SCITX To Brave Rough Hosting WatersSCITX To Brave Rough Hosting Waters

Today's Web-hosting market looks pretty anemic to many observers, but that isn't stopping SCITX Inc. from entering the fray. SCITX (pronounced SY-tex), which celebrated the grand opening of its 40,000-square-foot Santa Cruz, Calif., facility last week, is determined not to repeat the mistakes of other hosting firms. To wit: rapid spending that far outpaced revenue.

"The problem with other companies is they grew too quickly," says Benjamin Toker, sales and marketing manager for SCITX, which also provides co-location services. "We want to grow with the customer."

That wasn't the approach taken by companies such as Exodus Communications Inc., which accumulated more than $3 billion in debt and recently reduced this year's sales target by $700 million, to $1.6 billion. Loudcloud Inc., the newcomer headed by Marc Andreessen, also has struggled, with its stock having nose-dived nearly 70% since its March initial public offering, from $6 per share to less than $2.

SCITX, which has experienced leadership in the form of CEO and founder Arlin Bleclic, formerly of Verio Inc. and Digex Inc., intends to differentiate itself with pricing. Toker says the company will be able to deliver faster Internet service at one-third the cost, in part because its new data center is housed in a former Wrigley chewing-gum plant owned by one of SCITX's investors, University Business Park.

Still, the combination of experience, low overhead, and competitive pricing may not be enough, says Chris Foster, an analyst with Technology Business Research. "Unless they have some very specifically defined niche, then there's a problem," Foster says. "On the network side, I've seen prices down 30% and 40% over last year, and co-location is down around 30%." In fact, he's surprised any hosting company would want to offer co-location services given the wafer-thin profit margins. Says Foster, "We're seeing companies like Exodus say, 'We're not a co-location company anymore; that's what we started out as, but now we're a managed services company.'"