly attractive.
 
Businesses are becoming more comfortable with the notion of outsourcing data management, which is increasingly perceived as a specialist function best left to those with the expertise and dedicated facilities required to do it properly.
 
While some managers still feel uneasy about company data being stored and processed off-site and out of their direct control, the rise of internet-based on-demand software and services is helping to change the mindset that processing and storage needs to happen only in the office. The power of the on-demand model is demonstrated by the growth of a new breed of application service providers such as customer relationship management specialist Salesforce.com.
 
Telehousing as an alternative to outsourcing
As a result of all this growing demand for hosting, a plethora of hosting providers, large and small, are out there touting a range of offerings, from cheap and simple to sophisticated and gold-plated. Perhaps surprisingly, given the strong demand across the hosting services market, Roger Cockayne, group managing director of hosting company Revera, believes there is still a gap at the top end of the market.
 
He says New Zealand's large enterprises - Telecom, Vodafone and TelstraClear included - could probably learn a lesson from SMEs, who have been quick to embrace the benefits of telehousing, the idea of "putting your servers in someone else's shed".
Cockayne says big enterprises have traditionally signed up for expensive outsourcing deals which bind them to a particular service provider for a long period, perhaps five or even ten years.
 
"That's been a problem they've had at the top end of the market, in that when they do enter an outsourcing agreement it's usually with a supplier that has all the premises and all the data centre staff, so it's very hard to extricate yourself," says Cockayne.
 
"Why don't they telehouse their equipment in a neutral place that purely offers facility management and then let whoever needs to do the servicing on the gear turn up and do it? They're missing out on that and a number of them are trapped in arrangements that I'm sure they would like to have more flexibility in." That type of top-end facilities management service is not something Revera is currently offering, but Cockayne says the company is looking at doing so in future.
 
"Once you get to a certain size [as an enterprise running a data centre] you need some specialisation on how you manage your air, your raw power, your smooth power, all that sort of thing. You end up with a staff of people doing those sorts of things for you when really you could rent that type of space off someone who shared those staff with another two or three organisations."
 
Scale covers the important bases for hosting providers Cockayne says when it comes to data hosting in general, the bar is being lifted in terms of the services on offer to corporates. Serious hosting providers need a decent physical facility, good processes within the data centre and around the services they offer.
 
"You've got to have the in-built applications that look after the place so all your data is safe, all your servers are being monitored and reported, and incident and problem management services are bang up to spec."
 
Keeping competitive in the hosting game is an expensive business based around offering technology and services that are a step ahead of the competition.
 
Wellington-based hosting company iSERVE will spend $2.2 million this year expanding its infrastructure with new points of presence in Auckland and Christchurch and an ‘ISP independent' nationwide network which will be immune to the disruption of any particular ISP going down.
 
Virtualisation offers potential step change
Revera, meanwhile, is experimenting with a prototype ‘secret design' for cooling high-density data centres which Cockayne says could be a revolutionary advancement in effective server virtualisation, allowing for much more effective use of data centre server capacity. Virtualisation has been an industry buzz-word for the past couple of years and is picked to become even more significant in 2007 as data centres continue to look for ways to get more grunt out of their server infrastructure.
 
For its part, last year iSERVE introduced a one-hour server replacement guarantee for its clients, an initiative general manager Joy Cottle says has been well received and typifies the type of ‘pre-emptive' service offerings those in the hosting industry have to come up with to stay competitive.
 
"We're seeing a lot of people, including the corporates, wanting to pass off their IT problems onto somebody else - spam attacks, DOS (denial of service) attacks, security issues, those types of things are all much bigger than the average business person is wanting to cope with along with everyday life," says Cottle.
 
"So that's a really good opportunity for an outsourcing provider like ourselves to provide those services into businesses where for a monthly fee they don't have to worry about those issues."
 
We’re seeing a lot of people, including the corporates, wanting to pass off their IT problems onto somebody else – spam attacks, DOS (denial of service) attacks, security issues, those types of things are all much bigger than the average business person is wanting to cope with along with everyday life
 
Far reaching economic benefits beckon
If the reforms of the Telecommunications Amendment Act succeed in their aim of boosting broadband uptake, particularly amongst small business users, hosting services are likely to mushroom as new application service providers spring up to meet their growing online needs.
 
Broadband evangelists like Peter Macaulay, programme manager for the Government's Digital Strategy, have a vision of SMEs using online trading networks to boost productivity and generate new business. This in turn would boost the hosting market but is something that will only happen when small business operators perceive broadband as cheap and effective.
 
As Cockayne puts it: "Once they [SMEs] have got the confidence that the network is there and it's not going to hit them in the wallet if they make a mistake, I think they'll start to use it."
 
Cottle says at that point, business customers will become increasingly focused on ensuring they sign up with ISPs and data hosting providers who can offer them a suitable level of security and business continuity through adherence to recognised industry standards.
 
"Once Kiwis move to fully embrace e-commerce, which we've seen starting to happen over the past 12 to 18 months, the next thing will be looking for providers with those types of accreditations and guarantees and securities around being in business. I think that will be very important."