You have a product that can be sold over the Web. You want to be the next Amazon.com (albeit one that makes a profit). Where do you start and how much will it cost?
In the first couple of years of e-commerce, you could hire a recent college graduate, pay him or her in pizza and stock options, and connect a Web server to a reasonably fast network connection. We're past that point. Running an e-commerce site is complicated and risky. Complicated because the market is more crowded now and the customer expects a much higher level of sophistication. Risky because security equals reputation in the online world, just as it does in the real world. What happens to your reputation if a hacker downloads a month's worth of credit-card transactions from your servers?
To mitigate those risks -- as well as keep costs down -- use a hosting service rather than maintan your site in-house, especially if you have a smaller business. A hosting service provides a computer room (complete with redundant power suppliers, air conditioning, etc.), a network connection to more than one supplier, and sometimes even the computers itself.
A study by the Giga Information Group earlier this year compared the cost of running a minimal e-commerce site yourself to the cost of outsourcing it. While most costs were the same (you probably still have to buy servers and software licenses and pay support costs), you save the cost of a full-time staff by outsourcing, and some features (such as traffic load balancing, which automatically spreads the load of Web connections among a series of networked servers) are a lot cheaper.
For example, a reasonable setup for a medium-size business might consist of three Web servers, two database servers, an array of hard disks for storage, load balancing, and a fast connection to the Internet. Together with two full-time staff (although I challenge anyone to fill two positions nowadays with Giga's estimated $16,000) and software licensing costs, Giga estimates that configuration would cost you more than $1.1 million over five years. You might be able to trim some costs by working late yourself and using free software like the Linux operating system (download free from ZDNet AppWatch) or Apache Web server (download free from Apache.org), but that estimate does not include the cost of a proper, secure data center.
A hosted setup using the same hardware and features will run you around $870,000, according to Giga does, including the cost of the data center. The savings come primarily from eliminating staffing (maintenance services typically cost less than hiring someone yourself) and on features such as load balancing.
Giga estimates it would cost you $50,000 to provide load balancing for yourself (including the cost of the routing, switching, and load-balancing hardware), while a typical cost for that service from an outsourcer is only $20,000 because of economies of scale -- the cost is spread over the several companies that use the service at the hosting center.
As your experience and your online sales grow, you may want to consider bringing the operation in-house or using a co-location provider. That's someone who provides the floor space in a data center, but leaves all the work (and the hardware) up to you. But to start with, outsource it.
Help from a host
If this description has left your head spinning and the cost estimates are giving you heartburn, don't despair. There are easier ways to get your business online, especially if you want to start very small.
For very small businesses, one option is to sign up for a Web-based storefront, such as those offered by Amazon and Yahoo. This is an excellent option if you are not rock-solid sure that there is a market for your product online. You can test the waters without sinking large sums of money into servers and expertise. If it fails utterly, all you have lost is a few monthly payments and your time.
Web hosting is a reasonable option if the online marketplace hosting your service is directly related to your business -- for example, if you provide furniture restoration and you are linked to an antiques marketplace. However, it is not a good option for a large business that hopes to make a splash or for high-ticket items. You don't want to buy a $10,000 Rolex from a stall in a bazaar or from a man on the street. Check out ZDNet's Web Hosting Resource Center to find e-commerce and related hosting services.
That said, it is not an either-or decision. There are hosting providers all along the spectrum, from those providing just space to those providing everything, including consulting and design services. Decide what level of help you need and leave the rest up to your technology provider. Check out ZDNet's ASP Finder to help you find the provider that's right for you.
 Decide whether you want to do this yourself or leave it up to a hosting partner.
Consider how much of the service you want the hosting provider to handle and how much you want to do yourself.
Do a thorough cost analysis and extend it three to five years in the future (as much as possible). Often, the more expensive option will end up saving you money in the long run.
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ASP Finder
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Instant e-business
Some of today's smartest companies are turning to outsourcers to go from old economy to new economy in as little as two weeks. You can too.
Free market
For more on what you can get by using a hosted storefront, see these comprehensive, comparative reviews of free and hosted storefront providers. Great round-up piece.
12 e-store solutions
See reviews of nine entry-level and three midrange e-business solutions
with the best options for setting up shop online.
Solving the e-business puzzle
PC Magazine Labs tests five complete e-business solutions: PC, server, software, and services.
Still thinking of going it alone?
See ZDNet's collection of hardware and software reviews to help get you started.
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