EDS exploits shifts in hosting arena

As the Web hosting market falters, traditional outsourcers are picking up the pieces. Electronic Data Systems, for example, has expanded its data center expertise to include Internet connectivity. The company says 77% of the $19.2 billion in revenue it reported last year came from its I-Solutions business, which includes Web hosting. Network World Senior Writer Jennifer Mears recently spoke with Steve Lapekas, vice president of hosting services for EDS.

How does EDS fit into the Web hosting market?

Web hosting is a natural extension of EDS' business. We didn't have to go out and build data centers. We have 12 major service-management centers. EDS is 40 years old and we've been doing hosting and data center operations since the beginning. Exodus has 44 data centers and 5.6 million square feet of raised floor, compared with EDS' 12 data centers and about 1.4 million square feet of raised floor. It's not the quantity of space you have; it's the quality. And the quality is the managed services; it's the revenue you generate per square foot that keeps you in the business.

Do companies understand what EDS offers for Web hosting?

A lot of clients are turning to us because of our stability, because of our experience. It's the work that we do above the operating system level. That's where the market is going; it's very application-centric. The static Web site of yesterday is gone. It's all dynamic assembly now. It's reaching back into databases; it's reaching back into legacy systems. That's really where there is a separation between us and who is left out there.

Obviously IBM Global Services is very big and has capabilities similar to EDS. After that you have the Digexes of the world, and maybe even Genuity, and they have their issues.

But after that there's a very large gap. The only ones with the money to stay in the market are your [telephone company]-type providers. But they base themselves on the central office scenario, the facilities core, and so when you go above the operating system there are definitely limitations from the AT&Ts and Qwests of the world.

What sets EDS apart from IBM?

The quick answer is choice. They have collocation facilities, and obviously you can bring in all kinds of equipment. From a managed services perspective, the box is going to be blue. We have our existing alliances, but if you come into one of our data centers, we'll have IBM boxes, we'll have Hewlett-Packard boxes, we'll have Compaq boxes, we'll have Dell boxes.

We can do a lot of things under one roof. For instance, to do order fulfillment, you can go into our business process-management business and we have distribution centers around the county, around the world. An EDS employee can fill the cardboard box and send it out - all under one roof. If you are IBM, they fall short in order fulfillment, but they'll tell you they make the server.

Has your hosting strategy changed since the market has fallen apart?

Because we weren't in collocation, there wasn't any strategy change. My issue is, where do we take hosting next? What you'll see from EDS is more high-availability types of offerings; 99.95 to four of the five nines; zero-latency environments. Blade architecture that lends itself to, I hate to use word utility, but capacity on demand or rapid provisioning and deprovisioning. Web services are obviously a part of our future.

Who are your competitors?

Today, obviously IBM Global Services [and]Digex we see a lot in the marketplace. Twelve months ago there was everybody and their brother saying they could do Web hosting. Two things have happened: Obviously the economy; but also we've seen the need for complexity to emerge. It's no longer just three databases. It's three databases that have to be clustered, that have to be fully redundant, and how do you tie that in and how do you global load balance?

What are you seeing as far as demand goes?

Some want to do what-if scenarios: What if Exodus Communications shuts its doors, what can you do for me? EDS procures the hardware and it's part of our monthly charge. While you're running in a facility that might be about ready to shut its doors, we build the environment, we start swapping content, we flip the switch and you're operational. Companies are also asking for those complexity issues. They're asking for an integration piece to databases or back-end legacy systems, global load balancing-type scenarios.

Have you seen a drop in demand?

From a Web hosting standpoint, we've actually seen an increase in demand. It stems from the market. I'd like to say I'm the greatest Web hoster out there, but there are just fewer people who can do it. n