The Big Kahuna Hits the Beach

A cofounder of high-end webhost Rackspace has founded a new company courting the other end of the market. Richard Yoo's ServerBeach will offer fully-functional personal website hosting for $99 per month.

by Alex Goldman ISP-Planet Associate Editor [January 23, 2003]

Richard Yoo cofounded his ISP, Cymitar, while still attending Trinity University in San Antonio. Cofoundin partners were fellow students Dirk Elmendorf and Patrick Condon. Today, the URL Cymitar.com points to the second business the three cofounded, Rackspace. All of this makes ServerBeach, Yoo's latest venture, his third business. This time, Yoo is working without partners (although he maintains a positive relationship with Rackspace), and if you get a business card from him, it will list his job title as "The Big Kahuna."

Whereas Rackspace specializes in the high-end dedicated server market, where each customer has one customized computer system and full-time help (over half of Rackspace's staff is dedicated to customer service of one kind or another), Yoo's new company will specialize in a new niche market, the discount dedicated server where each customer has their own computer, but accesses automation, not human help.

Yoo and his colleagues entered the hosting market almost by default. "Cymitar was like any local ISP," says Yoo. "It started out in my apartment, with an ISDN line and five phone lines. After 1996, when MindSpring and AT&T entered the San Antonio market, we were up to 40 phone lines. Although the dialup customers were taking up a lot of our time, once we sat down and looked at the numbers, we realized that about 80 percent of our revenue came from webhosting."

They specialized in dedicated servers before there was a term for that market niche. "We did some research and learned that other companies were not satisfying their customers. Customers wanted access to CGI, etc., and weren't getting it," he says.

Yoo's demanding customers were at the core of the Internet boom. "The term 'dedicated server' was not yet in the lexicon, so we were leasing equipment and colocating it on our customers' behalf. As Rackspace started growing, we saw that we were fulfilling a need for e-commerce and B2B hosting. These folks wanted it a certain way, with no down time. That required a robust infrastructure and high touch service," says Yoo.

The idea for his new company, ServerBeach came from experimenting and from conversations with friends. "We have lots of customers who host their business infrastructure on Rackspace, and many wanted space to experiment or host, say, wedding pictures. Those services do not require the same level of service and infrastructure. I have friends and peers and colleagues who wanted to host stuff but did not need what Rackspace offers," Yoo explains.

Yoo started doing research. He found that at the low end of the market, which he defines as being under $150 per month, service quality was low. "We looked at what we could buy and the service we could deliver, and we found that since the dot com bust, prices are down for everything from bandwidth to data center space to equipment and processors. We found we could build a robust offering that is not by any means Rackspace-class, but is home user or SOHO quality."

During his due diligence, he settled on offering 99.9 percent uptime, or downtime of about 44 minutes each month (Rackspace offers 99.999 percent uptime, which is less than 30 seconds). His team found that each additional "9" of uptime added and exponential amount of cost.

Whereas Rackspace dedicates a significant percentage of its personnel to customer service, ServerBeach cuts costs by automating most customer interaction with a system built in-house. The company's trademarked BeachBall Automation System and Portal is designed to allow customers to do everything that any hosting control panel system would allow.

"Some customers may be used to cpanel, Ensim, or Plesk," admits Yoo. "But Ensim and Plesk force you to use standard versions of operating systems and are incompatible with some Microsoft Windows systems and some modified Linux systems, such as RedHat. ServerBeach is automated and cookie cutter and that differentiates us from our competitors who have not implemented automation. ISPs with reliable back end systems and strong automation that gives customers the ability to set up their own e-mails, for example, are doing well."

ServerBeach charges more than $99 per month if customers want to use licensed software such as Plesk or Ensim. The company's service level agreement (SLA) has teeth: if the user experiences more than 44 minutes of downtime during the month (outside of scheduled maintenance), they get the next month of service at half price. The SLA appears on a ServerBeach page entitled "Our Promise." If that doesn't convince you of the company's commitment to service through automation, Yoo has written his own personal note on the company's "About Us" page.

ServerBeach spent about 9 months developing and testing its back end software. It started connecting customers in the summer of 2002, and has 2,000 so far. Yoo hopes that with a direct explanation of what customers are buying, none will feel cheated or feel pressured into buying anything they do not want or need. Aggressive and even deceitful sales practices, he claims, have made customers distrustful in the low-end hosting industry. His goal is to grow to 4,000 satisfied customers by the end of 2003, and to be the best hosting company in a niche he says is not being served at all.

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