Aug. 25, 2002 -- Back in June, when Cable & Wireless and Sprint announced their exit from the US hosting market, analysts and reporters wondered aloud whether the web hosting business model worked.
Not for everyone, maybe. But there are no shortage of success stories among the regional colocation and hosting companies, who have proven the business model in market after market across the country.
"What you see in the hosting industry is the telcos stepping out and a lot of the regional players starting to step up," said Lance Crosby, chief operating officer of The Planet, a Dallas-based regional provider that is among the many fast-growing regional players.
"We've doubled in revenues every year, and we've just had our largest sales month ever in July," said Crosby. "I think it's going to be a great year."
The Planet, which became profitable last year, is a privately-held firm founded by company president Peter Pathos, who started out in the telecom business in 1994 by founding National Knowledge Networks, Inc. (NKN) to sell high-speed access lines to school districts. When Verio bought the company's Internet access business in 1998, the web hosting operation was spun off into The Planet.
The company started small, taking 1,000 square feet in The Infomart carrier hotel in Dallas. They gradually grew into 25,000 square feet in the building, and expanded last year with the acquisition of Inflow's former Dallas data center.
The new, 60,000 square foot facility is already 40 percent full, and Crosby expects to fill the data floor by the end of next year. With 2,500 customers and growing fast - with an estimated gain of 385 customers in the past 30 days - The Planet is looking for opportunities to expand its data center network.
"We are looking at other data enter acquisitions or hosting businesses that might be for sale," said Crosby. "We're looking to be geographically diverse. Our only weakness is the impression that we're only a regional player. There's a lot of opportunities out there, and we're looking for a national footprint."
The key to The Planet's success, according to Crosby, is its focus on customizing solutions for its clients, who are primarily small-to-medium enterprise companies.
"Flexibility has been our strength, especially in managed hosting," he said. "What customers want is something that suits their needs, not some cookie-cutter, 'take it or leave it' approach. What we keep hearing is that this model doesn't scale. We've shown that it does."
The Planet has also broadened its offerings, having added larger enterprise customers and recently entering the discount dedicated server market with its ServerMatrix unit. It's investing in managed security services as a growth driver in the business market.
"What we're really focused on now is the managed hosting business," said crosby. "In the past 12 months we've really started focusing on managed security in particular. Security has been the hot button issue for the past 12 or 18 months. That's one of the main concerns for many of our customers."
While many data center executives are concerned about pricing pressures, Crosby believes the worst of the pricing wars may be behind us.
"Pricing got a little crazy towards the end of the bubble," he said. "Some (providers) just wanted to keep money coming in the door. We've actually increased prices in the past year.
"People are looking at the business on a long-term forecast, not just making it through the next few months," Crosby added. "There's still some smaller shops doing that cut-rate pricing, but it's not a strategy for the long haul."