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Outsourcing has gained popularity over the last few years as companies around the globe have turned to outside experts to deploy sound technology strategies. Once reserved for larger companies, outsourcing is now viewed as a cost-effective alternative to in-house solutions for companies of all sizes. Recent findings from market research firm The Yankee Group found that over 50 percent of small to medium-sized businesses (SMB) now employ some type of outsourcing to fulfill their information technology (IT) needs.

As the trend toward outsourcing moves into the SMB market, small companies are learning to leverage technology to streamline business operations and automate their business processes to create greater efficiencies. One of the main reasons that SMBs are increasing their use of outsourcing services is to help lift the burden from already-taxed IT staff. According to The Yankee Group, the ratio of IT staff support to personal computers in small businesses is 1:25, while medium-sized businesses have a ratio of 1:33. In fact, some small businesses 29 percent of very small businesses have no full time IT staffs at all, according to Yankee.

One of the fastest growing segments of SMB outsourcing is that of Web hosting. A growing percentage of companies are turning to outsourced Web hosting solutions to ensure that their Web site is secure, reliable and scalable. In fact, analyst firm Aberdeen Group predicts that the percentage of SMBs opting for Web hosting services will grow from 40 percent today to more than 70 percent in 2004 (Network Computing, September 3, 2001).

The SMB market is an important market segment in today's economy and is expected to grow significantly over the next three to five years, said IDC Web hosting analyst Melanie Posey. The demand for more complex Web site functionality, ever-escalating costs and greater outsourcing benefits will further spur outsourced hosting among SMBs.

Outsourcing: The bottom line

As SMBs evaluate the shift to an outsourced Web hosting model, Total Cost of Ownership (TCO) is often viewed as a major benefit of outsourcing. For SMBs, establishing their own hosting capabilities internally often is a larger investment than outsourcing. The TCO of self-managing a Web site is generally higher due to the costs of an in-house IT staff whose primary responsibility is to manage the Web site. In addition, TCO also factors in the equipment, software, and initial set up costs, as well as the periodic upgrading of equipment, 24/7 help desk services and around-the-clock monitoring and management.

Given today's economic conditions, a reduction in capital expenditures is a key consideration for any business. By leveraging a Web hosting providers data center infrastructure, network and expertise, companies can expect a 25 to 80 percent cost savings over in-house solutions. Outsourcing enables a company to reduce its TCO by freeing assets, such as cash that is allocated to capital expenditures and the expense of specially-trained staff, which can account for anywhere from 22 percent to 47 percent of the total budget for the Web site.

The benefits of using a hosting service provider (HSP) go beyond a reduced TCO. While an HSP enables small businesses to get connected to the Web quickly and efficiently, it also provides a strong assurance for a reliable e-commerce platform and provides end-to-end accountability for the performance of a site.

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