March 3, 2003 -- (WEB HOST INDUSTRY REVIEW) -- Big checkbooks and big brand names don't necessarily mean good hosting. In fact, smaller hosts in Australia say size isn't important down under.
"We are on a different level to the big players," said Steven Freeman, director of Value Hosting Australia/USA. "In the hosting business you don't necessarily need to be a big player to competitively and professionally position yourself in the market."
James Kruss, of Spherious Web Hosting in Australia, agrees.
"A company does not have to be large to succeed," he said. "They have to be good."
Although it's difficult to determine exactly how many web hosting companies there are in Australia, some reports suggest there are more than 300 hosts. Not only are they competing with each other, but they are often in direct competition with big-spending telecom giants such as Telstra or Primus. They've also got a run for their money with Australia's largest host, WebCentral, which soaks up about 20 per cent of the market, hosting more than 50,000 sites and domains.
But the telecom giants' big spending and glamorous advertising doesn't appear to concern some Aussie hosts who believe they have one up on the big players; they focus harder on hosting, while hosting is often just a slice of the big telecom pie.
"Smaller companies need to target specific areas and build advantages for themselves in those markets," Kruss said. "We offer a more attractive package including an uptime SLA (service level agreement), more value adding features, and more flexibility. We provide all this at a lower cost."
Hostworks in Australia have also made their way with focused hosting at cheaper rates.
"We specialise in hosting mission critical enterprise applications and complex Internet sites," said Gary Thomas, commercial director of Hostworks. "Primus does not offer this service, and Telstra has only recently started to offer services in this market.
"We compete with Telstra, and other high-end providers such as CSC and IBM GSA, in terms of our specialization in the area. We can demonstrate greater expertise compared to these larger, multi-service organizations. We are also more flexible, responsive and lower cost."
On the other hand, officials at Australia's leading host WebCentral,say "size does matter."
"Especially in terms of being able to leverage buying power in negotiations with ISPs and hardware providers," said WebCentral chief executive officer, Lloyd Ernst.
"We are continually acquiring customers from smaller hosting companies and developers. We have certainly seen smaller companies either selling up completely or merging in an attempt to become more viable. WebCentral has undertaken about 10 acquisitions of varying sizes in the past 18 months."
The real struggle for Australian hosts is expensive bandwidth. With few companies controlling the market, bandwidth prices, as well as high server and data transfer costs, have sent many smaller hosts scurrying overseas for the services.
"Our hands are tied in respect to data charges, as the major Australian bandwidth providers charge everyone a per-MB fee for data transfer," said Ernst, of WebCentral, which has two data centres in Brisbane. "There is a considerable expense in WebCentral having to 'count' traffic with large routers and databases for storing data traffic records. We are charged by our suppliers for data transfer and this expense, as with all business expenses, must be covered by the prices we charge."
WebCentral says it balances the high costs by maintaining a mass of customers, allowing them to take advantage of scale economies.
"Leveraging these economies of scale, we are able to offer a larger range of services that are complementary to traditional Web site hosting and provide value to our customers," said Ernst.
Smaller hosts don't have the same advantages and many have been driven overseas.
"All bandwidth is controlled by Telstra, resulting in high prices," said Freeman of Value Hosting Australia. "Overseas it is more deregulated and there is more competition. We remain competitive by using servers overseas."
Spherious also has servers in the USA, but heavily promotes the fact that they are located in Australia and Australian owned. "Some Australian customers are attracted to overseas companies, but in general, Australians like to buy from businesses located within."
With Australian hosts using overseas servers they are able to provide local customers with the best of both hosting worlds; access to fast, cheap overseas services but they still get to support the local economy and are almost guaranteed prompt customer service from home.
"The best customer service is found when the customer deals with a local provider opposed to an overseas one," Freeman said.
