Diversification and Web Hosting

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By PoorBloke
August 21, 2001

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Been away for a couple of days, since my trusty and disciplined German ISP's Internet access was down (Code Red?).

Anyway, about Intel Online Services (IOS)...

This is a high-risk venture, and I still don't know whether it will succeed in the long run. All the competitors such as Exodus and Loudcloud are laying people off, as IOS has.

The big difference in the approach to web hosting is in what services you offer, and how much you charge.

Exodus stormed the market by providing Co-Location (Co-Lo) services. This is simply building large data centers with fast pipes (Internet connections), guaranteed power supply, air conditioning (no server overheating), and some level of security to prevent someone wandering in and switching off the competitor's servers.

This allowed companies to outsource the majority of their web servers without having to build expensive internal capabilities for Internet access from buyers, customers, consumers, whomever. The servers were owned and controlled by the customer, and their employees were responsible for keeping the servers up and running, and updating the information on them.

Seemed like a good idea at the time.

With the bursting of the dot-com bubble, many of these companies like Exodus have found themselves with massive overcapacity, and customers who can't pay. The overcapacity in the market has forced them to slash prices, and hence profitability. Co-Lo is now a very low margin business.

Bad news.

IOS took a very different approach, and targeted companies who didn't want to hire people to set up and look after their own servers/websites/anything. That was more attractive to the newer dot-coms, such as, and Intel got burnt by them accordingly.

But! It was also far more attractive to big, brick and mortar global customers, and "event driven" companies. The biggest initial customers were events like "Big Brother" and "Tour de France." These were companies that didn't know anything about websites, and IOS got them up and running in about 2-3 weeks.

Good source of revenue, but it was event driven. How to get a steady revenue stream?

The biggest companies have now realized that IOS provides a service that they want and need, because IOS can do it more effectively on a global level then they can internally.

Intel knows how to "Copy exact," and so knows how to offer the same level of service to companies worldwide. The reports on the "performance" of the customers website can be accessed from anywhere. That is a service.

Whether you are calling about a problem you are having from Japan, or Paris, or Cardiff (unlikely), then you need to get through to someone who can immediately call up the status and tell you where the problem is, and what is being done to solve it.

At the end of the day, the service needs to be repeatable, just like global companies want.

That is why I think IOS has a better business model. They provide higher value-added services, and you can charge more for them.

Cheers, PB