Interland - King in the Land of
Hosting.
Posted July 1st, 2002
Updated September 2002
Are you a small to medium
business that has noticed an ownership change at your hosting provider? If so,
chances are the buyer was Interland Inc., an Atlanta-based hosting company that
has been consolidating the SME hosting market for more than two years.
Originally born out of a merger between HostPro and Interland, the company was
spun out from under the ownership of Micron Electronics, flush with cash, an
aggressive management team, and ambition to match.
Given an increasingly mature
website market, the high-pace of growth experienced by hosting companies during
2000 and 2001 has slowed to a more manageable pace. To hyper-grow their
revenues and market position, Interland has been using acquisitions to grow their
customer base, which the company now claims to exceed 400,000 sites. Their
major competitor would be Verio, a
large-hosting company that was acquired by Japan's NTT Communications. While
the management team at NTT/Verio has been working diligently to align their
business objectives with their new corporate parent, Interland has been working
hard to become a parent to smaller independent web hosts. In February 2002,
Interland acquired CommuniTech.Net a
profitable web host based in Kansas City that serves nearly 20,000 customers.
Then in May, Interland snapped up Florida-based Dialtone Internet; a vendor of dedicated
server hosting. These purchases came on top of shared hosting asset buys from
AT&T and Interliant. However, with more than $172 million in cash,
Interland can afford to be in the market. They confirmed this in September when the company purchased iNNERHOST, a Florida based provider with extensive Windows/NT hosting accounts.
In an exclusive interview with
HostIndex.com, Joel Kocher, Interland's CEO commented about the Dialtone
purchase, "Our acquisition of Dialtone Internet is exactly in line with the
strategic direction we've been communicating all along, to be the leader in
providing standardized business-class hosting solutions to small and medium
businesses. We see the Dialtone acquisition as a platform for dramatically
expanding our market position in managed dedicated hosting, and we're very
excited about the strengths Dialtone brings."
Interland has regularly mentioned that it is not only the assets the company has which interest it, but rather the
entire company; management included.
With the CommuniTech.NET acquisition, Gabriel Murphy, a savvy 25 year-old
entrepreneur, who has already been named as of one Ernst
& Young Emerging Entrepreneur Award winners, joined the team.
Then with Dialtone Internet, Interland gained These team additions come at a key time
for Interland who is strengthening their execution ability following the April
2002 departure of former Vice-Chairman, Ken
Gavranovic. "Overall, we've reduced the size of our staff considerably
over the past year as we've focused on efficiency, centralization and
integration of acquisitions. At the
same time, we are growing and preparing for future growth – and that requires
continuing to attract talented employees," noted Kocher. In order for Interland to properly and
smoothly integrate its' acquisitions, Kocher will definitely need to motivate,
retain, and challenge his expanding management group.
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In addition to the primary growth
strategy of consolidation, Interland is also making efforts to strengthen its'
product offerings and hosting platforms. The company has been fast to market the
so-called Virtual Private Server platform, which enables site owners to have
greater technical access (commonly referred to as 'root access') while keeping
the cost more similar to a shared-package than dedicated pricing. According to
Kocher, "Interland has long been a
leader in providing and developing Virtual Private Server technology, and
consider it to be an important part of our product portfolio. We are
continually upgrading and expanding the capabilities of Freedom, our Virtual
Private Server line, and plan to continue to do so.". The company also is making internal investments in their product line, and announced in September, the launch of blueHALO technology that enables high-availability for shared customers.
Yet, with Interland so clearly focused upon the SME
marketplace, has it positioned itself to become a commodity-provider of hosting
products? Many telecom and hosting analysts have expressed recurring fears that
bandwidth, shared hosting, and other data services will continue to decrease in
price while increasing in features; an analogy similar to personal computers.
"Certain segments of hosting are already a commodity – the very low-end, mostly
consumer shared hosting business, and at the other extreme, colocation. At both extremes, very little value is
added, or expected by customers. But in
the business-class hosting segment, customers are looking for more than rented
space," clarified Kocher. He was quick to differentiate how Interland will
stand-apart from other providers, "Web hosting is a service business, not a
technology business. That means that as
both a company and as an industry, we add value by improving service, by understanding
and meeting the unique needs of our customers.
Interland intends to set new standards for the industry."
Without question, Kocher and his
management team displays tremendous enthusiasm about the years to come; noting
their belief in a shift to network-centric computing and its' consequences to
increase revenues for hosting providers. "We believe it's clear that over the
next several years applications will move from the desktop to the network, and
that they'll be hosted in data centers – hopefully Interland's," said Kocher.
"We're focused on being the leading provider to those SMEs, and positioning
Interland to provide those applications when the time is right.
As the old saying goes, cash is
king – especially under today's economic environment. While enthusiasm and
strong product offerings are important, it's extremely hard to discount the
purchasing power that Interland brings to the table. Those who ambitiously hold
cash are bound to rule their kingdom, a feat Interland aims to demonstrate. Coining Interland the 'King of Hosting Land' may indeed be right on the money!
