Hospitable hosting

The outsourcing of basic IT functions, such as web hosting, has been commonplace for a number of years. While companies initially turned to Europe and the US for such services, a raft of local operators are attempting to win customers back with a range of services, including the much maligned application service provision model.

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By  Maddy Reddy Published  July 29, 2004

Hosting market overview|~|deanpolley_gm_aspgulf1.jpg|~|Dean Polley, general manager of ASP Gulf.|~|In the mid 90s, the onset of the internet encouraged millions of companies to embrace the online world. In turn, this created a whole new market opportunity for internet service providers (ISP) and telecom businesses, which hosted these websites, along with data and files. Back then, hosting essentially involved renting out server space and paying a monthly service fee to ensure bandwidth was monitored and websites were always available. A company’s hosting initiative was dictated by a number of factors, such as budget, security, infrastructure requirements, connectivity and the degree of control over its servers it required. Locally, the market has matured slightly differently. With its tightly regulated markets and state-run monopoly operators, the Middle East missed out on the first wave of hosting sites and most regional companies ended up hosting in the US and Europe. Secondly, the internet, with it’s universal access model, created a level-playing field in which regional hosting companies couldn’t compete with the highly elastic datacomms market abroad. “Most of the major portals in the region [still] host abroad in Europe and America. The connectivity there for the same price is better. If you are a content provider, you don’t want to host in a country where the censorship is high. And, if you are running a service, why does it matter where the servers are located," says Jawad Abbassi, president of Arab Advisors Group. However, by 1999 the Middle East took notice and set up data centres as part of information communication technology (ICT) free zones. One of the first major initiatives was the setting up of data centres by the Dubai Technology and Media free zone to tap into the regional focus of Middle Eastern companies. Even the telecom operators followed suit, by beefing up their hosting and connectivity initiatives. Recently, Etisalat-owned Emirates Internet & Multimedia (EIM) and Comtrust have been merged to form an eCompany capable of taking an even greater share of the local hosting market. “We started with hosting services four years ago. Since then, we have seen big growth, especially since 2003 when we saw 75% growth. In the first half of 2004 alone we’ve had 200% growth compared to the same period last year. The demand is now here,” says Ahmad Abdulkarim Julfar, general manager of eCompany. “Regional customers want to see and feel the servers in the data centre. Global hosting companies cannot offer that. We understand the culture of local businesses here — we are in a time zone that is halfway across the world,” adds Kuldeep Bhatnagar, director corporate business, e-hosting datafort (EHDF). Tejari.com is one such customer that has returned home after seeing the local market mature. Only last year, the B2B migrated its hosting platform to Dubai after hosting in the US for four years. “Until last November we hosted our online market place in California. There’s a big time zone difference of 12 hours; the working days and weekends are different, which created issues of maintenance and availability of support. Secondly, we had a vanilla implementation, since there was no control for customisation... So to satisfy our customers, we wanted to co-locate here,” explains Radhakrishna, technical director, Tejari.com. “With regards to the bigger picture, from a socio-political angle we wanted to show the world that the Middle East has [comparable] capabilities, resources, skill sets, hosting facilities and data centres,” he adds. Since the online B2B marketplace was making the local move for greater control, it wanted to go all the way. “We tested managed services earlier with other vendors and the results weren’t satisfactory, so we decided to go for co-location and manage it ourselves,” Radhakrishna explains. The migration involved porting Tejari’s massive 200 G/byte Oracle database from its US servers to its new servers in Dubai Internet City (DIC). Being a 24/7 marketplace, migrating the data from the US to Dubai was a stiff challenge, considering the fact that there are more than 2400 members and 200 live concurrent users at any point of time. Couriering the tapes could take at least 48 hours resulting in critical downtime while transferring the files across the internet wasn’t feasible considering the data sensitivity and size. To tackle the issue with minimal downtime, Tejari undertook the hosting switch-over at off-peak hours over the weekend during Eid. Tejari claims that in the eight months that have passed since relocation, server availability has gone up from 98% to 99.97%. Because it is hosted locally, the number of hops or routers a data packet must pass through has reduced from 30 to six hops, thereby increasing the speed by 70%. Extensive testing of the new Tejari hosting environment revealed that users now get a service that is 35% faster and one that eases the creation of online auctions, responding to requests for tenders and bidding for new business. Besides the access benefits, Tejari says the move also worked out to be cost effective and it is saving a lot on hosting charges. Earlier, the company could run only two instances of Oracle — one production and one test, due to its US host restrictions. Now, Tejari with support from its local partners Sun Microsystems and Oracle can run up to four instances to test various projects. Driven by the impetus of its regional virtual presence, Tejari is now looking beyond online trading. It is currently migrating its US-based online project management services for the construction sector and expanding operations across the Gulf, Levant and North Africa. It is also working on offsite vaulting and plans to have a dedicated disaster recovery centre in Port Rashid, Dubai, 25km away from its current hosting facilities. While companies like Tejari are helping take the cause for regional hosting, they also represent the last batch of co-location companies. According to Meta Group, the