

Ask HN: Starting my own hosting company, any advice? - foxtrot

I have been in the hosting industry for about 7 years now, working in lots of different positions: Telephone Support, Technical Supervisor, Team Manager, Product Executive for one company then Technical Support for another (Systems Admin would be a better description)<p>I've been wanting to start out on my own for a while, just to generate a little extra money and my ethos is:<p>Transparency is the best policy<p>I've built my website, created my products (aimed at the beginner) and now I'm stuck. I'm worried about the failing my customers. Any advice on what to avoid or do to stay motivated and on my goals?
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patio11
Do you have any experience in the marketing end of the business? I might
suggest signing up as an affiliate of one of the big ones, or whitelabeling,
and then trying your hand at that prior to sinking hip-deep into a capital
intensive industry.

The reason: hosting is saturated and the marketing is cut-throat. Most of the
companies are highly dependent on affiliates, and the type of affiliates who
operate in hosting are often about one level more scrupulous individuals than
the ones in PPC. (It means Porn, Pills, Casino in this context.)

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zalew
Don't know what is your planned offer, but:

1) Focus on a niche. There are thousands of similar php standard setups and it
will be hard for you to get out with yours, while there are far less reliable
python/django/pylons, ruby/rails shared hosting platforms. If you know (or
have someone who knows and will work for you) how to set up for this
technologies, you can rock in this market.

2) Hire an uber-geek who can give instant support, fix stuff, install and
configure needed frameworks, dbs, libraries, deal with problems, etc. If you
are small, don't act big - be accessible, respond to every email, have an
emergency-only phone number, give support, engage with your clients. If you
have lots of devs as clients they'll probably help you (willingly or by
accident) tune up your setup, you'll know the common needs, and so on.

I'm on a local shared hosting who meets both of the points above and I bring
all my clients to them when it's possible.

An affiliate program would be nice, it can be simple - give discount points to
devs that bring new customers. I don't even pay a dime for my shared thanks to
the clients I've brought.

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sushi
I'd also suggest to focus on niche. One particular niche that I can probably
think of right now is "pay as you go" or "prepaid" hosting which is only
provided by nearlyfreespeech.net as of yet.

I think you can experiment with billing and can come up with an innovative
sales pitch. Also honesty matters a lot in this industry. It's the reason why
people who host on nearlyfreespeech.net, prgmr.com and linode.com swear by
their service.

~~~
foxtrot
Couldnt agree with you more here, I have been around the industry for a while
now I have seen all the crap that goes on. The constant lies and deceptions,
which is why I am making the effort off the bat to be honest. I have a section
on my website which clearly says "What is not supported" this gives them
information straight away with them assuming it has it and ordering the wrong
package.

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mseebach
What is your value proposition? Why should anyone give their money to you
rather than say Dreamhost? Transparency? What would a beginner do with that?
You'll write on your blog that their site was down for three days because a
hard drive failed while you were on a beach somewhere, and, no, you can't
afford automatic fail-over at $9/year, what did you expect? (devils advocate,
of course -- but hosting is _extremely_ competitive)

Anyway: what's your differentiator? Once that's clear, identifying clients and
delivering that value to them is much easier.

~~~
foxtrot
Thanks for the reply.

My target is to not oversell my systems, what most people fail to do most of
the time. Offer spam protection at no extra cost, means less server
administration for me and happier customers overall.

My differentiator is that whilst I offer very small hosting packages, aimed at
the small business website I offer a package addon which means they can pickup
their phone and just ask for something to be done, a page updated, email
address created, sent a backup of their site etc etc (this is within reason).
My aim is to take out the worry of maintaining a website for the new user, and
allow them to focus on running their own business instead of fiddling around
with a hosting control panel.

~~~
mseebach
If you want to make your clients not worry, take over the entire process of
being on the internet, not just hosting (there's a lot of worry in getting a
website made). Get a network of freelancers and farm out the actual work, but
you're the face of the work that the clients always talk to.

But there's a pitfall here: While you can make money on developing website,
it's very hard to make money from value-added hosting. If you charge maybe
$25/month, you can afford maybe 15 minutes of support a month, and you still
face the risk of the client moving to some crappy host that only charges
$5/month (80% savings!!) and they won't know what they're missing (you) until
it's too late.

Either way, you're going to end up in the people business, not the hosting
business -- and is that what you want?

