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Common sense dictates data center choices

The business of managed data center hosting has greatly matured during the past several years, particularly for the small and medium-sized business (SMB) market. Better software has become available, and there is far more Web enablement than in the past. In the IT department, there is also a greater understanding about what makes sense to host. Recently, Gordon Haff, a senior analyst at Illuminata Inc., a Nashua, N.H., consulting firm, talked about how outsourcing this function has changed.

Gordon Haff, senior analyst, Illuminata

Gordon Haff, senior analyst, Illuminata

Who benefits most from data center or data infrastructure hosting today?
The greatest interest comes from people who can't do it themselves, or can't do it cost effectively themselves. There is a lot of interest in SMB hosting. Vendors [like IBM, Hewlett-Packard Co. and Dell Computer Inc.] are offering special programs oriented toward the SMB. For small companies, [it's] obvious … because they don't have the IT staff.

Medium-sized companies often have the skills with some vertical packages. If they have to run an e-commerce infrastructure, it may not make sense to do in-house. The value proposition of outsourcing is that companies need to increasingly focus on where they need to add value. If you are a medium-sized company that makes widgets, it doesn't make sense for you to do a lot of reinvention of e-commerce software.

The equation changes with larger enterprises. They can do, within reason, whatever they want. Then

You may get far better service with a hosting provider than you can do yourself on the budget you have to work with.

Gordon Haff, senior analyst, Illuminata

it becomes a build-versus-buy analysis. Enterprises are finding that in their own specialized world, it makes sense to let someone do generic functions more cost effectively than they can. It's about skill level and capability. They may be there and the [project] can be put in place easily, but can it be done for 20% less money outside? So it's still fundamentally about cost?
Most businesses could do the whole thing in-house, but [choose to] do it externally because appropriate service levels can be delivered less expensively by someone else. With the right supplier, you can deliver high levels of service with far fewer distractions than if you did it on your own. Are there any new disadvantages to managed hosting? Ones that have evolved as the market matured?
You are still dealing with a vendor rather than maintaining your own control. Viewing yourself as the devil you know, whatever the costs and headaches … you've got your hand on it. If you're the CEO the CFO or the CIO and there is a problem with the e-commerce site, you can go yell at someone. It will cost you money to fix, but it's in-house.

And you still have to pick a quality vendor. Things might not work out for whatever reason. A provider gets bought out or [goes] bankrupt. Are you comfortable with their level of security? If you farm out your data center, you lose control, so you have to fit within the constraints of what they offer.

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There may be some compromises you have to make in the levels of customization you could do internally. You may get far better service with a hosting provider than you can do yourself on the budget you have to work with. It sounds like IT shops of all sizes are much more comfortable using managed hosting for data centers than they were just a few years ago.
Whether it's outsourcing engineering functions or applications, in general there is more openness to looking at each individual place in the company and asking how, when and where we can do this most efficiently. And in general, there is considerable openness to farming out functions that don't make sense.

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