For small firms looking to establish a virtual presence, going online has never been easier, writes Ian Campbell.

The SME e-commerce revolution was heralded with a trumpet in 2000 that had turned into a splutter by 2002, but today there's a thriving web hosting sector which means it may at last be happening.

Talking to the providers would suggest, however, that small firms are gravitating towards the web, but most of their needs are modest.

They want e-mail with their own domain name in the address, according to Michele Neylon, chief executive of Blacknight Solutions, one of Ireland's leading independent hosting companies.

“E-mail is the lifeblood for a lot of businesses,” he said.

“You could disable a client's website for a month and they probably wouldn't notice. Take e-mail out for three minutes and they'd be on the phone straight away.”

So we're not experiencing an e-commerce revolution?

“God no,” said Neylon. “And anyone tells you otherwise is kidding themselves.”

According to Neylon, elaborate web hosting propositions are a distraction at the lower end of the business.

“You can get dazzled by the offerings from the different providers, the crazy amounts of bandwidth and disk space, loads of things the SME doesn't really need.”

Blacknight has 5,000 clients with many using the e-mail part of the package and little else. As a customer base, they are not that technically literate and have no reason to be, he says. “That's our job. We give them the tools and spare them the techno babble.”

Ed Byrne, marketing director at Hosting 365,was similarly quick to cut through the technicalities of the sales pitch.

“A lot of hosting companies give very technical specifications but when we talk to customers we try to focus on what their business really needs,” he said.

“A small local firm has no interest in the global dimension of the internet. What they want is an e-mail address that features the company name, something they can put on the side of their van.”

Last year, Hosting 365 met this need when it launched an e-mail-only plan, charging customers just €10 a year. Domain name registry is the most basic service and the least profitable part of the business, according to Byrne. But it is important because it acts as a ‘feeder'.

It's an automated process, but it's usually the first point of an engagement with a client who will go on to take an email address and web space.

Both companies are doing good business in the entry-level space, something that might not have seemed likely a few years ago. The common perception was that Irish web hosting was expensive and businesses would be better served by US companies rather than pay a premium for a local provider.

“There was this idea that IP transit and staff were more expensive in Ireland and this was reflected in our charges,” said Byrne. “Some of that was true, but now we are competitive with the US. At the low end, in particular, it has become a fiercely competitive industry.”

The battleground has been between independent hosting companies as larger telcos, like Eircom and Esat (now BT Ireland),moved on to other segments of the market.

“Most of the companies that were big five years ago have been eclipsed, partly because they were not automated,” said Neylon.

When customers sign up with a web host they are given access to control panels where the user can go to make changes for themselves, adding e-mail addresses or creating a new database.

“At the same time as we were empowering the end user with a self-service approach, some of the larger players were charging silly money for products and services we provide for free, such as adding domain pointers,” said Neylon.

A pointer routes sub-domains, selected by the customer because they are similar to the main address, to the same site. “It doesn't cost us anything to do it so why would we charge for it?” said Neylon.

“I'm not running a charity but I'll only charge for things within reason.”

This self-service approach has been key to keeping independent hosting companies lean and mean. Of the staff they do have -14 in the case of Blacknight and 42 in Hosting 365 - two-thirds are technical and the rest are in administration.

This breakdown supports the two business attributes you can't afford to get wrong, according to Byrne - support and infrastructure. While the concept of a 24/7/365 business has become a cliche, it has real meaning in the web hosting world, where success depends on always being available.

They all have international clients, so time zones and regular working hours become meaningless. While it might seem logical to carry out some server maintenance in the middle of the night in Ireland, for example, it could be the middle of a busy day in the US.

The only approach is to minimise risk, reducing potential points of failure.

As a consequence the leading hosting companies take bandwidth from multiple suppliers, giving their clients a level of redundancy that will cope with worst case scenarios. The expected norm is 99.9 per cent uptime for their customer websites.

When something goes wrong, support has to be available fast, either on the phone or through an email ticketing system.

These are boxes that the customer would expect to be able to tick. But as the hosting requirement becomes more sophisticated, the service demands will also increase. Tellingly, 95 per cent of Host 365's business is in the entry-level market, but it only accounts for 25 per cent of its revenue. More complex hosting services are where the money is made.

