Web Hosting Interview - BlueTie July 2005

DAVID KORETZ: BlueTie was founded in 1999 by myself, and another well-known entrepreneur, Tom Golisano (founder and Chairman of Paychex,inc).  For me, BlueTie is my fourth venture, and the one that gets me the most excited.  The company was founded on the basic tenet that small businesses want and need the same technologies that big businesses use, without the cost. This is the same basic outsourcing model that Paychex was created to focus on).  Understanding that the only way for small businesses to obtain a business-class email solution with collaborative functionality was a really expensive (both money and people) server based solution; we created an option that allows them to have all of the same great email and collaboration functionality without the investment in hardware, software or additional IT staff.  We provide customers with a web-based application enabling anytime, anywhere access, a gigabyte of storage, desktop and mobile support, spam filtering, and virus protection as well as all of the collaborative necessities businesses need, starting at just $2.99 per user, per month.  The real differentiator for us with businesses is that they can select from an a la carte menu of options, which features that they want each end user to have, and only pay for what they use.  A server-based solution doesn't allow them to do that, it's one size fits all -- that's one more reason why businesses are choosing BlueTie.

Today, BlueTie is widely recognized for the strength of our Software as a Service (SaaS) approach, recently winning the Forbes "Best of the Web" award as one of the top four websites for small business for the third year in a row (the other three are Yahoo!, Microsoft, and eBay).  Our vision is to provide small and mid-sized business with incredibly simple collaboration, and we have become one of the world's leading SaaS providers by delivering on this vision.

DAVID KORETZ: That study clearly shows that there is a demand for collaborative services, however, it would be interesting to understand the average size of the business they were surveying. I am guessing if you would ask those same companies if they would rather pay $2.99 for the employees that just need business class email, and $7.99 for those that need full collaboration, you would get close to a 100% positive reaction.

Small businesses are an extremely price-conscious group that are looking for a good value and fast ROI. The BlueTie offering is specifically designed for that target market, and the pricing and delivery reflect that.

In 2003, Service Providers of all kinds (telcos, ISPs, web hosts, domain registrars) began realizing that by offering a premium email product (we also include spam and virus protection) with optional collaboration features to their customers they are no longer just the pipe over which customers access the Internet.  Email is a very sticky product -- especially now that most people use email as a database to store all of their contact information, photos, presentations, and other information due to the huge increase in storage space offered by the free consumer Webmail providers.

Email is still the killer application on the web, and if used effectively, service providers can not only combat attrition, but use it to drive ARPU by offering the collaboration services their customers want. I think this is a tremendous opportunity for website hosting providers.

DAVID KORETZ: We believe that these statistics show that customers prefer choice, and BlueTie exists to provide small businesses with an alternative to the Microsoft platform. BlueTie is built on Linux, Apache, and a variety of other open source tools that run the majority of the Internet. This gives us a huge cost advantage and proven scalability and reliability.

If a hosting provider is trying to decrease their reliance on a specific vendor, or if they are trying to reduce their costs in the incredibly competitive world of website hosting, we believe BlueTie offers a great alternative.

DAVID KORETZ: BlueTie Service Provider Solutions provide a carrier-class messaging and collaboration alternative to service providers of all kinds.  We provide a premium email solution that is web-based, private-labeled and has desktop-like functionality (spell check, drag & drop, etc.) to carriers to help reduce attrition and increase customer satisfaction. We also offer a full collaboration suite that helps carriers to increase data revenue and drive up ARPU.  

DAVID KORETZ: The Private labeling capability of BlueTie's application is another differentiator, and a seamless way for service providers to continue to present their customers with their own brand to solidify that relationship.  We can make BlueTie completely invisible within the application - end users are presented with the familiar brand of their own service provider on the email interface.  The application also masks all references to BlueTie with custom help, support, and login pages.  

DAVID KORETZ: The website hosting business is finally showing signs of maturation. There are many low cost providers out there competing exclusively on a cost basis and increasing the commoditization of the market. Unfortunately, technology architecture is hard for most customers to compare, and customer service is only tested after the deal is signed, so it is challenging for the average customer to differentiate providers. Therefore, their decision gets made on price.

Service providers including web hosting companies need to be able to provide additional services to their customers to increase lock and augment falling ARPU - BlueTie can definitely help.  

As an example, in our retail business selling direct to small businesses, our average revenue per user is more than $5, and our annual attrition rate is 3.4%.

Website hosting companies are going to need to quickly figure out how to differentiate or suffer the consequences.

DAVID KORETZ: Webmail has always been an afterthought for most website hosting companies. By delivering an incredible Web-based email and collaboration solution that feels like a desktop software application without any client-side software, website hosting providers can get customers using and demanding a unique solution.  

DAVID KORETZ: We currently power the email and collaboration solutions for Registerfly.com, PlanetDomain (a division of Primus Telecom), and MaxMD  -- all of these companies were looking for ways to upgrade to a premium email solution without giving up their brand equity.  They came to BlueTie because they understood the business opportunity in providing value-added solutions to their end users.  

They also took a good hard look at BlueTie's application, the intuitive user interface, and the API (application programming interface) that makes it easy for them to deploy - we believe we are the best alternative out there right now and service providers around the globe are increasingly turning to BlueTie.

DAVID KORETZ: We currently operate two Tier 1 datacenters, one of which is housed at our corporate HQ.  Our architecture incorporates a fully redundant N+N architecture, raised floor, wet power with battery back-up and diesel generators, and biometric access. We use multiple firewall clusters, VPN tunnels between datacenters, and intrusion detection systems. Our main datacenter has more than 20 Gigabits/second of bandwidth from more than four distinct points of fiber.

Our software is designed to be Layer 3 load balanced so servers can be instantly imaged and added to the BlueTie architecture as it scales. It is built on a Linux back-end, with support for data load-balancing.

All data is replicated in duplicate or triplicate, and we are currently moving to a real-time geographically load-balanced model across datacenters.

Each datacenter is designed to handle at least 10 million users.

DAVID KORETZ: We have a lot of technology in development right now that we think is really interesting, but here are three of the most revolutionary:  

The first is a system that will combine secure email with the BlueTie hosted application to deliver the first completely integrated solution. Currently, businesses have to buy enterprise servers on top of mail servers to achieve the same result. The goal here is democratizing technology for the small business, and specifically, the small healthcare providers.

The second development is called Blue Mesa, which is the code name for our next generation storage technology. BlueTie now has production support for 10GB email boxes. We believe that we are rapidly approaching a new era where the lines between local storage and Web storage are going to continue to blur. BlueTie is focused on developing a back-end technology to support this that will enable production storage at under $900 per Terabyte.

The third development, and perhaps the most interesting is the concept of completely blurring the lines between desktop software and Web software. When people look at the latest BlueTie app, they often comment that it feels like a desktop application on the web. The next generation of our web client is going to blur the line between the desktop and the web, to provide a seamless online or offline experience. We believe that for the first time in history, the pendulum will shift to enable  web apps to be more powerful than their desktop equivalent. The idea of thousands of businesses working to integrate the same two applications seems woefully outdated. We believe we have the solution for this. Stay tuned!