~~~
ahemphill
It is, indeed, very difficult. I co-founded a niche service that offered
hosting and support for about a year -- until we succumbed to scaling
problems. Just be VERY sure of your business model and cost of doing business
beforehand.

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stoic
I've got a few tidbits on the operations side of hosting that may be of
interest. Since you've been around in the hosting biz a while, some or all of
these things may be old hat to you. My experience is largely at mid- to large-
size dedicated server hosts (1k-35k hosts), so this may not apply to your
particular model, but hopefully it's useful in some way.

\- Make sure your policies/procedures are clearly written and do not have any
gaps or gray areas. Keep in mind that you will probably have to train a new
hire from the ground up at some point, and the less hand-holding needed, the
better. This goes for everything from operations to sales to billing.

\- Automate EVERYTHING. Linode is a great example of how to do this correctly
(although automating VPSes is a touch easier than bare-metal servers).
Softlayer's web panel is pretty good, as well. The more your clients can do
without opening a support ticket, the better.

\- Monitoring is important. You should be notified of problems _instantly_ so
that they can be fixed very quickly, ideally before any clients notice a
problem.

\- Proprietary software/hardware for core offerings is generally a bad idea,
unless you're hosting MS Exchange (and Openchange should eliminate that issue
eventually). Keep in mind that you may have to migrate every bit of data
someday in the future, and implement your stuff accordingly. This also ties
into automation: proprietary stuff tends to be harder to write code for,
harder to troubleshoot, and more expensive to maintain in the long run.

\- Do not skimp on facilities, hardware, or network architecture. Always have
hot spares to replace your live gear in case something gets fried
(switches/routers, power supplies, hard drives, RAM, server chassis). This
requires some investment, but telling clients "we're waiting for a new
powersupply shipment from Dell, you're down for X hours" will make them spend
X hours researching their next hosting company.

\- If your organization is responsible for deploying hardware in datacenters,
be absolutely sure that you are not overloading your power drops. If you can,
get intelligent power strips that allow you to monitor load on each circuit.
Know the maximum load for your hardware, in case everyone on a circuit gets
slashdotted or similar.

\- Do not roll out new services/datacenters/hardware without stress testing
them first. Launching new stuff that doesn't quite work 100% (or will work
with minor adjustments) will cause headaches for staff and clients alike.

\- DO NOT LIE TO ANYONE, ABOUT ANYTHING, EVER. Transparency may be your
policy, but integrity is pretty high on everyone's list, too. Admit mistakes,
especially the embarrassing ones. Don't make promises you can't keep without
breaking a sweat.

\- When mistakes _are_ made, take systematic steps to eliminate their causes,
permanently. Examine procedural failure before human failure; the former
generally leads to the latter.

That's just a few things I've gleaned from the last 6 years fixing broken
servers... I may have left a few things out, but that should be a good start.
Feel free to drop me a line sometime (email is in my profile) if you want to
talk more about this kind of thing :)

~~~
foxtrot
hit the nail on the head there mate, very accurate and whilst not all
applicable some are and I have thought of the processes for them.

The automate everything is tricky, I would like to offer this, but it also
steers me away from the client a little as a package could get setup and they
have not spoken to me about their needs. Automations with package setup all so
leaves you open to abuse which incurs more cost.

Softlayers panel is pretty cool, a little outside what I want to do but
inspiring all the same.

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charliepark
You might ping Hiten Shah, or at least listen to his interview on Mixergy,
where he talks about how he and Neil Patel lost $500,00 trying to start a
hosting company.

