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Fast-growing Internet companies have to frequently upgrade and expand computer servers and related facilities to remain competitive.

Christopher Phelan

But should they be doing all this costly investment on their own?

Not necessarily, according to Christopher J. Phelan, manager of the Japanese subsidiary of Exodus Communications Inc. of the United States, a pioneer operator of Internet data centers.

An Internet data center provides space for its clients to operate servers with proper security and a broadband network.

“If companies are experiencing very rapid growth in the Internet industry . . . either they keep moving offices constantly and expanding their buildings, or they can host with us,” said the 35-year-old Phelan. “That is a big issue . . . the ability to grow quickly.”

The Japanese subsidiary was set up last December when the U.S. firm acquired a Tokyo-based Internet service provider. The parent company, which initially started as an Internet provider, became the world’s first Internet data center operator in 1996, Phelan said.

Today, the trend of outsourcing to data centers is quickly gaining a foothold among Japanese Internet firms, freeing them from the burden of arming themselves with heavy computer hardware and up-to-date skills to operate their Web sites, he said.

On top of the server hosting service, Exodus Communications also offers technical assistance such as setting up servers and upgrading software and hardware, saving costs for their customers.

Exodus Communications targets Internet companies that need to operate large-scale Web sites for their business, such as those offering search engines and electronic commerce.

“We provide higher quality than they can provide themselves. . . . We can provide all those things cheaper than companies can provide by themselves because we are doing it for many customers at the same time, which means we can do it for a cheaper price per customer,” Phelan said.

One of the critical tasks in the Internet outsourcing business is protecting data from hackers and intruders to computer networks and facilities, he said.

To that end, Exodus Communications employs data security programs, firewalls and intrusion detection services for computer systems, while taking security measures ranging from swipe key cards to palm prints and biometrics for those who enter and leave the data center, Phelan said.

At the same time, the company is equipped with a backup power system of batteries and diesel engine generators, which allows the computer system to operate for up to a week during power outages.

“We have enough backup power with batteries and generation for a week with no electricity from a power company,” Phelan said. “I don’t know who is going to be looking at the Internet if all the power in Tokyo is down, but we can do that in an emergency.”

Phelan said he believes the Japanese Internet outsourcing business will eventually grow into a multibillion dollar industry.

Driven by such a bright expectation, some 30 companies — including major telecom carriers and general trading houses — have launched or announced plans to launch Internet data centers in Japan, he said.

Exodus Communications, for its part, opened its first Japanese Internet data center in Tokyo in March, increasing the number of employees here from an initial 70 to some 130.

It plans to add at least one more Japanese data center in 2001, he said.

“Our target is to keep up with growth in a lot of ways . . . to grow as fast we can,” Phelan said.

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