The Hidden Benefits of Application Hosting

The desktop application hosting model offers a variety of IT management and administrative benefits. The potential gains for the subscriber include lower acquisition and operating costs for technology.  While a business owner knows that there are costs associated with the equipment, software and other tangible elements, he or she may not consider the ongoing costs of maintaining and managing the system.  End-user support, backups and data management, network security and virus protection, content filtering and lost productivity are all areas where the business spends time and money, but few businesses totally recognize  these soft costs as being directly attached to their IT budget.

An application hosting service turns all of those tangible and intangible costs into predictable fixed expenses.  Because the cost of the infrastructure (hardware, networking, datacenter, etc.) as well as engineering and technical support are all factored in to the cost of the service, the company no longer has to bear the direct costs of initial system acquisition, ongoing support and service, emergency break/fix, etc.   This is not to say that an application hosting model will always be less expensive than a locally-installed system.  But in many case, it is viewed as an insurance policy, protecting the business from what could happen.  This is also why many businesses view the implementation of a hosted solution as part of their business continuity and disaster recovery plan. Having a separate system to fail over can be extremely expensive.  Using an application hosting service can offer significantly more redundancy and protection than an in-house system, and the cost of that level of protection is also factored into the service fee.

The elements that make up the cost of a hosting service are essentially the same elements that a business would require if it implemented its own systems:

• Facility or building where equipment is housed (includes utilities such as electrical, HVAC, etc.)
• Networking equipment (hubs, switches, routers, firewalls, etc.)
• Connectivity (Internet connectivity)
• Computer equipment (servers: database servers, file and print servers, web servers, application servers, “desktop” servers, etc.)
• Storage (hard drives, removable storage)
• Licensing (operating system licensing, licensing of administrative and management tools, application software licensing)
• Engineering and technical resources

The difference is that the hosting service provider enjoys a certain economy of scale, meaning that a single element in the infrastructure may be re-used many times over for many subscribers, allowing the provider to place a single expensive piece of equipment and leverage it over the entire subscriber base.  This is certainly true when it comes to the datacenter, internal networking, broadband service, and engineering service.  If a company were to attempt to provide for itself the class of systems, redundancy, fault tolerance, protection, and skill sets, the implementation would be far too expensive and would not likely provide a business benefit commensurate to the cost. 

Many businesses that attempt to create their own in-house hosting environments rapidly discover that the hardware and software cost may be acceptable, but the technical expertise required to implement the system and manage it over time is where their resources run dry.  In fact, many of the best customers of the hosting companies are the businesses who attempted to do it for themselves.  These businesses realize the cost and complexity of what they want, and are willing to let the experts handle the hard part.