At Cotyshop.com sales are going like gangbusters. Since Coty revamped its online consumer site a year ago, executives say revenues have increased 80 percent. The global marketer and manufacturer of men's and women's fragrances, skin-care products and cosmetics has had a Web presence for five years, starting with brochure-type sites and a corporate home page. It outsourced those sites from the beginning, going with small Web developers or ISPs to handle the online headaches.

"We made a very clear decision early on that we would not host any Internet sites internally," says Barbara McSpedon, director of global communications for Coty.

So when Coty decided to launch a transaction-based e-commerce site two years ago, the question wasn't whether to outsource it, it was with which company. McSpedon knew that not just any Web hosting firm would do. She wanted a fully managed service -- something that is becoming increasingly popular as more businesses go online, either with e-commerce ventures or with hosted applications that keep employees scattered across the globe connected.

Web hosting companies are responding to the complex needs of larger businesses. These hosting firms are developing standardized configurations so they can launch more services, more quickly, at a lower cost than businesses could on their own. In addition, special services such as round-the-clock monitoring, caching and security mean many businesses can get better performance from a Web hosting company than they could if they implemented and maintained the network themselves.

"Really, the hard part isn't even trying to construct it, as much as they don't even have the skills for all those pieces," says Andy Hunn, senior director of business development for Web hosting firm Digex. "Most companies don't have a massive technical organization that is highly skilled in Internet technologies."

Although the move into the Web hosting data center market has been slow, market research firm IDC predicts the trend to pick up quickly, increasing six-fold from $4 billion in revenue in 2000 to more than $24 billion by 2004.

"A lot of companies are asking their providers to do more stuff, not just provide floor space to stick all the company's equipment in," says Melanie Posey, an IDC analyst who authored a Web hosting services report. "They're saying, 'We don't even want to deal with this at all -- you do it.' "

That's the approach Coty took, leaving its e-commerce site -- and its Web-related worries -- in the hands of IBM Global Services.

Higher-level services

No longer are raised floors, diesel generator backup and ventilation systems enough. As large organizations move their applications and Internet ventures into data centers, they are looking for services such as data backup, security and storage services, application management, load balancing and real-time network monitoring.

Web hosting companies are responding to the demand, and corporate network managers can expect to see yesterday's Web hosting company morph into a combination network, application and professional services provider. Analysts expect to see partnerships and strategic alliances as Web hosting companies expand their services.

Consider the deals during the past year: WorldCom/UUNET

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