Web Hosting Interview - Rackspace October 2004

PATRICK: My name is Patrick Condon and I'm one of the founders of Rackspace Managed Hosting. My two partners and I started Rackspace back in 1998 and today we're a $100M a year company growing at about 50 percent per year. My role today at Rackspace focuses around strategy, marketing, and product development.

PATRICK: We started the business in 1998. At the time, we were developing web applications for customers that needed advanced transactional capabilities on their Web sites. After we built these applications for clients, we generally ended up hosting them for them as well. We did this not necessarily because we wanted to, but because most of our customers looked to us for an end-to-end solution. As a result, we developed a pretty acute competency in hosting large Web applications. As developers at the time, we really wanted to only focus on the development of applications and not the hosting. We wished we could outsource the hosting aspect to a partner so we could spend 100 percent of our time on development. We looked for a managed hosting company to partner with, but couldn't find one that suited our needs. We realized that there were probably many other developers out there just like us that would like to outsource the hosting piece of the business to a true hosting specialist. We spent about a month productizing our hosting offering and launched it on a Web site at Rackspace in 1998. Within a month we had 50 customers!! It turns out that there were thousands of other developers out there just like us that needed to partner with a managed hosting company.

PATRICK: We saw a big need for a service oriented managed hosting service back in 1998 (and still today for that matter). We were looking for a vendor that fulfilled our unique requirements back then and since we couldn't find one, we decided to start one ourselves. We have always believed that managed hosting is a service business and not strictly a technology business. This was one our founding principles and today it's what we call our Fanatical Support™ philosophy. It's part of our culture and it what we focus our time and attention on as we grow the Rackspace business.

PATRICK: We have a lot of demand generation activities to promote the Rackspace business and the Rackspace brand. Our Web site has always been a critical piece of our business and continues to be today. We do a lot of online advertising to drive traffic and prospects to our Web site. We also run print campaigns in trade and business publications. Recently we've spent a lot of time developing lead-sharing relationship with some of our strategic partners such as Dell and Microsoft.

PATRICK: Right now the product that is getting the most traction for us is our Intensive Hosting offering. Intensive is focused on complex Web hosting on the Microsoft platform. It is really designed for companies running complex Microsoft-based Web applications that need an SLA around not just the hosting infrastructure but around their application as well. Intensive tailors the SLA for each customer's application so that we can provide a guaranteed quality of service all the way through the customer's application layer. Intensive is our highest level of service that is build upon our Fanatical Support philosophy as well as our 100 percent uptime infrastructure.

PATRICK: I think the Rackspace brand has tremendous equity with our target customers. What I mean by this is that companies have heard of Rackspace and have a positive impression of us because our reputation for Fanatical Support. In fact, 60 percent of our new business comes from referral which is an awesome testament to how happy our customers are with our service. In addition, our existing customers stay longer and buy more from us than anyone else in our industry. Our customer base grows organically every month, month-over-month. What this means is that even if we didn't sell anything to new customers, our existing customer base would keep purchasing additional servers from us. This has caused the Rackspace business to grow at a fairly rapid pace and it is something of which we're extremely proud. It means we are keeping our customers happy and providing them the services that they want so that they stay with Rackspace and purchase more from us. They also tell their colleagues about us which accounts for our 60% referral rate for new customers. So, in a nutshell, some our most effective marketing comes from serving our customers fanatically every day. When they're satisfied, they buy more from us and tell their colleagues to consider Rackspace as well.

PATRICK: I think my answer above somewhat addresses this point. In addition, I think our position as a focused managed hosting provider has been a real key to our success. When you look at the companies that we're in competitive situations with every day (IBM, AT&T, Savvis, EDS), they're all what I would consider to be generalists. They do everything from IT outsourcing, point-to-point connections, consulting, etc. We're just the opposite. We specialize in just one thing - managed hosting. We're focused exclusively on managed hosting with Fanatical Support, and as a result we're very good at it. Think about it this way: If you needed to have brain surgery, what kind of doctor would you choose? A general practitioner or a brain surgeon? I'd know I'd choose a brain surgeon - a brain specialist. The reason is really pretty intuitive. I think the same is true for Rackspace in the managed hosting business. We've done it before for thousands of customers. We've encountered all the complications that can occur when deploying complex hosting infrastructure and we have a plan to deal with those complications when they come up. We're focused and we're specialized. Most of our customers tell us that they've chosen Rackspace because of our focus. They've told us that their Web infrastructure is simply too important to entrust to anyone but a specialist

PATRICK: We're received numerous awards over the years both for our superior customer service ability and also for our company growth. Rackspace is Microsoft Gold certified Partner and the Microsoft Hoster of the Year. We've also been named at the best hosting provider by Linux Journal Magazine and honored for customer service excellence by Frost & Sullivan.. In addition, we were named one of the 100 Top Innovators by Always On Magazine and in the InfoWorld 100 for Technology Innovation.  

PATRICK: Rackspace has emerged a winner in an industry that has faced a very tough time. Despite all of the consolidations, bankruptcies and failures, Rackspace has seen rapid growth and is continuing to grab market share. The hosting landscape has changed so dramatically, yet Rackspace has remained focused on serving customers with Fanatical Support. I think a lot of other hosters have not been so focused and as a result aren't around today. It's been very rewarding to have continued to grow despite the burst of the "Internet bubble" and the instability of the hosting industry.

PATRICK: Although many see hosting as a commodity, nothing could be farther from the truth. Customers need customized solutions developed specifically for their businesses. I think they way the industry is moving is more towards a service based model where the technology and specific hardware components become less relevant. We're already writing custom Service Level Agreements (SLAs) for our customers and I think we'll continue to do this. Each customer is unique and has a specific business objective on the Internet. We're beginning to work with customers to identify the specific business outcome or business process a customer is trying to fulfill with their Web infrastructure. We then work with them to write an SLA around this business process versus just the infrastructure portion of hosting. I think this is a dramatic shift from how hosting companies have guaranteed quality of service in the past.

PATRICK: Rackspace is more than a hosting company. Our vision is to build Rackspace into one of the world's greatest service companies striving to offer world-class service alongside organizations like Nordstrom, the Ritz Carlton and Federal Express. These companies are known for their unique customer service experience and we want Rackspace's Fanatical Support to be similarly recognized. While we think we're the industry leader in service, we are constantly striving to be better. I think this is one of the defining characteristics of a truly world-class service organization.