May 3, 2002 -- For web hosting companies, automating data center processes can be a powerful cost-reduction tool. Customers, on the other hand, like to have a trained human being standing ready in case their web server dies.
Balancing the dual demands of financial viability and customer satisfaction can be tricky. This week managed hosting provider Inflow Inc. announced it will lay off 60 percent of its staff and use remote monitoring software to centralize off-hours support functions.
Inflow chief executive officer Art Zeile acknowledged that the restructuring was designed to achieve financial goals. But the cost savings wouldn't be possible without the capabilities of FlowTrack, the company's operational support software.
"We had always proven our technical abilities," said Zeile. "But there was a cloud over our head concerning financial viability. That was one of the big questions we've had to answer. The big plus is that we are now EBITDA positive."
Getting to that point meant the closure or sale of four of the company's data centers, and letting go 230 of Inflow's 380 employees. That number includes many sales employees and headquarters staff, but also support technicians who staffed data centers on late nights and weekends.
Inflow has set up two national network operations centers in Denver and Austin that will use FlowTrack to monitor off-hours operations across the company's network. The two NOCs will be able to mobilize local staff for any support issues that can't be addressed remotely.
"We came up with an operations model for running the data center between 7 am and 11 at night that will use 5 people," said Zeile. "We're convinced that's the right number. Our data shows that less than 3 percent of our trouble tickets that require physical intervention occur during these off hours."
In recent months Inflow began providing facility management for corporate data centers, including remote off-hours monitoring.
"We now manage data centers in Calgary, Portland and Houston outside of our network," said Zeile. "Now we'll manage our own graveyard shift and weekend shifts using the same toolset from our enterprise program. The bottom line is that we had to gain a comfort level with this approach."
But do the customers have a comfort level? Inflow managers contacted every one of the company's 775 customers to discuss the planned changes.
"More than 90 percent have been extremely supportive," said Zeile. "There has been about 10 percent that have shown some hesitation. For those customers, it comes down to proving that it will work."
About 40 customers are currently housed in data centers in Sacramento and Irvine, Calif. that will be closed as part of Inflow's restructuring. Zeile said "a good percentage" of those customers will accept transition packages to other Inflow facilities, primarily San Diego.
"We just did not get good traction in those two markets," said Zeile. Inflow will also sell majority stakes in its facilities in Dallas and in Dublin, Ireland. Zeile said the company is not considering closing any additional sites.
"All of these data centers become EBITDA positive through these moves," he said. "These data centers are definitely keepers."