When start-up company 247Meeting was looking for a web host provider, managing director Gavan Doherty quickly grew exasperated with the response from some of the larger players.

They took little interest in meeting the specific needs of his business idea. 247Meeting is a web-based business, an online environment for businesspeople to come together for audio conference calls or to share a desktop securely with colleagues or even customers.

As someone with an IT background, he was a discerning shopper who looked beyond the sales pitch.

“I went to four different suppliers and never got past the list price. When I contacted Servecentric, they talked about doing a special plan for the business,” said Doherty.

Servecentric was able to meet one particular requirement of 247 that was crucial to its business model.

“One of my requirements was a connection to a telephone provider because it was key to the conference business model,” Doherty said.

“You'll get server hosts with bandwidth and disk space in a server farm, but typically they are only connected to the internet. That narrowed the players quickly.”

Dedicated Servers

The proposition steps up a gear when a customer wants to host its business on a dedicated server.

Most SMEs will make do with a portion of disk space alongside hundreds of other companies on a shared server.

“They are fantastic value; they do e-mail perfectly and are fine for a basic database or blogging,” said Byrne. “But no matter what anyone says, sharing a server with 500 other websites can never be as secure as sitting on one on your own. And if a site is getting a massive traffic load, a shared service won't be good enough.”

There are no definitive rules on the best time to move to a dedicated server because the step-up will depend on the business. A more tech-savvy SME or a small retailer with an online angle, for example, would be ripe for the standalone approach, according to Byrne.

“We wouldn't recommend hosting an e-commerce site on a shared server,” he said.

“Our marketing challenge is to educate the market and get across the idea that dedicated servers are not only for corporates. If you have a transactional site it's important that it stays up all the time and that it doesn't get hacked. Security becomes more important.”

The price point for moving to a single server obviously goes up, but the big question is by how much? Hosting 365 would advise a prospective customer to avoid the cheaper deals on offer because the server may turn out to be less robust that the one they were on in a shared environment.

“You can get a dedicated server for €100-€150 per month which will give you an instant performance upgrade, but it's not a stability upgrade,” said Byrne. “At that price, you only have one hard drive. It can be a nasty shock if it dies after six months, which does happen.”

Hosting 365 encourages the customer to pay more for a better quality server. “Our minimal entry for a dedicated server is €250 per month. The box comes with two power supplies and two hard drives in a RAID configuration so you get a level of redundancy built in,” said Byrne.

Another long-running debate is the hosting platform. The battle between Linux and Windows has been rumbling on in data centres for many years. For entry-level customers, it isn't usually an issue because they don't care what server software is used as long as it works.

However, a company with a developed IT strategy will expect the host to meets its technical requirements by supporting one or other platform.

Microsoft has been working hard in this area, courting hosting companies through huge reductions in its Service Provider Licensing Agreement (SPLA).Like most hosts, Hosting 365 offers an agnostic approach.

“We wouldn't recommend one over the other,” said Byrne. “We have a 50-50 split between Windows and Linux. The key factor is being able to offer the choice if the customer asks.”

Moving up the value chain are hosting companies that have their own data centres and offer a range of managed services. Blacknight rents space in Irish data centres, while Hosting 365 has its own.

This means it can offer its clients a more comprehensive managed service meeting specific technical requirements. Both Eircom and BT have large data centres facilities and managed service propositions.

While much of their business is aimed at larger corporates, they have entry-level packages for SMEs looking to go online.

BT, in particular, has been reviewing its approach to the sector, looking at ways of bundling phone and broadband services with an internet package - a proposition that dedicated hosting companies can't compete with.

“From our research we know that small businesses want just one bill and a fixed price,” said Anne O'Leary, managing director of BT Business.

“This is a country of SMEs and we want to be part of it. I don't think what we are offering has been done well by anyone. We're trying to be a one-stop shop, meeting all their needs from an IT perspective.”

BT has partnered with Hostopia, a US company that provides white-label services for SMEs, and will launch a new offering next month, the Internet Business Pack. For the €150 per year entry-level package you get a choice of domain names, 20 e-mail addresses with virus and spam protection, and 250MB of web space.