In the last edition of ICT Spaghetti we looked at the benefits and drawbacks of a managed hosting solution.  Again we join E-Consultancy.com and look at the potential costs involved, and what to look for when choosing a managed hosting provider:

What to Consider when Selecting a Provider

Do you need to outsource?

• What do you gain from outsourcing in terms of reduced costs, reduced risk and reduced internal operational complexity?
• To what extent is it possible to quantify any savings and benefits?
• Are you in a position to do a detailed cost/benefit analysis?
• How much would you need to invest to provide a comparable service in-house?
• Are the functions you wish to outsource strategic to your organisation?
• If they are, then what would you lose by not having them in-house?
• If they are not strategic, will outsourcing enable you to focus on the core competencies which make your business profitable?
• How much do you need to outsource?
• Do you want to outsource some fundamental, well-defined services or do you want to benefit from a full range of offerings which may be available?

How do you select a vendor?

• What is your budget and what services can you realistically afford?
• How business-critical to your business are the areas you are looking to outsource?
• Is it worth making savings in some areas while paying for the best service in others?
• What buying criteria are you using to select a provider?
• Is cost your only driver or are you prepared to pay extra for best of breed services tailored to your specific requirements?
• How important is proven experience, customer testimonials and confidence that your provider can deliver?
• Are you seeking a strategic relationship with services which are tailored and high-value, or do you want something more transactional?
• Are you willing to pay for a proactive service or are you happy with something reactive?

How do you find the best fit with your own organisation?

• Do you want a global provider or a smaller company – a vendor with a size and reputation in line with your own business?
  
• Is the company financially stable?
• Will the provider be able to cope with the growth of your own business and increased demands for service?
  
• Would you prefer a services provider with a proven track record in a particular technology? (e.g. Microsoft or Linux)
  
• Do you want a network-focused provider or a services provider which relies on another ISP for connection?
  
• Have you met the customer-facing employees your organisation will be dealing with?
  
• Will there be a single point of contact or will you be dealing with a helpdesk rather than named individuals?
  
• Do you want to see the provider’s facilities first-hand?

What type of Service Level Agreement do you want?

• Is the SLA tailored to your own requirements so you are getting higher levels of service in the most important areas?
• Will you be able to trust the provider’s reporting or will you pay for a third party website monitoring organisation to provide independent data about quality of service?

What procedures does the provider put in place to prevent serious problems, and what happens if there is a disaster?

• What is the procedure for back-up, disaster recovery and continuity planning?
• Are you clear on your own responsibilities as a customer?
• What is the process for resolving problems?
• Are certain levels of response time guaranteed?
• Does the provider issue “trouble tickets”?
• What happens if there is a malicious third party attack?

What Does it Cost?

The cost of managed hosting can vary widely depending on the range of services you are interested in.  Shared hosting can cost as little as a few pounds per month but managed hosting with a fuller suite of services is likely to cost upwards of several hundred pounds per month.

Differences in prices between providers will generally reflect the sophistication of equipment and architecture and the level of account management required.  Services such as application support will obviously make the service more expensive but any additional costs incurred need to be considered in the context of the internal costs of reproducing the same service.

Providers will generally charge a fixed monthly rate which will be calculated according to the scope of the services and support which are outlined in the Service Level Agreement.  Providers will often offer a cheaper monthly rate if the customer commits to a longer contract (e.g. 24 months).

Some providers will charge a fixed amount - or calculate a charge based on a daily rate - to cover the initial set-up costs.  There should not be any “hidden extras” because the SLA should set out exactly what is provided – and, just as importantly - what is not provided as part of the flat monthly fee.  It is important to be clear about what circumstances could result in extra costs for your business.

The customer also needs to be aware of “variable” costs.  In particular, bandwidth usage is typically capped to an amount written into the SLA and anything over that is charged at a per GB rate or in bands.

Some may regard this as unsatisfactory because it is “punishing a site for its success” in that greater volumes of traffic mean greater costs.  If the customer is to be charged for additional bandwidth, it is worth negotiating a cap or limit to what this can amount to.
It is also worth establishing what will happen to costs (and services) in the event of a Distributed Denial of Service attack when a vast amount of unexpected traffic could be trying to reach a website.

Utility Model

The utility business model, whereby customers pay for services according to how much they use them, is beginning to make inroads because it enables customers to spend their IT budgets more efficiently while also reducing the complexity of their internal IT structures.  The model means that customers do not have to predict their IT requirements so far in advance because they can scale their IT infrastructure up or down according to demand. 

ICT Spaghetti is grateful to Chris Lake of E-consultancy.com Ltd for contributing to this article.  For more information and to access their report Managed Hosting – A Buyer’s Guide click here http://www.e-consultancy.com/publications/managed-hosting-buyers-guide-2005/