How to get the most from being a host
Web hosting has traditionally been thought of as a low-profit sale. But this limited point of view does not recognise the wealth of potentially lucrative services and add-ons hosting can offer. Nick Booth explains how to reap these benefits to the full
It is often the small things that make all the difference between surviving and thriving in the IT business. The old chestnut about selling, “retail is in the detail”, only became a cliche because there is so much truth in it.
Still, not all cliches hold true. What about the one about having to avoid commodities? Surely commodities such as bandwidth, or hardware, should be shunned by all right-minded VARs, because by their very nature they are impossible to add value to. But this is not an argument that holds water.
Why would you deny your customers something they need, just because there’s not much margin in it for you? Surely this will send them into the arms of a rival supplier, that is happy to cater for them. Rivals who will be even more happy to give a quote for the more lucrative jobs that need doing.
Nothing exemplifies this as much as the market for web hosting. The conventional wisdom is that web hosting isn’t much of a business. Domains, servers and email addresses are desperately cheap. Someone can buy a web site domain for less than the price of a pint of lager. So being a domain name vendor is even tougher than running the old Dog and Duck that used to be in the High Street.
Even some ISPs don’t seem enthused about the prospect of web hosting. “I can’t see the attraction for resellers, to be honest,” Conleth McCallan, managing director of Datanet, says.
However, he adds: “There’s no money to be made in hosting small companies. Unless of course you move them on from shared hosting, to dedicated hosting. Then VARs can start to add on all kinds of services, and grow as their customers grow. That’s how some of our partners started with us 10 years ago, and they’re massive now. You start small, but you go on a journey. It’s like using a sprat to catch a mackerel.”
This is precisely the thinking behind the strategy of Gloucester-based ISP, Fasthosts, which is throwing considerable channel marketing money at the hosting market. Andrew Michael, chief executive of Fasthosts, said the good news is that you don’t have to risk all your time and capital getting into this market.
“We’re making it very easy for resellers to get into this market,” he claims.
“They don’t have to make any investment for the first three months, and there are all kinds of pre-sales technical and marketing support.
“Resellers can provision everything on the net, from a domain to a server to an Asymmetric Digital Subscriber Line [ADSL] account. And they get it at considerable discounts, so they can even undercut us.”
Fasthost’s channel varies from system integrators and networking resellers to one-man web-designing companies. It is looking for more partners that seek a foot in the door to growing businesses, and the web is still a vastly untapped market.
“There are thousands of companies out there with a web presence that is pretty limited. They’re on the net, but their site will be a static site with no interactivity. When they see that
they need to develop the site, maybe by taking orders online, then they’ll realise they need a partner,” Michael adds.
But couldn’t they do this themselves? Some customers will argue that they can get all kinds of hosting free these days. True, but as Michael urges resellers to impress on clients, there’s no such thing as a free lunch.
Nor is there truly free web hosting. Any client who is considering free web hosting should be asked: what do you think is in this for the provider?
Almost all free web hosting has a catch. Since servers, internet connections and engineers aren’t free, the ISP is either a rare IT industry philanthropist, or they’re doing something else to cover their costs. These furtive activities cover a range of behaviours which, it must be impressed on the client, will affect them.
Some free hosts make their money back by sticking adverts on their client’s web pages. Are these the type of hosts you would want? Clients should be warned that other tell-tale signs of a business hosted on the cheap are: poor reliability; slow loading; and very basic features.
The freely hosted web site usually has a name that is a dead giveaway. Something like yourwebsite.free-web-hosting.org, which is the equivalent of having a hotmail address for your business address. All you need to complete the impression of shiftiness is a PO Box number instead of an address.
A free web host, according to Michael, is the internet equivalent of a cheap suit. It says more about a business than cash ever can. Clients need to be made aware that free web hosts are all fur coat and no knickers, according to McCallan.
“There’s nothing going on underneath. You don’t get any technical support and there’s a real risk that the web host could disappear altogether. Free web hosting will cost you time and credibility,” he says.
Paid web hosting, Michael points out, frees you from the debilitating effects of advertising you don’t want, and it gets you the credibility of your own web addresses and email. More important, a business web site, if hosted professionally, can perform
all of the more advanced features you may require, such as running Java scripts and accumulating customer databases. Such a site can then also start taking orders on the net, which is impossible if the site is being hosted on a shared server.
According to McCallan, the really obvious point you should make to a customer is this: You’re setting up a web presence to let people know exactly who you are.
Getting a free web presence will send all the wrong messages out to potential customers. “If you’re going to do it, do it properly, or don’t do it at all,” he says.
Having established that an aspiring business needs a decent web presence, and not some off-putting cheap web site that sends out all the wrong messages, many might conclude that perhaps it is time they created and hosted their web site themselves. This is where web-hosting companies need resellers to make their economies of scale arguments for them.
