Web Hosting Interview - Hosted Solutions December 2005

December 2005
Web Hosting Interview - Hosted Solutions December 2005

Rich Lee, CEO of Hosted Solutions

Rich Lee bought in during the 'dotbomb' and turned his investment into a multi-million dollar industry. When others were deserting the sinking ship, why did he get on board? How did he establish the potential of the business so successfully?

  • HOSTSEARCH: Mr. Lee - thanks for taking time out for this interview. Perhaps you could introduce yourself and your company to our visitors.
    RICH LEE: My partner, Chris Hanks, and I founded Hosted Solutions in June 2001. We provide complete and customized managed and dedicated web hosting solutions to more than 300 clients throughout our three Data Centers in Cary, Charlotte, and Raleigh, NC.  
  • HOSTSEARCH: I understand that Hosted Solutions was founded through the purchase of a bankrupted managed hosting company right in the middle of the 'dotbomb'. What inspired you to delve into this area at a time when the industry was ailing so dramatically? Just how did you establish the potential of the business so successfully?
    RICH LEE: I had previously built and operated an ISP called MPInet that was acquired in 1999   I continued to do merger and acquisition work for them over the next couple of years and we came to acquire over 40 properties in about 18 months.  I gained a lot of experience in evaluating good Internet companies, and some not so good. After leaving in early 2001, some of my M&A contacts put me in touch with a company called Utenzi, which had fallen on hard times due to the overall environment in 2001. Obviously, there was risk and a lot of sleepless nights those first few months, as we were burning some money and had a lot of work to do to establish a new identity and show clients that we were here to stay and had a well thought out plan to turn profitable. We had done a lot of budget work and due diligence early on, and long story short, with our low cost of capital to acquire the bankrupt company and with a great facility and some good people, we quickly turned the company into a profitable provider within 12 months. We continued to acquire select assets at attractive entry prices and continue to fill our sites and leverage the cash flow our facilities provide.
  • HOSTSEARCH: Hosted Solutions ranks among the fastest growing businesses in the Carolina's. More and more often hosting companies are amongst the fastest growing companies, especially in the United States. Despite this, there are no hosting equivalents to Microsoft or Google. Is it just a matter of time before they emerge?
    RICH LEE: I think in the low end shared hosting space, you already have Yahoo and others attacking that space. That is not a space I want to be in as price erosion and churn to the Yahoos and Googles of the world I predict will be high. We play in the enterprise hosting space, and what I have come to learn is that it really is not an easy place for the volume guys to play. It requires feet on the street and a very local/regional approach that we feel has high barriers to entry for the national volume guys to compete.
  • HOSTSEARCH: You have turned a $325K investment into a $25 million business. If there are people new to the hosting industry who want to emulate you, what should they do? What advice can you give them?
    RICH LEE: I spent over 2 months doing diligence and putting a model together that I felt could be very successful. I think too many people do not build realistic projections and worst case scenarios into their models, and have to execute perfectly to make the business work. I've always taken an approach that let's me hit singles and doubles to be successful, and too many people try to swing for the fences right out of the gate. You've got to walk before you run.
  • HOSTSEARCH: How is catering for a company like Pepsi Bottling Ventures different from catering for a smaller company?
    RICH LEE: There really very little difference in how we handle a large marquee client versus a small business we host. Every client is valuable, and if you have the proper process and procedures in place, I feel you can provide superior service to all customers. As I said earlier, we are not after quantity, but quality accounts that typically have sophisticated IT personnel in place, and that certainly helps when our technical people can effectively communicate with our customers' techs. It is much harder to support ISP or low end shared hosting customers who don't quite have the staff or education in technology that our clients typically have.
  • HOSTSEARCH: Here is the question we ask everyone: What's the next big thing to hit the Internet and how will it impact people's lives?
    RICH LEE: Wow, tough question. If I had to guess, I would think voice and video applications such as Vonage and Skype as well as Tivo now coming to an IPOD will surely be compelling technology.
  • HOSTSEARCH: You are currently based in North Carolina. Do you plan any expansion? If so, will expansion be in emerging markets like Asia / Southeast Asia?
    RICH LEE: Yes, we do have expansion plans in our future, and are actively identifying new facilities as we speak. Most likely we will stay in the Southeast though.
  • HOSTSEARCH: A lot is being said on various forums that 100% uptime is impossible. Your website guarantees this. How can you ensure 100% uptime?
    RICH LEE: Actually, quite a few people offer 100% uptime (we offer it on network, power, and cooling), through redundancy at the network and facility layer. We can offer it also on clustered environments and redundant, fully distributed architectures. Naturally it is impossible to guarantee 100% availability on single server deployments, as we all know servers can have motherboard or other component failures.
  • HOSTSEARCH: For you, what are the best and worst things about the hosting industry?
    RICH LEE: The best thing I would say is that we are the market share leader in the Carolinas after four years, and with that brings a lot of referral business and upgrades from existing accounts.  This certainly makes growing the business a lot easier.

    Probably the worst thing is that we are still trying to educate people on what managed hosting and true uptime really are. Clients are starting to expect 100% uptime, and educating them on how to get there sometimes can be an uphill battle.
  • HOSTSEARCH: When the day is done or the week over, what do you do to relax and enjoy yourself?
    RICH LEE: I spend time with friends and family, and you may occasionally find me on the links.

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