US$2.7 billion market for managed hosting services is slowing to a 23% growth rate, as many customers consolidate contracts and migrate services inhouse. Through 2006, the research firm expects managed hosting revenue to grow at 30% CAGR and the percentage of servers in co-location and basic hosting contracts to decline steadily from the current 45% to 15%. Another hosting based service that is struggling, and has done since its inception, is the application service provision (ASP) model. A recent study by AMR Research shows that just 2% of the total software applications market is managed by ASPs today, in spite of all the market hype. EHDF’s Bhatnagar says not offering customised applications was the Achilles’ heel of most ASPs as each company had different requirements, barring generic applications such as groupware. “A few years ago, ASPs weren’t able to customise based on user needs... [and] they weren’t able to handle the resilience, flexibility or strong customisation, which made them fail,” he says. But Dean Polley, general manager of ASP Gulf, argues the vested interests of software vendors were to blame for the earlier debacle of the ASP model, rather than connectivity or customised apps. “One could argue that the end user is still not comfortable with the hosting concept and still has concerns about data security. However, the reality is that the software vendors have inhibited the ASP model. They prefer to get their money upfront, rather than have their revenue spread across 12 or 24 months,” he argues. Polly claims there are very few enterprise software vendors offering their wares on a pay-as-you use basis. And among those that do, none have a regional ASP price list. “Globally SAP offers an ASP pricing option, but SAP Arabia does not. In addition, those software vendors that are willing to sell their software on an ASP model are under the misconception that the onus lies with the ASP to market and sell their solutions in this model. How much marketing have we seen from any of the software vendors, on the advantages of a subscription based pricing model? The fact is, it is not financially attractive for them,” he says. Despite these obstacles, the ASP market appears to be making a come back as more customers want to cut IT costs on the higher end of the value-chain and the emergence of technologies such as web services and utility computing make it more appealing. In the region, hosting companies are now offering niche applications for verticals and standard or generic apps with minimal customisation for the horizontal market, rather than trying to please every customer or be dictated to by enterprise application vendors. They are also getting down to the basics of capitalising on their hosting infrastructure, to cater a growing need from regional customers who do not necessarily have web hosting as high priority, but instead are looking at hosting companies for business continuity. “You can offer ASP services only if you have the infrastructure layer… ASP requires hosting, it’s a subset of hosting. Hosting is not necessarily surviving because of ASP — there’s no direct co-relation. On the hosting model, you have managed services, co-location, disaster recovery services, storage and a range of services,” says Bhatnagar. To cater to the demand both from regional companies and from hundreds of multinationals that need to comply with global policies, EHDF is building two large data centres of 70,000 sq feet. It will have them up and running by mid 2005. ASP Gulf and IBM also recently signed a deal to offer business continuity services as an outsourced solution and the duo have agreed to expand to a second data centre. ||**||The vertical ASP approach|~|Jean-Paul_amlaki1.jpg|~|Jean-Paul Tarud-Kuborn, marketing manager, Amlaki.|~|One regional ASP that is pursuing the vertical approach is Amlaki. The real estate focused ASP has targeted its Java and SQL driven applications at the booming multi-billion dollar real estate business in the Middle East and Far East. After pumping in more than US$3 million into its local hosting facilities over the past three years, Amlaki has managed to convince more than 60 regional customers and 1000 users to sign up. “We believe the collaboration and communication aspect is what prevails in the ASP model. When you have employees outside the office premises and external vendors and global real estate agencies, the only way to communicate effectively is through a centralised system, on the internet,” says Jean-Paul Tarud-Kuborn, marketing manager, Amlaki. Base pricing for the monthly subscription services for provisioning software starts at US$163 per month for three users and scales up to US$435 for advanced services ranging from rentals management, agency brokerage business, property developers and the facilities maintenance. “The market is growing. Only now are real estate companies beginning to understand that they need a system. However, when they do start, they get quotations from IT vendors for hardware, servers, databases, client licenses, staff, consulting and investments upwards of US$600,000 or more. They get intimidated by that, which is why ASP is a good option,” says Tarud-Kuborn. Taking a cue from the specialised ASPs and hosting companies, Healthcare Solutions (HCS), part of the Al Babtain Group, has recently introduced the ASP Healthcare Model, called ‘e-booking’ an online healthcare suite. Elsewhere, Info2cell is focusing on the wireless application space and the region’s booming telecoms sector. The company’s US$2.5 million dedicated WASP hosting facility in DIC connects to 10 operators across 12 countries through a secure VPN 4 M/bits backbone and beams out wireless content to more than 150,000 subscribers across 250 categories besides run the billing applications of the operators. Info2cell expects its user base to reach 250,000 users by 2005. To cater to new wireless access format, such as MMS, GPRS, 3G, the Jordanian company is now overhauling its hosting services to stream multimedia content to broadcasting companies and media outlets, as well as launching new B2C services. “The ASP market is still not very big, hence we have a very niche product catering to a niche market,” says Bashar Dahabra, CEO Info2cell.com. “However, we will continue to develop our model. We see advancements in bandwidth and [deregulation] enhancing our service and business,” he says. ||**||

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