March 17, 2000 2:45 PM PST

HP attempts to play host with pay-per-use service

Hewlett-Packard plans to launch a series of Web hosting services with a special twist--customers will be billed simply for the services they use, similar to how a utility bills for water or gas.

Next week, HP will unveil a new hosting service called Infrastructure-on-Tap. Under the plan, HP will provide all the technology necessary to start and manage a Web site, including hardware, data storage, network security, maintenance, network connections and other IT support. All a company has to do, HP says, is figure out how much traffic or business the site will draw.

Customers will not have to sign a binding service agreement or pay any up-front fees for the hosting services, HP said. Instead, companies pay only monthly fees for services used. HP plans to target companies that focus on business-to-business exchanges, or marketplaces, initially for the new services.

A number of the larger PC makers, such as HP, Dell Computer, Compaq Computer and IBM, have thrown their hats into the ring by offering Web hosting and application services. The companies are targeting products and services at growing Web businesses in an effort to better tackle the Internet and gain new revenue streams.

Dell recently made several investments in Web hosting firms and application service providers (ASPs)--including Interliant and NaviSite--to gain a wider presence in the market. ASPs allow companies to rent expensive business applications on a hosted, per-user/per-month basis.

Rival Compaq invested in FutureLink, and most recently in ASP Digex, to further its entry into the market.

HP did not disclose specific pricing details for the plan. "You'll be able to get your computing power just like your electricity, by plugging in," said Frank Barker, a general manager at Palo Alto, Calif.-based HP. "HP will design and run your whole computing infrastructure for you…not just host your Web site."

GartnerGroup analyst Stephen Elliot said that for HP to stand out in a rapidly growing market, the company needs to become a full service provider.

"Rather than just offering real estate and a Web site hosting service, HP can compliment that by offering management services, managing the Web site, managing applications," said Elliot. "Most hosting companies are not at this point yet. They're still in the first stage, mainly providing the big, bandwidth pipes."

Elliott added that the pay-per-use pricing model HP plans is fairly new, and that companies have expressed interest in it. Whether customers will prefer to pay as they go or stick with solid contracts remains to be seen. Regardless, Elliott said HP will be able to use its model as a competitive advantage, at least in the short term.

"Certainly the easy-to-understand pricing models tend to win out," said Elliot. "All contracts will come under increasing pressure as competition increases. Right now there's a lot of flux occurring in the market."

Later this month, HP will announce another hosting plan for established companies with more elaborate systems. HP's Managed Web Solutions is also based on the pay-as-you-go pricing model. Under the plan, HP said it will manage system migration and integration issues, as well as custom design computing systems for customers.

Large Web hosting firms, such as Exodus and Digex, also provide companies with Internet connections and data center facilities necessary to run a Web site. But they typically charge an initial set-up fee and require customers to sign-up for between one year and three years of service.

For example, aside from initial set-up fees, Exodus charges extra for network security and management monitoring services. Digex also charges companies an initial fee plus monthly fees for hosting services.

The announcements mark HP's second attempt to crack the hosting market. Last April, the company announced an e-commerce hosting plan comprised of software and services from third-party providers, including Cisco Systems. The new hosting programs are being offered directly through HP.

 

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