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Collocation is out; managed hosting is in. That's where the agreement among managed Web hosting service providers ends. The current market is characterized by fierce competition (and frequent shifts in business models) as vendors strive to establish themselves as early market-share leaders.

The most obvious differentiators are quality and price. Managed Web hosting fees vary widely. So does the value that a company can expect to obtain for the service being purchased, vendors argue. There is a tremendous difference between the service quality of a $1,000-per-month managed hosting service and services that cost $50,000 per month or more. At the low end, customers may not receive service features such as dedicated technical-support personnel, integration services or even database administration services.

Some vendors define service quality by stressing the difference between shared hosting and dedicated hosting models. In shared hosting approaches, certain hosting infrastructure elements, such as database services or back-end storage, are shared among many customers. Companies that offer dedicated hosting arrangements, in which virtually all the hosting platform and its support resources are dedicated to a single customer, consider their approach the epitome of a quality service offering. As such, they tend to charge more for their solutions than providers of shared hosting services.

Nowadays, most providers use shared hosting models. Vendors are driven to the model by a rule of thumb well understood throughout the xSP industry: The more that infrastructure can be shared, the more likely it will yield economies of scale and reduced operational costs as customer ranks swell.

The debate over shared hosting versus dedicated hosting is somewhat specious, however. Virtually all managed hosting service providers share at least some network resources among multiple customer installations. Debates become even more picayune when vendors begin arguing about the relative impact on service quality of the sharing of specific infrastructure elements.

Today, managed hosting vendors are experimenting with sharing everything, from software and hardware elements of their infrastructures (including directory servers, application servers, databases, storage arrays, firewalls and load-balancers) to technical- and support-staff resources. The jury is still out on which of these can be shared safely and effectively so problems in one customer's hosting environment do not spill over into another's. For this reason, companies considering shared hosting service providers would be well-advised to demand extensive testing -- and to specify airtight contractual remedies -- as an offset against being used as crash test dummies.

In the final analysis, the vendor's strategy must do more than deliver cost-benefits to the vendor (that it may or may not pass along to customers in cost reductions). The strategy must also deliver the benefits that the customer expects from the managed Web hosting service as a whole.

U.S. Demand for Hosting Services Click here to enlarge

The expectations of customers tend to be high, according to most hosting company insiders, and are often unrealistic.

For example, companies frequently approach managed hosting providers with requirements that include bulletproof security, zero downtime and full redundancy with real-time database mirroring across multiple hosting facilities separated by great distances. In short, they seek a perfect solution with perfect uptime and real-time failover. In their defense, customers are often driven to these expectations by marketing hype promulgated by industry advocates. Many companies have found, often to their chagrin, that high availability and other attributes sought from a Web hosting service can be obtained--but only at considerable expense. Based on our RFI responses, fully mirrored sites cost well in excess of the $50,000-per-month high-end offering (see "RFI: Managed Web Hosting Services"). Most companies, upon learning the price tag of a redundant site, settle for a more modest single-site solution that entails somewhat greater risk but significantly lower cost.

Those willing to shoulder the cost for site redundancy may be disappointed by the technical limitations that continue to mitigate its efficacy. For example, static Web site content can be mirrored relatively efficiently between dispersed locations -- assuming that the hosting provider offers at least two facilities and communications links of sufficient bandwidth are available. However, strategies that require synchronization of databases at two or more sites in real time (or near real time) often run afoul of the technical limitations of most current database products.

As described in our RFI's hypothetical case of Romao Vineyards, customers sometimes call upon hosting service providers to accommodate master/master database configurations. Master/ master configurations entail two separately operating databases to update one another as they process external transactions. The word on the viability of these configurations from service providers is mixed. Some providers quote the database vendor's brochure and state unabashedly that the strategy is feasible. However, the wisdom from hosting service vendors who have actually tried master/master configurations is to avoid them, for now at least.

Hype vs. Reality Click here to enlarge

Database synchronization is only one example of a technical limitation that may affect some managed Web hosting strategies (see "Hype vs. Reality," at right). Other examples include the ability to make customer applications work with the host's application servers or directory servers, and hosting providers' ability to support customer-developed applications reliably using the middleware components and staff know-how available within the provider's operational environment. A key point to remember, some vendors assert, is that technical limitations do not disappear simply because the Web hosting platform is being outsourced.