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Collocation (the practice of businesses hosting their own equipment and applications at a specialized third-party facility) just makes too much economic sense for big businesses. There's a real payoff for them to keep their own e-commerce servers in secure facilities on major network backbones, where redundant pipes and ample infrastructure can be shared, and content can be positioned closer to its destination.

Our own research, based on coordinated efforts with U.K. research company Netcraft and Hoover's, indicates that about 20 percent of Fortune 500 commerce sites outsource hosting with eight primary service providers, which we've dubbed The Great Eight: AT&T, Cable & Wireless, Digex, Exodus Communications, GTE Internetworking (GTEI), IBM Corp., Sprint Corp. and Uunet (now an MCI WorldCom company). The rest still self-host. Given dissatisfaction with this emerging industry, extremely large companies can only be expected to move gradually toward housing their own equipment in collocation facilities. Some will try to hasten commerce offerings by tapping into fully managed services based on provider owned and managed systems--but "managed hosting" has its greatest appeal among midsize and smaller companies that lack the staff and budget to effectively bring such services in-house.

In this report, we look independently at collocation and managed hosting services. We asked vendors to answer dozens of questions in about 15 areas pertaining to their business practices. Next, we assigned point values to each category, ranging from 10 for managed hosting providers' number and location of data centers, to 60 for collocation providers' security practices. You'll find detailed responses and scores for these providers in the navigation to the right.

Of the five collocation companies that agreed to participate in our survey, Sprint scored highest, earning 411 of 500 points. Exodus came in second at 395, followed closely by Uunet at 354. GTEI, which puts much more emphasis on its managed hosting services, came in at 304. Digex is evaluated in a separate article on managed hosting because it only has a few collocation customers. AT&T, C&W and IBM chose not to participate; see why we think they declined and what analysts and customers have to say about these companies in "They Boast, But Do They Host?" on page 60.

Each of our Great Eight participants presents a different business model and history. Sprint's hosting service has a number of technical and business innovations, including top-notch SLAs (service-level agreements) and an ASP (application service provider) partnership with Deloitte Consulting. Yet, it remains unclear what will happen to that business given MCI WorldCom's bid to acquire Sprint. If MCI WorldCom holds true to form, customers may simply be routed to Uunet's facilities.

Uunet offers experience and data centers that have attracted a significant customer base. To the extent it offers ASP-like services directly, it's more likely to be managing Web-server and similar applications. It has partnerships, but puts its greatest emphasis on its existing core business. Uunet also has a European hosting presence that stands out among The Great Eight.

GTEI's collocation services make up only about 20 percent of its business. Its focus is on premium managed services, many of which are highly customized and aimed at large sites. It is building relationships with partners including Keane and Ernst & Young.

Exodus has the largest collocation customer list of those we evaluated. Its emphasis is on large businesses, with average annual customer revenues hitting $176,000. Exodus has done an excellent job of overcoming traditional collocation physical security challenges by caging customer servers and introducing state-of-the art, biometrically controlled vaults (see "Security Blanket Has a Few Tatters," page 64).