In its second-largest acquisition, Amazon buys the company for $970 million.
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There are thousands of hosting companies to choose from so retailers have to be careful in their choices. The number one question to ask a potential hosting partner is the extent of their knowledge of retailing, merchants and consultants say. “Make sure they understand the scope of your business-the traffic you expect, the dynamics of your site, how long people stay, traffic patterns, spikes and valleys,” Land says.
One way to get at whether a hosting candidate understands that information, Thompson says, is to know who the hosting company’s other clients are. “If they have other retailers, you can be pretty sure they understand the direct marketing industry,” he says. “Anybody can put a box on a network and call themselves a co-location facility. But if they have other retailers, they’ll know how important it is that you’re always up.”
Further, a hosting company that deals with retailers will understand the phenomenon of bursting-that is, dealing with sudden spikes of traffic-and will be prepared to deal with it without charging exorbitant fees, Thompson says.
Retailers also should learn if their hosting companies keep up with technology from third party-vendors. “You don’t want to have to do your own basic research on other vendors,” Thompson says. “They should be able to tell you what their other clients are using.” For instance, Fry helped Gardeners Supply choose Coremetrics Inc. as its analytics vendor, Thompson says.
The types of service level agreements that a hosting company is willing to offer ares also important to a decision. While service level agreements are standard, a hosting company should be willing to offer seasonal agreements, experts say. “We have one retail client whose business peaks in February, May and November, so we give them an SLA significantly higher in those months than the rest of the year,” Pataro says. “Not only are the SLAs higher that month, but the penalties assessed for not meeting them are higher as well. We try to craft agreements in a way that makes them most comfortable.” Adds Land: “Any web hosting company that handles any kind of retailer business should be comfortable with seasonal SLAs.”
One area that businesses seeking a hosting company sometimes overlook is the physical security of the hosting facility, consultants say. “It’s a question retailers should ask,” says Burke of Multimedia Live. “They should know who gets into a facility and how many levels of security a facility has.” For instance, Multimedia Live’s hosting facility in Northern California has five levels of security that involve some forms of biometric scanning, Burke says. Says Land: “Security is a really important question to ask.”
Of course, electronic security almost goes without saying, analysts say. “Especially in today’s environment, a web hosting company should have strong security compliance,” Land says.
Retailers should also ask about a web hosting company’s routine redundancy, such as its ability to respond to a garden-variety power outage, as well as its disaster recovery procedures. Multimedia Live, for instance, has generator backup at its hosting facility in the event of power failure. It also has multiple connections to the Internet backbone.
Hosting companies argue that geographical diversity is not a requirement of redundancy. For one thing, Burke points out that Multimedia Live’s facility is in a building that is supposed to withstand an earthquake of up to 9 on the Richter Scale. For another thing, even if something happens to a facility, re-starting on a new facility elsewhere is fast and relatively cheap if the retailer has the applications and e-commerce data backed up, Pataro says. “It’s a matter of how long it takes to get the site operational again vs. paying the insurance,” he says. “If you’re under $20 million a year it might not be worth the costs.”
Another area to explore with a potential hoster, Thompson says, is the experience of the engineering staff. “If my in-house staff is not available, I need to know if the hosting company has somebody who understands how each individual platform works,” he says. “It’s very important that somebody there know the actual e-commerce platform you’re working on and how to troubleshoot it.”
Know what’s coming
Before even interviewing hosting companies, though, a retailer should clearly understand its own needs and be able to forecast accurately the amount of business it expects to get via its web site. With the phenomenal growth of online retail sales, forecasting is harder in the virtual world than in the real world. “Some retailers don’t have an idea how to forecast their needs,” Pataro says. “They’ll forecast 20% and get 35%. They have a tough time getting their hands around how their marketing initiatives affect their capacity needs.”
If failing to know that information leads to problems with a hosting company, it can lead to disaster for a retailer that hosts its site on its own, observers say. “There’s no margin for error any more,” Thompson says.