-It is starting to become clear [Web hosting] is a very different market and one they can't add a great deal of value to," Gauvin told ZDNet Australia.
Marketing director for Dell Australia, Rob Small, explained that Dell conducted a pilot program for a Web hosting business in the US, but it didn't make it to Australia. -We signed up a large number of small businesses, but it didn't grow to the level Dell expected, so it was closed," he told ZDNet Australia. -If it's not profitable, why would you do it?"
-During the dot-com hype we had a large number of Web services that were outside our core business," Small said, adding that a couple of years ago Dell's returns were not looking so hot. Since it concentrated on its core business the returns have improved dramatically, according to Small.
Gauvin claims more companies are realising this. -Prices and profitability have become a focus so people gain the most by staying close to their knitting," he said. This also avoids a conflict of interest where suppliers compete with their customers.
-If hardware manufacturers get into providing services they begin to compete with one of the major markets for their boxes," said Gauvin. -This way there's no conflict. We can talk to server manufacturers we deal with on the basis we are the customer and they are the supplier."
In the release announcing the discontinuation of Intel's Web hosting business, Dalibor Vrsalovic, president of Intel Online Services (IOS) said: -While IOS has been successful in attracting new customers, market trends and financial projections for the hosting services industry lead us to today's decision."
However, Gauvin believes one of the main issues with the IOS operation was the business model. He said Intel spent US$100 million creating a data centre filled with servers before it had signed on a single customer.
-When they got into this market back in 2000, one of the issues with their model was they went in with a very high cost model," Gauvin said. -Since the tech wreck has hit they probably found it much more difficult to achieve profitability without the -spend" mentality."
An Intel spokesperson declined to comment on Gauvin's statement.
