Report: E-Biz Neglects External Web Hosting Options

More than one-third of U.S. businesses are missing out on an opportunity to realize 30 to 40 percent in cost savings -- or between US$6 million and $12 million over the next three years -- by continuing to host their Web sites and technology infrastructure responsibilities internally, according to a study released Wednesday by Jupiter Media Metrix.

"Companies that continue to host their own sites will gain little competitive advantage and spend more money on staffing and technology than those that outsource these functions," said Jupiter research director David Taylor. "Those that act and act now will be saving millions in the long run."

The research firm found that companies with highly trafficked sites stand to derive the greatest cost reductions from outsourcing -- and also have the most to lose if they do not go that route.

For instance, the report said an in-house staff of 18 to 25 employees costs three times as much per year, while management tools and related expenses will result in an additional $2 million outlay over a three-year period.

In addition, Jupiter forecast that recurring costs such as bandwidth, co-location services and vendor management can easily add in excess of $1 million in expenditures during the same period.

Fear Factor

However, Jupiter said that an increasing number of businesses will opt to outsource their Web hosting needs to specialists within the next three years as the advantages of outsourcing become more apparent. The shift will render in-house hosting a "rare" occurrence, the report concluded.

Among the most pressing concerns holding executives back from making the switch to outsourcing were security and control issues, Jupiter said. The 30-plus chief technology officers surveyed by Jupiter also cited fear of giving away company knowledge, and poor customer service by outside vendors, as obstacles to switching their systems over to outsiders.

Building Blocks

In addition to its Web hosting findings, Jupiter also released new data on Web development projects. According to Jupiter, 80 percent of companies undertake Web development initiatives before their site hosting and technology infrastructure is in place.

As a result, the report said nine out of 10 of these ventures will face some form of avoidable rebuilding.

"Companies engaged in Web development projects must select a technology infrastructure provider simultaneously with an application developer," said Jupiter.

Doing so, the report projects, will cut implementation delays by 25 to 30 percent by eliminating wasted development time.

Selling Scalability

Jupiter also said that executives are greatly underestimating the importance of scalability, with none of its respondents citing it as an important factor in choosing a hosting provider.

By comparison, a survey of company leaders conducted by Jupiter in 1999 ranked scalability the second most essential criteria in their selection process.

"Web companies today should not take scalability for granted, because spending slightly more up front to assure proper scalability can prevent crises resulting in massive costs," the research firm said.

The report advised companies to consider a range of factors when picking a hosting provider, including reliability, scalability, security, proven success , accountability, response speed and customer service.