If your datacenter processing load doubled this year, could you handle the growth?
That's what happened to Bazaarvoice, an Austin, Texas-based start-up that serves up product ratings and reviews to more than 180 e-commerce sites run by Sears, Dell, Macy's, and others. Last year, Bazaarvoice needed several dozen additional servers to run its proprietary software.
"Theoretically it would be possible for us to run our own datacenter, but it would be far more difficult for us to keep up with the growth without a service provider like Rackspace,'' says Andy Maag, vice president of engineering for Bazaarvoice.
"If you have to grow your capacity very quickly, you can run into physical space constraints, power constraints, and environmental constraints like air conditioning,'' Maag says. "When you're a fast-growing business that can present problems. When you're a specialist like Rackspace, and you're already in aggregate spread across many datacenters and you have so many people, you're able to handle fast-growing traffic.''
More booming businesses like Bazaarvoice are turning to Web hosting companies, including Rackspace, Savvis, AT&T, Terramark, and IBM, to handle their datacenter operations. These companies are growing at an average of 15 percent per year, according to IDC.
The growth is coming from "complex hosting,'' says John Engates, CTO of Rackspace. "It can be serving both the enterprise and the more Web 2.0-centric group. Complex hosting means it's not just dedicated [servers]. It's really a solution with firewalls and load balancers and networking components as well as services to take care of them like patching and monitoring.''
Engates estimates that complex hosting is growing at a much higher rate -- as much as 70 to 80 percent per year. He says about half of Rackspace's 15,000 customers buy complex hosting services. Rackspace operates eight datacenters, four in the United States and four in the United Kingdom.
The customers that are driving demand for complex hosting include software-as-a-service companies with unpredictable growth and e-commerce companies with seasonal spurts in traffic. Another thriving market is short-term promotional Web sites run by marketing departments or advertising agencies.
"One of the big ad agencies brings us lots of business,'' Engates says. "We host promotional Web sites that are limited in time frame for large Fortune 500 companies that have a new product to launch ... or for an event like Super Bowl-type activities.''
Leading this shift to complex hosting and utility computing is Savvis, whose revenues grew 26 percent last year to $794 million. Around 15 percent of Savvis' revenues are from its virtualized intelligent hosting offerings.
"We understand what's needed by our enterprise customers not just to solve Internet-facing applications but back-office applications with demanding performance requirements,'' says Bryan Doerr, CTO of Savvis. "We understand how to be an extension of the operational IT arms of our clients.''
Savvis has 29 datacenters worldwide, including a new energy-efficient facility that opened in Dallas in April. Savvis offers managed hosting and utility computing services in every major metropolitan area where it does business.
"We see good, strong demand for our datacenters,'' says Jim Kozlowski, vice president of hosting services at Savvis. "We see the most demand in Santa Clara, New York/New Jersey, Washington D.C., and Chicago. We have capacity plans in place to meet the demand in those areas.''
Analysts predict the shift toward utility computing will continue in 2008.
"The thing that is most important is the evolution of utility computing offerings for all of these vendors. I'm talking about virtualized, communal infrastructure that can be purchased on demand. That's the key trend in product and capability for all of these vendors,'' says Lydia Leong, research director at Gartner and co-author of a recent report on North American Web Hosting.
Analysts expect the growth of complex Web hosting to continue despite the U.S. economic slowdown. That's because it's cheaper for companies to hand off datacenter operations to service providers than it is to build datacenters, buy servers, and hire IT staff to operate and maintain them.
"We don't believe the U.S. economic slowdown will have much of an impact in the short term,'' Leong says. "Companies that spent money developing software last year are going to continue to deploy it this year.... If CIOs start getting dire budget cuts and need to find ways to be more efficient, outsourcing can be one of those ways. That's one of the strongest arguments for virtualization.''
Utility customers predict more growth
Bazaarvoice, which has outsourced all of its datacenter operations to Rackspace since 2006, anticipates growth in 2008. The company has dozens of dedicated servers that it rents from Rackspace, which is responsible for powering and cooling the servers, server operations and maintenance, and network connectivity.
"Rackspace is our origin datacenter. That is where all the data originates from, so when you read a product review on one of the Web sites we support, our application servers and database servers at Rackspace serve up that information,'' Maag says.
Bazaarvoice uses Rackspace's Dallas datacenter with Internet content provider Akamai as its back-up provider.
"The advantage of using someone like Rackspace is that they are experts in physical hardware and network management. We would have to invest a significant portion of our engineering time toward that, and we didn't want to have to do that,'' Maag says. "If we ran our datacenter, physical space would become a concern when we're trying to scale like that.''
