Data center mushrooming? Why not get rid of it?

If your data center processing load doubled this year, could you handle the growth?

That's what happened to Bazaarvoice Inc., an Austin-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.

To keep up with the growth, Bazaarvoice outsources its data center operations to Rackspace Ltd., a top-tier Web hosting company.

"Theoretically, it would be possible for us to run our own data center, but it would be far more difficult for us to keep up with the growth without a service provider like Rackspace," said Andy Maag, vice president of engineering at 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 said. "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 data centers 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 data center operations. These companies are growing at an average of 15% per year, according to market research firm IDC.

The growth is coming from "complex hosting," said John Engates, chief technology officer 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 estimated that complex hosting is growing at a much higher rate -- as much as 70% to 80% per year. He said about half of Rackspace's 15,000 customers buy complex hosting services. Rackspace operates eight data centers -- four in the U.S. and four in the U.K.

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 includes short-term promotional Web sites run by marketing departments or advertising agencies.

"One of the big ad agencies brings us lots of business," Engates said. "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 Inc., whose revenue grew 26% last year to $794 million. Around 15% of Savvis' revenue is 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," said Bryan Doerr, CTO of Savvis. "We understand how to be an extension of the operational IT arms of our clients."

Savvis has 29 data centers 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 data centers," said 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," said Lydia Leong, an analyst at Gartner Inc. and co-author of a recent report on North American Web hosting. "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."

Analysts said they 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 data center operations to service providers than it is to build data centers, buy servers and hire IT staffers 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 said. "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 data center operations to Rackspace since 2006, anticipates growth in 2008. The company rents dozens of dedicated servers from Rackspace, which is responsible for powering and cooling the servers, server operations and maintenance, and network connectivity.

"Rackspace is our origin data center. 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 said.

Bazaarvoice uses Rackspace's Dallas data center, with Internet content provider Akamai Technologies Inc. as its backup provider.

"The advantage of using someone like Rackspace is that they are experts in physical hardware and network management, "Maag said. "We would have to invest a significant portion of our engineering time toward that, and we didn't want to have to do that. If we ran our data center, physical space would become a concern when we're trying to scale like that."

Maag said the fact that Bazaarvoice uses Rackspace's data center rather than running its own appeals to its largest corporate customers.

"Rackspace lends us a lot of credibility," he noted. "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 data centers 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 said.

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 added. He said he is considering migrating Bazaarvoice's Exchange e-mail service to Rackspace, too.

Another company that plans to increase its use of outsourced data centers is Wall Street Systems Delaware Inc., 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," said 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' data centers to support its software-as-a-service offering. Wall Street Systems uses two Savvis data centers now, and it expects to add two data centers in Europe during the next year.

"We expect continued growth at the levels we have been seeing," Tirschwell said. "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 said Savvis has handled the growth in Wall Street System's infrastructure "exceptionally smoothly. We couldn't ask for a better outcome," he adds.

Tirschwell said owning a data center 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 said. "Our infrastructure costs have dropped by 20% 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' data center 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 said. "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. For example, Rackspace has a spin-off venture called that allows Web 2.0 developers to outsource all of their IT operations.

" is cloud hosting, so you don't have to think about how many dedicated servers you need to run your application," Engates said. "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 or"

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 asked.

Gartner's Leong said 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 said. "It's about vendor responsiveness, the vendor's degree of proactiveness 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, "Data center mushrooming? Why not get rid of it?" was originally published by Network World.

Copyright © 2008 IDG Communications, Inc.

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