A TopHosts Web marketing report

Most small and mid-size online businesses aren't candidates for hosting their own sites in-house -- the setup costs for server hardware, bandwidth capacity and software development are beyond the means of most. And once the server is set up, ongoing maintenance can be challenging and costly.

Fortunately, there are alternatives. Companies specializing in Web hosting abound, and enable even the smallest e-business to gain an online presence quickly and inexpensively. But as an online business, you have a number of special needs that someone running a personal home page does not. That's why free Web hosting bundled together with your basic monthly fee from your ISP, or free home pages through services like Tripod or Yahoo! are generally poor choices for sites that generate transactions.

Ten key issues should be on your checklist as you select your e-commerce host:

1) Bandwidth

"You need your site to be easy for people to download," says New York-based e-commerce consultant Jon Bednarsh. "And you need to capture information that your site visitors send to you -- like registrations, orders and credit card data -- as quickly as possible." That means that you need a host with bandwidth to spare. Your best bet is to find a provider with a minimum of one T-3 (45 mbps) line connection to the Internet's backbone, or to an "upstream" provider. This is 28 times faster than the T-1s used by many smaller providers.

"Don't be fooled by the sheer size of the connection," says Bednarsh. "You'll also want to find out what percentage of their bandwidth is being utilized by existing demands on the system. The average bandwidth utilization should not be greater than 30 percent of the available total, and peak bandwidth should be no greater than 60-70 percent." Beyond that level, performance across the network begins to deteriorate. You might even want to write in a guarantee of bandwidth utilization limits when you prepare a contract with your host.

2) Proximity to Backbone

Many hosting companies connect to larger Internet connectivity providers, running a commercial phone line "upstream" to the larger company, who in turn might be running a connection to yet another "upstream" provider. The further "downstream" your provider is, the more chances there are for things to go wrong, as your data is handed off with each upstream connection.

Ask potential hosts: "How many hops are you to the backbone?" A "hop" refers to each server or router location Internet traffic must travel through before continuing on to its destination. Ideally, you want a host with few hops -- or whose machines actually sit on the Internet backbone itself. Don't discount companies based on size -- even small companies can pay to "co-locate" their computers at a site that feeds directly to the Internet's backbone.

3) Server Setup

Make sure the host you choose is using top-of-the-line hardware, preferably multi-processor server machines. Bednarsh points out that they don't have to be name brand; in fact, many of the best Web hosts build their own equipment.

4) Redundancy and Reliability

"As we all know from experience," Bednarsh says, "nothing ever works right all of the time. A vital measure of a reliable host is its preparation for the unexpected." Your host should have multi-homed Internet connections. This means connectivity provided by more than one backbone provider to ensure maximum reliability.

Hard drives should be backed up daily and you should have access to them at any time. Your host should also have a back-up uninterruptible power supply onsite, like a generator, that is programmed to kick in immediately in the event of any power failure or flicker.

5) Disk Space

As a general rule, you won't need as much as you think. Most hosting packages start at 25 MB of hard disk space -- enough for 500 typical Web pages. But the important thing to inquire about is the ability to easily increase your disk allocation.

6) Site Creation and Commerce Tools

Many commerce hosts incorporate easy-to-use software for building online catalogs. This will enable you to maintain your storefront without the need of an outside developer. Some of the most widespread and easy-to-use packages are:

· SoftCart, by Mercantec

· ShopSite, by ICentral

· Commerce Publisher, by iCat

Be sure to find out which software packages your host recommends and supports.

7) Security

The current standard for the security of online transactions is Secure Sockets Layer (SSL) encryption. This protocol encrypts the transaction data as it passes over the Internet. However, a digital certificate is needed to verify the merchant's identity. You will most likely want to obtain your own certificate from one of the two largest and most widely supported issuing authorities -- VeriSign and Thawte. Verisign's pricing schedule is somewhat higher than that of Thawte, but the VeriSign certificate is supported by a larger number of older browsers.

8) Payment Processing

To accept credit cards online, you will need to acquire the service of a payment processor. A payment processing service handles credit card transactions between a Web business and merchant account in real time. Your payment processor choice will depend on which shopping cart solution you choose, since most have at least one payment processing component built-in. Three of the most popular payment processors are:

· Cybercash

· Segue Systems

· ICVerify

Also check with your merchant bank, as it may have relationships with one or more of the above processors. Important: You will need to apply for a merchant account on your own, as any business accepting credit cards must. These companies will help you use your merchant account for your site, but they are not banks, and cannot offer accounts themselves.

9) Back-End Integration

Many site owners will want to feed data from their Web sites directly to their existing accounting, inventory and consumer database systems. A top-shelf host will offer some degree of integration assistance. While you might not consider this an important issue as you start up your site, if you succeed in building a business online, integration of your systems will become a significant issue, so inquire about the scalability and service a potential host offers.

10) Cost

Last, but certainly not least, is the cost of getting started and maintaining your online presence. Many smaller site owners receive excellent service from their hosts for as little at $100 per month. But the more success you have, the more support you'll need. Large companies often pay their hosts as much as six figures per month. How much will you have to pay? Here are a few ballpark costs to keep in mind:

Expect to pay anywhere from $50-$150 for setting up a plain vanilla commercial hosting account.

If you don't already have your domain name registered, you will most likely pay between $100 and $200 for your host to register it for you, as well as $70 for the first two years' fee to Network Solutions, the official registrar of .com, .net and .org domains.

Software licenses for e-commerce catalog applications range from $249 to $3,500 at the low end, and can cost many times that if you need customization, or serve a very large number of customers. (Some providers have negotiated special agreements with software vendors -- it's worth asking about).