Maag says the fact that Bazaarvoice uses Rackspace's datacenter rather than running its own appeals to its largest corporate customers.
"Rackspace lends us a lot of credibility,'' Maag says. "Every client is concerned about where our data resides. It's a lot nicer to say that we host our machines at Rackspace,'' which runs datacenters that are certified to meet SAS 70 security requirements.
The arrangement helps Bazzarvoice keep its internal IT staff down to only two of its 200 employees.
"Our internal IT is working on only a handful of things, such as keeping people's personal machines up and running,'' Maag says.
In April, Bazaarvoice announced that it has served more than 10 billion user-generated reviews. The company launched its service in January 2006.
"We'll probably be at least doubling again in the next year'' in terms of the number of servers it rents from Rackspace, Maag adds. He says he is considering migrating Bazaarvoice's Exchange e-mail service to Rackspace, too.
Another company that plans to increase its use of outsourced datacenters is Wall Street Systems, which uses Savvis for its corporate network infrastructure and to support its software-as-a-service offering. Wall Street Systems provides treasury and high-performance transaction-processing software to financial institutions.
"We're using Savvis' utility computing framework to deliver our solutions to our clients,'' says Mark Tirschwell, CTO of Wall Street Systems. "We've probably tripled the amount of infrastructure that we had a year ago from Savvis.... We were originally using some shared Savvis components, firewalls and things like that, but now we have our own dedicated firewalls and our own dedicated Active Directory infrastructure all managed by Savvis.''
Wall Street Systems uses Savvis as its corporate network and to provide e-mail, videoconferencing, voice over IP and standard data communications to its 500 employees in 12 countries.
But it is seeing more significant growth in its use of Savvis' datacenters to support its software-as-a-service offering. Wall Street Systems uses two Savvis datacenters now, but it expects to add two datacenters in Europe during the next year.
"We expect continued growth at the levels we have been seeing,'' Tirschwell says. "This is great for us and good for Savvis, too. We see the market for our products expanding even in this shrinking economy. As more companies become very conscious of costs ... the software-as-a-service value proposition is stronger.''
Tirschwell says Savvis has handled the growth in Wall Street System's infrastructure "exceptionally smoothly. We couldn't ask for a better outcome,'' he adds.
Tirschwell says owning a datacenter and equipment and hiring IT staff to support its software-as-a-service offering doesn't make economic sense for Wall Street Systems.
"I haven't found a model that works as well as having Savvis own everything and we lease it out,'' Tirschwell says. "Our infrastructure costs have dropped by 20 percent over the last year because of the nature of technology changes, such as dual-core CPUs being replaced by quad-cores at relatively the same cost. My infrastructure costs are actually going down.''
Using Savvis' datacenter not only saves Wall Street Systems money, but it also speeds up its ability to serve new customers of its software-as-a-service offering. And it's less risky.
"If we do a risk analysis between a client of ours doing something themselves versus going the outsourced route, it's night and day,'' Tirschwell says. ``With Savvis, we have SAS 70 certification, auditability and we have [service-level agreements] for response times and turnaround. It's a no-brainer. Our products run much quicker, the transition is much smoother, and there's much less risk. So that's a huge value to us.''
What Web hosting vendors are working on next is what they call "in-the-cloud" offerings that allow customers even more flexibility in how they purchase Web hosting services. Rackspace, for example, has a spin-off venture called Mosso.com that allows Web 2.0 developers to outsource all of their IT operations.
"Mosso.com is cloud hosting so you don't have to think about how many dedicated servers you need to run your application,'' Engates says. "One day you have one server. The next day you end up on Oprah, and you have the resources of 100 servers. It's pretty seamless. It's ideal for blogs that typically have a trickle of traffic and one day they get a scoop and they're on Slashdot.org or digg.com.''
As the Web hosting industry grows so rapidly, one question for buyers is whether they will continue to get top-notch customer service from their providers.
"Rackspace itself is growing so quickly. This is obviously something that we do have a concern about. Can they continue to grow and still maintain that hungry side of them to continue being top-tier in customer service?'' Maag asks.
Garner's Leong says the key factor for enterprise customers in choosing a Web hosting vendor is customer service.
"The key area where the customer makes a buying decision is the quality of service they can get,'' Leong says. "It's about vendor responsiveness, the vendor's degree of pro-activeness and their ability to be flexible. It's not just about fixing an outage. It's about supporting a customer who needs to make a change.''
This story, "Datacenter mushrooming? Why not get rid of it?" was originally published by Network World.