Hosted IT: When Simple Won't Do

Amazon.com inc.'s utility pricing and on-demand services may change the hosting game, but some applications continue to demand more of a hothouse environment. "There is no way to apply the fast-food hosting model to really complex custom applications," says Daniel Golding, a vice president at Tier 1 Research. At the high end of the market, a more familiar name in corporate IT is well-positioned: IBM Corp. "When it comes to specialized needs, IBM can pull together consulting, integration, hardware, software and industry expertise in a way that is unparalleled," says Laurie McCabe, a vice president at AMI Partners Inc.

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Mike Riegel, IBM's director of managed services, says the complexity of many cutting-edge applications brings customers to his shop. Some want scalable video and wireless services, such as movie animator Threshold Digital Research Labs, in Santa Monica, Calif., or TekVet, a North Salt Lake, Utah-based company that sells monitoring services to cattle ranchers. Other IBM customers, including the PGA Tour and Eurotunnel's Channel Tunnel, which has its Web site and ticket operations run by IBM, must deal with high volume and enormous traffic spikes. IBM manages over 200 high-level data centers around the world, and commands about 30 percent of the complex-hosting market.

The trend in complex hosting, says Riegel, is outsourcing entire business processes, "from quotes to cash." But IBM is mindful of the commoditization of computing services, too. In December, for example, the company announced that it is partnering with Yahoo! Inc. to offer a free enterprise-search service called IBM OmniFind Yahoo! Edition, which takes dead aim at Google Inc.'s Mini search software. "Why buy hardware when we can give it to you like a cable box?" says Riegel. Or as Nick Carr wrote at his Rough Type blog, "In an age of cheap computing, hardware wants to be software, and software wants to be free."