The reseller has a choice to make. If the reseller partner is a web designer, they might rightly conclude that they cannot be bothered to buy a server for their client, then wait for it to turn up, install it, load the software, order an air conditioning system to keep it cool and then find a generator to ensure it is immune to power outages.
VARs may think it would be worth learning, which they’ll eventually do as they slowly fulfill your first customer order (which may well turn out to be their last). More likely, resellers will conclude that they should have stuck to what they know, and outsourced the rest to an ISP partner, such as Datanet, Fasthost or Globix.
Don’t bother wasting time with servers. Even experienced resellers and system integrators will concur that there is no money to be made in selling hardware.
Michael says: “Servers are old hat. There’s not a great deal of money in shifting boxes. You’re much better off selling a hosted server service, where we can set up a dedicated server, and fine tune it and protect it, for a fraction of the cost.”
This argument only stands up if the provisioning of these services is easy and trouble free. Fasthost claims that everything can be done in minutes through a browser. But managing all of your customer accounts and keeping on top of your payments from this ‘single, intuitive place’ without any technical knowledge, may bring unexpected challenges. A lot of companies have experienced this problem, but Fasthost gives its resellers a free three-month trial to find out.
Online provisioning may make it simple to manage your customers. But the real attraction is that it enables VARs to white label customer control panels for clients. This includes the option to define what customers can do with their own web site and email control panels. VARs can also create targeted customer newsletters and billing advice emails.
From here you should have a good business proposition to offer, a good range of partners to work with, and an efficient method of provisioning the service. Surely the nation’s resellers, from the scruffiest pony-tailed web designer to the slickest system integrator salesman, are clapping their hands with delight at this new opportunity. And yet the market is still wide open.
Perhaps this is because VARs suspect that customers would rather deal direct. For example, Zyweb uses the reseller channel for its online web site builder, which includes the web hosting. Being able to rebadge the service has proven popular with resellers thus far.
“We have found that our sales for purely web hosting are a direct sale,” says Nova Fisher, communications director of the Xara Group, owner of Zynet and Zyweb.
“Our customers like to know that they are talking to the people with whom they are entrusting their data. In some sales there are technical queries that are best answered by the hosting company. We believe that customers associate web hosting with an internet company, which is not necessarily their computer network company.”
Unfortunately, this can be case. The host has the data centre, and the first, second and third line support, but there’s no reason why this should be a block on the channel sale, as Christian Eckley, sales director at Globix explains. The reseller provides the understanding of the client’s
business. The host provides just the infrastructure, in the same way that BT does. People understand that.
“Buyers of web-hosting services have matured significantly since the dot-com boom days,” Eckley says.
Another doubt VARs have is that SMEs are notoriously difficult to sell to. There is so much work involved, for so little margin. However, this is not always the case, Eckley says.
“We’re seeing stronger demand among the SMEs for full outsourcing of web-hosting services. In the enterprises sector, there’s a tendency to insource,” he adds.
So there is a good market, some pretty solid looking potential partners and a customer base that will not be impossible to convert. Yet this is a familiar situation for the channel.
There have been plenty of potentially lucrative IT markets – storage, for example – that have seduced resellers into massive investments of time and money, for some pretty meagre returns.
Daniel Conlon, managing director of Pipex Hosting, says resellers should start small and look for a host that will offer plenty of support. “Get a taste for hosting, for minimal capital outlay,” he says.
“There are some pretty lucrative services if you can only get a foot on the value ladder and start moving up.” Neil Barton, director of Hostway, says: “Web hosting used to be just about hosting a web site. These days it’s also about hosting applications and services, such as CRM and ERP.”
As Barton says, hosting isn’t an easy service to get into, you need data-centres with redundancy, security, climate-control and power protection. The real host will be too busy managing the infrastructure. That is why they need resellers to manage the relationship with their clients.
You start with just a relatively small company, and gradually build them up, just like Datanet did with the London Camera Exchange. It started with static web sites. Then it wanted to individualise each of its 40 shops. Then it wanted to start taking orders online, and simultaneously updating stock records at head office.
You cannot run fancy scripts on a web site, unless you have a dedicated server, as is the case for e-commerce. So soon enough the customer becomes pretty reliant on anyone who can manage all of this for them. And then the revenue streams just keep growing, McCallan says.
“Soon you’re making real money on connectivity, providing broadband to homeworkers, VPNs and firewalls,” he adds.
You grow with your customers, just as long as you can keep pace with demand.
CONTACTS:
Actinic (01932) 871000
Datanet (0845) 1306010
Dynmark (01242 257949
Fasthosts (01452) 561844
Globix (020) 7611 3000
Hostway (020)7538 8000
Pipex (0115) 9170000
Zynet (01392) 209500