Dell Expands E-Commerce with Web Hosting Service

Online computer giant Dell Computer Corp. announced today that it is expanding its e-commerce offerings by launching a Web site hosting service for small to medium-sized businesses.

Dell’s new hosting service is available on Dellhost.com, which appeared on the company’s Web site late Friday.

By contrast, Dell’s major competitor, Compaq Computer Corp., began a nationwide advertising campaign this past weekend for an Internet-ready server. The product offering is designed to make it easier for small and medium-sized businesses to set up their own Internet presence without a hosting service.

Competing Against Customers?

Dell’s foray into this highly-competitive business comes at a time when many small businesses are outsourcing their Web-hosting and e-commerce services. With prices in the $20 to $50 (US$) per month range to operate a Web site, even companies that have added DSL service for dedicated access to the Internet are often outsourcing their Web sites.

However, some industry analysts point out that by offering the new service, the Round Rock, Texas-based online computer seller could find itself competing against customers it currently supplies with servers and disk-storage equipment for their Web hosing businesses.

However, even if Dell should lose some business as a result of its new Web hosting services, it would be a small price to pay in order to compete with its rivals. Such companies as IBM Corp., Hewlett-Packard Co. and Gateway, Inc. already offer or are making plans to offer similar Web hosting services.

The market, however, is extremely competitive. Virtually every Internet service provider (ISP) offers Web site hosting. In addition, there are several national firms, such as Verio, Inc. and IMCOnline, Inc., that have built substantial hosting businesses nationwide to service small and medium-sized businesses.

Natural Extension to Dell

In published reports, Dell CEO Michael S. Dell said that Web hosting is “a natural extension” of its PC market to small and medium-sized businesses. He also acknowledged that customers who once would have purchased equipment from Dell to set up their own Web hosting are now embracing outside services.

He added that the overall Web-hosting market is estimated to grow to $17 billion revenue by 2003, from $2 billion last year. In addition, he estimated that only 26 percent of small and medium-sized businesses now have a Web site, and only 15 percent have an online store.

Dell’s hosting service is being provided through Purchase, New York-based Interliant, in which Dell holds a minority stake. Its average customer pays $22 a month for its Web-hosting services.

Dellhost.com will offer Web site hosting for $18 to $300 a month, based on the equipment and usage. Dell will also charge companies a one time setup fee, starting at $50.

Battle With Compaq

This latest move by Dell comes only one month after topping Compaq in U.S. PC sales for the first time ever, according to data from Dataquest and International Data Corp (IDC).

Both analysts attribute Dell’s surge to PC sales over the Internet. IDC added that selling PCs to consumers via the Internet has become a more effective method than selling via traditional brick-and-mortar stores.

While Dell now leads in U.S. sales, Compaq continues to hold a commanding lead in global sales, with a 13 percent share of the international market compared with Dell’s 10 percent.