Managed Solutions

Large U.S. companies have begun to outsource their enhanced Web server hardware, databases, and applications software, as well as all the management and maintenance of hardware, software, and content. It is becoming more and more popular for companies to outsource these functions to experts rather than use a less skilled or constrained in-house team. Almost all hosting is about cost savings, performance improvement, and convenience.

Because of the sluggishness in the overall economy, many service providers and enterprises can no longer afford to do this IT function in-house. Those who have held off on expansion cannot afford large capital expenses for new equipment or expensive personnel. For example, according to industry analysts, 53% of IT professionals stated that staffing expenses will rise in 2004 regardless of the economy. According to Forrester Research, enterprises can save 47% to 82% of their enhanced Web site-based server infrastructure costs by turning over their sites completely to a Web host. Hosted companies experienced a 91% drop in downtime incidents. The increased uptime translates into about $5.8 million per year in revenues per company.

There are many conveniences that come along with outsourcing, including easy access to bandwidth, availability of complementary products, security, consulting services, and predictable budgeting. These conveniences enable companies to focus on core competencies, improving overall productivity.

Enterprises are still wary of giving up mission-critical applications to hosting providers. There is a general concern that a company gives up too much control and limits its IT flexibility when outsourcing mission-critical applications. But according to Summit Strategies, outsourcing enhances capabilities, supplements in-house skills, and provides for optimized environments. Plus, outsourcing does not need to be an “all or nothing” proposition.

Finally, according to Cahners In-Stat Group, e-commerce applications are the most likely applications to be outsourced by medium-sized companies. At large companies, these applications are the second most likely to be outsourced (after database).