The Ins and Outs of Web Hosting

First off, you have to decide between two very different business models: agent or wholesaler. Each model has its own set of advantages and disadvantages.

In the agent model, a solution provider places links on its Web site or in outbound

e-mail that leads potential customers to a hosting site to sign up for services. First pioneered by Amazon.com to sell its books, this model is also known as an affiliates program. Dell's Dellhost.com is one of the larger vendors in this area, and there are numerous others. The solution provider receives a small fee for leads its company originates. The upside is that little effort is needed to produce income. What's more, because there's no technical support required, solution providers do not need to add staff. The downside is that very little added value translates into very little added revenue. A variation on this model is for solution providers to set up specialty sites to just resell hosting services, but that still involves commissions and limited technical support on the solution provider's part.

The wholesaler model equates to selling a "private label" hosting service. In this case, a solution provider takes a piece of the hosting-service business from one company and apportions the overall bandwidth and facilities among its customers. Like a traditional wholesale-goods vendor, the solution provider packages the products and services for each specific customer as it sees fit. The solution provider can include technical support, site design and applications consulting as part of the overall package.

Picking the right model depends on the level of service you want to provide.

"If you don't have the service, you can have the best pricing in the world and it doesn't do you a bit of good," says Rod Martin, president of RMJ and Associates, an Orange, Calif.-based Interland VAR. "Verio got so big and engrossed in profits and cost-cutting, it turned its service capability down so much that it's losing to other Web-hosting companies."

Four Factors To Consider

Regardless of which model you choose, you need to examine a number of factors before deciding on a hosting provider.

• First, determine what the various hosting plans will cost and whether they include dedicated or shared-hosting services. The difference is that dedicated services marry each customer to its own set of Web server or servers, customized applications, server administration and other networking infrastructures. Shared services means that multiple customers run on the same Web and networking hardware,typically a less expensive scenario. Also, be aware of the great deal of fine print and numerous extras, including costs for running e-commerce sites with shopping carts and credit-card validation services; setting up applications; using more disk space or storage than specified; and data transfer and page views.
• Speaking of costs, you should also determine a payment method and how the hosting service accounts for referrals. Do your customers get billed directly by the hosting provider, or do you have to prepare the bills and, thus, add your own markup to the provider's services? Do your commissions get paid once a quarter or at some fixed time after the sale is completed?
• Second, consider the reliability of the provider. Your business depends on it. Some providers guarantee a certain level of uptime as part of their agreements, and have put in place duplicate or redundant T-1 lines to different upstream Internet providers. Others have redundant storage arrays and networking-infrastructure components to handle failures with these components. There's also load-balancing to route traffic and share the incoming loads, and extensive backup routines and systems to protect your customers' data in the event of a failed server or component.
• Third, look into support. Many providers promise 24/7 response, but you need to examine those promises closely. It could be the case that support offered in the evening and overnight hours isn't with a person, but consists of a call-in number that results in a call-back hours later. Does the provider offer different tiers of service and support, and can you differentiate your own hosting services? Does the vendor support both Windows and Unix Web servers, or just one particular platform?
• Fourth, determine scalability. It's critical to figure out beforehand whether a provider will be able to grow with you as your own hosting business grows. If not, you'll have to find a higher-tier provider down the road Does the provider have depth of experience with supporting a variety of Web-based applications and services, or does it concentrate on one particular vendor's set of products? What happens when your customers want to upgrade to more storage or move from a shared to a dedicated server?
• No doubt, there are plenty of issues to consider when contemplating adding Web-hosting services to your portfolio. Given the multitude of hosting providers, trying to find the right one is bound to take some research and effort.