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23
Nov
2010

Offshore Hosting vs. US Based Hosting, A Legal Analysis

by Administrator

by Matthew P. Collins

Which should you choose? Everybody in the hosting business has been asked this question many times and alas, the answer is not an easy one to give. NationalNet is proud to offer both US based hosting and, through its affiliated companies, off shore hosting. This flexibility is ideal as your needs may shift over time. I’m going to take you through the steps in evaluating your offshore or US based hosting needs with some legal considerations for you to keep in mind as you think about these options.

How do you choose whether to use US based or offshore hosting? What do you truly need for your business? Start with this question: what are your main concerns and priorities in looking at a hosting location? Think of your top three priorities for your hosting needs. Let’s look at your results…

US Based Hosting

If you said your top priorities are:

  • Price
  • Speed
  • Ease of Access

This is the normal ranking of priorities, however you shouldn’t stop reading now as there may be other considerations for your review.

The US hosting market is very competitive and has the best bandwidth, colocation and server deals. Furthermore, the diversity of connectivity options is unparalleled. For this reason, the best price is almost always going to be found in US based hosting.

Many customers are looking for the fastest solution to get content into the hands of the surfer. No doubt exists that the closer you are to the customer, the faster the content will be delivered and this explains the popularity of content delivery networks and mirror hosting as options to get the content closer to the surfers. Ask yourself this: where are your customers? Then you can better discuss where you should locate your hosting.

Some customers need access to their equipment on a regular basis, and this is only possible if the equipment is based near your office. You should review your visits to your colocation cage and determine how often these visits occur and how necessary they are in order to evaluate this need.

Offshore Hosting

If you said your top priorities are:

  • Targeting your international visitors
  • Avoiding US Tax authorities
  • Avoiding any interaction with the US government

Then you should look at offshore hosting. Even if you didn’t think of these issues as first priorities, you should certainly consider them in your decision to choose a hosting location. These are important legal considerations for any company to consider.

Targeting your customers is another good reason to choose offshore hosting. Before making any hosting decision, you should spend some time to learn the answer to this important question: where are your customers located? You may find that a surprising number are located in Europe or other important regions of the world. Just as I mentioned above, the closer you are to your customers the faster your content will reach them, so having an offshore solution often makes sense to deliver a superior customer experience to your international visitors.

There are many terrific solutions to help you get closer to your international customer. Just to name a few that you can consider:

  • Mirror your sites offshore;
  • Set up a content delivery system with a specific target of certain international locations;
  • Set up offshore content and sites specifically targeted to local countries and languages.

As you can see, there are a wide variety of good business and customer support reasons to set up offshore hosting.

Some companies want to have their content offshore to avoid US taxes. Beware, just because you are hosting your content offshore, does not mean you don’t have to pay US taxes. Many times a client seeks offshore hosting to avoid US taxes only to be told that going offshore does not eliminate US tax liability. Moreover, if you want to avoid US taxes, you should talk to your tax professional to find out if offshore hosting will accomplish this goal. Don’t assume that just because your server is offshore that you are exempt from US taxes.

Another common misconception is that having the servers offshore means that you can successfully avoid interaction with the US Government. Rest assured that the reach of the US government is long and strong and this assumption is dangerous to make. Talk to your lawyer about the best strategy for you to utilize if you want to avoid US government interactions and make sure to discuss the option of offshore hosting.

In life there are tradeoffs and in the choice of whether to choose US based or offshore hosting, you have to decide which priorities you want to emphasize and then you can better evaluate your hosting needs.

Matthew P. Collins is General Counsel for NationalNet and has practiced law since 1993 with a focus on Internet and hosting business law from the Internet’s inception.

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