~~~
foxtrot
What I am trying to do is run the company whilst working for another company.
I imagine the cost they lost was on hardware? That is where I am fine as I am
running a modest server at the moment for my own websites, with enough space
to sell and an easy route to increase the resources/migrate to a larger server
when the time comes.

~~~
itgoon
To me, that seems less like a hosting company, and more like increasing
utilization.

I'm another one of the "been there, done that" crowd, back in 2002-2005 - and
it was much easier then. I eventually sold for a small loss.

Rather than target the general public, try to find a couple of higher-end
clients, and take care of them like they were your mother. It was those
clients that ended up bringing in the most value.

Just my .02, and good luck, no matter what you do.

~~~
foxtrot
Thanks for the response, much appreciated.

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bcx
I ran a hosting company on the side for about 10 years before starting
<http://www.Olark.com>. Basically, hosting is pretty much a commodity right
now, and big companies are willing to spend upwards of $100 to acquire a
single virtual hosting customer.

Here's what I would avoid:

1) competing on price

2) building a commodity

If you focus on customer service, you won't fail your customers, your product
can be mediocre i.e. (<http://www.tiptopwebsite.com>) and with the right
connection to your customers you can still make money.

If I was going to start a new hosting company today. My cheapest plan would be
$25 a month. I'd shoot for superb service, and try to find a really wealthy
under-served part of the market to focus on. I'd try to build something that
was unique, i.e. not a commodity. (That said, as an executive in a webhosting
company, you probably know how tough it is to compete in webhosting)

Good luck!

~~~
foxtrot
Thanks for the comments. Your olark.com website is really nice.

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anamax
Write a description of what your target customer wants and needs, (Note - may
be different.) How does your service help that customer do what they really
want to do?

How much will it cost you to deliver?

How much will it cost you to acquire said customer?

How much is that customer willing to pay? How much do they pay now? Why will
they pay you instead?

If there's a mismatch, change what you can and go through the exercise again.

I suspect that there's a huge market one level up from hosting, but I'm not in
the biz, so YMMV. (No one says "we want hosting" - they want something else
that they get via hosting.)

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qeorge
_I've been wanting to start out on my own for a while, just to generate a
little extra money_

To be frank, that scares me. I want my webhost to live and breath hosting, not
treat it as a side-project.

~~~
foxtrot
There are certain people that I will not appeal to, and I want to make sure
that is easily visible to everyone. One of the largest problems I have seen in
the industry is inaccurate selling and deceiving customers. I don't want to
attract large websites I am actively aiming at small, low traffic, low impact
websites. Those are the easiest customers to support and the easiest to
please.

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rianjs
Web hosting is the closest thing to Perfect Competition, in the economic
sense, that I've been able to find. I wouldn't go anywhere near the field.
There may be some niches (cloud?) that haven't reached the level where there's
no producer surplus, but cloud hosting isn't as straightforward as vanilla
hosting.

<http://en.wikipedia.org/wiki/Perfect_competition>

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eisokant
My initial idea would be to find some local design/web development firms and
try to become their "default host" (maybe offering a good referral fee).

~~~
foxtrot
A great idea, now to find them and persuade them.

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SingAlong
Sometimes when I tend to lose motivation on a project I've been working for
long, I concentrate and force myself to focus on it and launch it soon to get
feedback. That way when a couple of people like it, it gives me a push to
continue working on it :)

P.S: If you want a niche idea I have one: start a cheaper heroku, I'll be your
first customer and can get you one more for sure

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freeformz
Don't start one. Hosting is dead or dying.

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FreeRadical
Have great customer service!

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paolomaffei
Don't.

~~~
foxtrot
I hear that, hosting is all I know and think it may be a good place to at
least try.

~~~
ig1
No, just because it's what you know it doesn't mean that's a good place to
try. If there's no opportunity then it doesn't matter how much expertise you
have, it's like drawing blood from a stone. You might well be better off
starting in something which you have less expertise but there's a bigger
opportunity.

