The Planet’s Big Bet

(Ping! Zine Issue 29) – Sitting in Doug Erwin’s office at The Planet’s Houston headquarters is an interesting experience. In between anecdotes, metaphors, and technology industry equivalents of war stories, the 55 year old CEO gets up and illustrates corporate strategy on his whiteboard. He divides The Planet’s business into different divisions with the swipe of a dry-erase marker, talks about the people running each of those divisions, and discusses how all of those businesses will fit into the company’s overall strategy of working to become the leading provider of IT infrastructure hosting. It doesn’t take long for it to become apparent that Erwin has big plans and even bigger expectations for the dedicated server company that was nearly in bankruptcy just over two years ago.
 
Despite being dressed casually on the day of our meeting, Erwin is a self-described “suit.” The Pennsylvania-native, Texas-transplant has worked in the technology industry for his entire career, but with a degree in economics from Duke University, Erwin is no engineer. He joined The Planet as CEO shortly after it merged with EV1Servers in May 2006 and despite some initial challenges, has done well in growing the company and restoring its long-term viability. “When I joined, there was a suits versus geeks mentality where everyone thought the suits were coming to take over this business that was once run by geeks,” Erwin told me. “What we have tried to do here is create a world that is a combination of geeks and suits.”
 
One of the earliest and most significant results of geeks and the suits working together to make major changes to The Planet was revealed in early July. With much fanfare, including a complete web site redesign and five press releases, The Planet announced it was dividing its business into two divisions: Alpha and Northstar and that it was entering the managed hosting market.
 
The Planet’s bold move and new offerings represent an interesting addition to the company’s traditional, commodity-based business model and has the dual effect of bringing another major player into the already crowded managed hosting business. Every person I spoke to at The Planet was careful to emphasize that the company still wanted to be in the unmanaged market, but also wanted to expand beyond it. Erwin put it most clearly when he said, “I want it all. I want the commodity business and I want the service business.”
 
In the web hosting industry, it takes more than just a desire and a strong drive to become a market leader. The Planet has been preparing for these changes on at least some level since the merger. The company recruited executives from Earthlink, Rackspace, NTT Communications, and other technology leaders to run everything from customer care to network operations. Erwin and his new management team worked together and used their respective backgrounds as “suits” and “geeks” to implement and refine business processes, talk to customers about their needs and desires, and explore the industry. The company was divided into different businesses, each with its own general manager. Erwin worked to give managers a “piece of the rock” to ensure that they were committed to The Planet and to their work at the growing company. “When you do that, you end up with risk takers who are committed like the pig is to bacon and not like the chicken is to the egg,” said Erwin.
 
With their newfound dedication and commitment, The Planet’s managers wasted no time in getting to work. They refined processes and built up their divisions. Piece by piece and person by person, The Planet got ready to change the way it operated and more importantly, the way it served its customers. “I come from a world where if you break things down into baby steps, you can manage it far better,” Erwin told me. Everyone in the company, from engineering to public relations, got ready for July 8, 2008. The company’s official blog touted that “the galaxy is [was] waiting” and that big changes were coming to The Planet.
 
Come July 8, the short-term result was the announcement of the Northstar and Alpha brands. The long-term result was a paradigm shift in The Planet’s way of doing business.
The Planet’s Alpha brand and offering is essentially the company’s traditional dedicated hosting business with some changes and additional services. After the company acquired outsourced support company Touch Support in May 2008, The Planet felt that it had the manpower and expertise to begin offering a wider variety of a la carte management services. The result was The Planet’s Alpha Advanced series, which offers services such as server monitoring, security, and administration to The Planet’s traditionally unmanaged hosting customers on an à la carte basis.
 
The completely new Northstar offering is what The Planet believes will “galvanize the hosting marketing.” The most significant aspect of Norhstar is what the company has called “The Anticipation Advantage,” which is essentially a set of processes and procedures designed to provide customers with the best solutions for their needs and in turn, ensure that those solutions run as well as they can.
 
The Anticipation Advantage is divided into four self-explanatory steps: assess, design, maintain, and measure. The initial step of assessing consists of the account managers meeting with customers to understand where the particular customer wants to go and what they require from their infrastructure. Designing consists of working with engineers and other members of the customer’s team to create a series of plans to address and implement those needs. Maintaining is the actual management step that most customers are used to – support, maintenance, monitoring, etc. and finally, assessing is the process of going back and regularly reviewing how the different plans and implementations are working for the customer. The process is obviously hands on and is managed by a Rackspace-like dedicated team made up of account managers and engineers who are responsible for working with the customer from day one onwards. The goal is to deliver a more personalized service experience and let customers build a rapport with the people
 
Northstar also offers the SLAs that any discerning customer would expect to see from a managed hosting company. Like many other managed hosting companies, The Planet offers a 100% SLA on network and power, a one-hour hardware replacement guarantee, and 15 minute response times to support inquiries. A “standard” configuration with one or two servers, a database, firewall, and other basics costs between $1200 and $1500 a month. More complex configurations obviously have larger price tags.
 
The Planet is hoping that customers see the $1200 to $1500 a month price tag as inexpensive when they start comparing it to the cost of hiring a similarly talented in-house IT team. Urvish Vashi, The Planet’s Director of Product Management told me that Northstar customers are essentially hiring an “outsourced IT team” and that given the cost of hiring an in-house IT team with similar skills and talents, The Planet’s Norhstar and other managed hosting offerings make financial sense.
 
As a result, it isn’t surprising to hear that managed hosting is a growing sector of the web hosting industry. According to a study done by Tier 1 Research, the self-managed dedicated hosting market is growing at “just” over 10% per year. The managed hosting market, on the other hand, is growing at more than 30% per year. Managed hosting is a hot sector and with the exception of Rackspace, is relatively free of large players. Instead, the industry is dominated by smaller, regional providers that started in the co-location business and later moved into managed hosting. These providers pose a threat to The Planet and Rackspace, but they also tend to serve different customers and offer different services.
 
Of course, the elephant in the room of The Planet’s new strategy and Northstar offering is the lack of a comparable Linux option. “We built a business plan and hired 38 people to do one of them and that one was Windows,” said Erwin. “Linux will be coming out before the end of this year.” Justifying The Planet’s decision to start with Windows, Steve Kahan, the company’s vice president of marketing and product management, told me that, “A lot of the applications that small and medium businesses are most familiar with are in and around Microsoft. With that said, we realize we’ve got to support Linux and fully intend on coming out with a beta of our Linux managed hosting offering later on this quarter.”
 
With Linux coming soon, The Planet will begin to compete more directly with its southwestern neighbor, Rackspace. As an undisputed market leader in web hosting industry, friends and foe alike carefully keep an eye on the 2,000 plus employee, now-public Rackspace. Erwin says he isn’t concerned about Rackspace. “They are in the application business. We aren’t going into the application business because you have to hire a lot of people. We’re all about automation and we are going after a market that is a little different.”
 
In his office overlooking the Houston Aquarium and its picturesque Ferris wheel, Erwin tells me that, “The guy who will win at this game is the guy who owns his own datacenter.” If that is what it takes, The Planet, with its high quality datacenters and network, is in a position to do well in at least one aspect of its new business. Yet, managed hosting takes more than datacenters and more than technology – it takes people and a commitment to service and support. The Planet seems to be understand that managed hosting is as much high-touch as it is high-tech and they’ve invested heavily in improving upon what they already do and then taking it a step further by branching out. It’s too early to tell if The Planet’s big bet will pay off, but we can all be rest assured that the web hosting industry will be watching and that The Planet won’t be stopping until it is the undisputed leader of that very industry.

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