When renting server space from a host, you basically have two options - to rent shared server space or to rent a dedicated server. With a shared hosting arrangement (often referred to as 'virtual hosting') your web-site shares server space with other web-sites. If you rent a dedicated server, on the other hand, you get an entire server and network connection to yourself.

Shared servers are less costly to rent than dedicated servers. They usually require a lower level of technical skills too, because the host does most of the server administration. This is why shared servers are usually the best choice for entry-level web-sites or for small businesses whose web-sites do not have high traffic levels.

While shared servers are the most cost-effective option for small web-sites, they are not necessarily a good option for large, "mission-critical" or high-traffic web-sites. For these a dedicated server may well be necessary.

Dedicated servers are more expensive to rent than shared servers, and they also require a higher level of technical skill to operate. However, if you are making thousands of $$ a day from e-commerce and your business would fail if the server went down for a day or more, then you should seriously consider renting a dedicated server. Here's why:

Server Response Times and Site Traffic Management - The server response times on a shared hosting arrangement depend on what is happening with the other sites hosted on the server. Your own server response time will be affected by service interruptions on another site - for instance, if another site suddenly receives an unexpectedly high level of traffic. These interruptions will be outside your control on a shared server. With a dedicated server, on the other hand, you alone are responsible for managing, and planning for, traffic levels and other events that may affect server response times.

Flexibility and Software - With shared servers, you will have limited access to the operating system, and software applications will be limited to those, which are provided by the host. If you want to be able to install run your own advanced, customized ecommerce or database applications you will probably need a dedicated server.

Scalability - As your site grows, your traffic grows and your applications become more demanding, you will need to upgrade your server. If you are using a shared server, your upgrade options will be limited. Your host will usually allow you to increase the amount of disk space available to your site -- but that is all. You will not be able to upgrade the hard drive, Ram processors, and platform or software applications yourself. When you are using a dedicated server, you can do all of these things.

Security - Information on a shared server is likely to be less secure than information on a dedicated server. A dedicated server can also be provided with its own firewall. If you are storing highly sensitive information on your server, this increased security will obviously be a high priority.