A Chat about the Fate of the Hosting World

Last week, I was visiting family in Delaware and was fortunate enough to find time to connect with friends from HostMySite.com, where I worked prior to coming to Microsoft.  Over coffee, we spoke fondly of the “good ole days” and reminisced about the great company we had built. 

My chat with Lou Honick, ex-CEO and founder of HostMysite.com (now DBA Hosting.com), was the most interesting.  For those that don’t know Lou, his personality is an acquired taste.  He challenges everything and never compromises on service.  Even the most serious business conversations with Lou involve either a joke about some part of the human anatomy or a bodily function.  Lou, for all of his quirks, is one of the savviest entrepreneurs I know.  He does everything with such confidence and ease that you have no doubts he will excel at whatever he does because of his intense focus on the customer.  Currently, he is busy with his new venture in providing merchant services to hosting companies, www.hostmerchantservices.com.

After catching up on old times, we turned thoughts to the future.  Lou and I debated over the fate of the shared hosting business.  I argued that as larger providers (i.e. Google, GoDaddy, and Microsoft) offer cheap hosting alternatives to traditional shared hosting, or as new social media options like Facebook and Twitter gain traction among businesses, there will be little hosting companies will be able to do to compete in this space.  Lou’s counter was simple and expected.  It was what made HostMySite go from a few hundred servers running in a small server closet to thousands of servers in 3 datacenters within 5 years.  Lou said people still need someone to call for guidance, good support and customer service.  He said, “There weren't any really good options for small businesses, especially having a new small business and looking for options for myself.  For myself, I want something that works well, is always available, and if something is busted I can call, email, or chat and get it fixed ASAP.  I doubt that can be found for under $100/mo., let alone the sub $50 price point that SMB's want.  It's not that hard though.”

While most companies say that their service is what differentiates them from the competition, it’s a rare few that gain a loyal fan base.  Rackspace obviously is seen as the poster hoster for excellent service.  HostMySite enjoyed and still benefits from its loyal customers.  Word of mouth referrals account for a significant portion of HostMySite’s business.  How does one achieve this status and garner the trust of their customers?  I will explore that in a future post.  For now, I still maintain that unless you can truly offer something so compelling customers would rather pay a little more than to go with cheaper or in some cases free options, the shared hosting industry faces significant challenges to the current business models.

Monish Sood
Marketing Manager
Communications Sector, Microsoft

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