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Interview with Franc Nemanic, Founder & President of Hostopia


By Matt Alland
, August 2003

 

Matt: What makes Hostopia unique in the industry of private-label reseller web hosting?

Franc: Hostopia is 100% focused on providing wholesale, private label web hosting and email services. We do not compete against our partners for their customers and our service is a complete privately branded solution. Our partners have the ability to brand every single aspect of our service so that it appears to be an in-house solution while we provide the infrastructure, bandwidth, servers, and system administration. Our partners’ brand is the only thing their customers ever see. We are the Brand Behind the Brand.

We provide a “Business In a Box” solution that gives our partners access to our expertise and our $10 million plus investment in our technology for minimal to no start up costs. A business that can take years to perfect is available to our partners in an instant.

In addition, our services operate on our unique, one of a kind, clustered server hybrid offering a blend of both UNIX and Windows hosting functionality on one platform. End users can build and run websites using BOTH Windows and Unix applications at the same time which means that they can build better websites because they are not limited in their choice of applications. It also makes it easier for our partners to sell because it eliminates all of the confusion in choosing a hosting package.

What is your personal history in technology, web hosting, and the founding of Hostopia?

I founded Hostopia in 1999 with a vision - to become the world’s leading wholesale, private label web, email and e-commerce solution provider. At the time, it was evident that there were many hosting service providers who were unwilling or unable to build and support the capital expenditures it took to maintain their existing hosting service infrastructure or put a new infrastructure in place. That’s when the Hostopia idea was created and designed specifically to meet those needs at an affordable cost to the provider while remaining completely anonymous.

During the past several years I have had the great pleasure of addressing keynote audiences at ISPCON, Comdex and Internet World and accepting a number of industry awards on Hostopia’s behalf, including:

· Editors Choice for Best Reseller Opportunity 2002 by Hosting World Magazine

· Pioneer Award 2002 by Web Hosting Magazine

· Best Private Label Host 2001 by Web Hosting Magazine

· Best Host for Resellers 2000 by Web Hosting Magazine

What has led to Hostopia's success?

It is an over used cliché but the power of human touch is one of our key strengths. You can always reach a live person at Hostopia 365/24/7.

“Making Hosting More Profitable” is not just our slogan it is the driving force behind the vision of our company. We are 100% dedicated to making our partners successful because when they succeed we succeed. With this type of focus everything you design or create has to meet the test of -- Will this help our partners sell more?

Finally it is much harder to be profitable in hosting due to the enormous capital, technical, and human resources requirements. Hence larger, more automated players are doing better. That’s why Hostopia succeeds. We are a large successful player and we help our clients become so as well.

What incentives are there for a web host to outsource their hosting operations?

Outsourcing web hosting services can be the best decision a provider can make. The cost of running a hosting business to keep up with the massive retail businesses of companies like Interland and Verio is constantly increasing yet the price points and the margins keep falling. It is a nasty squeeze for the player with little or no scale who is trying to compete against these giants.

What you get by outsourcing to a company like Hostopia is a predicable and profitable hosting business with no worries and margins in excess of 60% or greater. Every month there is only one number to think about and you eliminate all of the capital costs, hidden operating costs, and potentially labor costs associated with supporting this part of your business. At the same time you get access to the world’s best R&D for a fraction of the cost of doing it yourself. Also you can focus and direct freed up staff resources toward finding and building other revenue generating opportunities within your subscriber base.

Do consumers in need of web site hosting see any reduction in quality when buying from a reseller?

No, assuming the underlying host provides an excellent solution. When combined with our 365/24/7 Tier 1 support service our partners can actually provide a better solution with us than they could by doing it themselves. By purchasing packages from a reseller, the end user benefits from lower hosting plan costs and added functionality such as advanced scripting languages and free e-store and site creation tools. These items simply wouldn’t be available at such a reasonable rate if the hosting service provider operated on an in-house solution and had to purchase licenses and spend countless months on the creation and development of value-added programs.

You seem like you've had impressive success in raising capital, particularly in today's tough economic times. How do you do it?

Success breeds success. Raising money is directly related to how successful your business is and whether or not you have a lasting competitive advantage. If you focus on the fundamentals of building a lasting business supported by real competitive advantage you will have no trouble raising money even in an investor shunned sector like shared hosting.

Our ability to raise $8 million plus is a direct result of the above factors and the fact that we have grown from zero to the Top 2 wholesale providers in the industry in less than 5 years.

What prominent hosting companies are currently outsourcing through Hostopia? (if you're allowed to name any)

We have over 270 wholesale partners worldwide and because we are a private label provider, we prefer not to reveal who our partners are. We respect and protect their identity as strictly as possible to ensure that Hostopia is in fact completely invisible to the end user. However, I can mention that we do business with Register.com, Telus (a subsidiary of Verizon and the 2nd largest telco in Canada), Bell Canada, USLEC and many others. In addition we have partnerships with other large Telco's, Cableco's, and Domain Registrars who are leaders in their industry.

What are among the first things you do when you turn on your computer?

I review the number of orders we received the day before. I like knowing exactly how our business is doing at every point in time.

You have a very distinctly green brand. Any reason why you chose green?

Green has always been the color of money and profit in my mind and I couldn’t think of a better color to represent the value we bring to our partners. Green is all about growth and that’s what we bring to our partners. The organic growth rate for most hosting companies has stalled, just look at Interland, yet our partners are growing at a 40% plus annual rate based upon our audited numbers. Besides I always liked green.

What are the advantages to being headquartered in Ft. Lauderdale?

Low taxes. Low cost of doing business from an operating standpoint and very low travel costs.

The Terremark facility, the NAP of the Americas, is also one of the finest IDC’s in the world today and our customers deserve the best.

Where do you see the hosting industry moving in the next few years? Do you think the number of companies in this industry will greatly reduce (being acquired by Interland for instance), or do you think smaller hosting companies will still have a competitive edge in the market?

The hosting industry will continue to expand at a much faster rate than the underlying economy. We are in the beginning phases of the shift from the early adopter market to the mainstream buyers. This literally represents 20 million plus Small and Medium sized businesses that will be coming online over the next 10 years. The growth in this industry will be awesome.

The challenge to capturing a leading position in this market is that doing it by trying to build a worldwide retail brand is an incredibly expensive proposition as Interland and Verio have learned. The enduser wants to buy from someone they trust and the person they trust the most will likely be the person that they buy their Internet services from. This is why we believe that the number of providers is only going to increase as demand drives more companies like Telcos, ISP’s, and Cableco’s into the hosting business.

My favorite saying to describe our wholesale model is “Sell them in bunches like bananas”. When we make one sale we actually get access to thousands of customers in a very cost-effective way.

Where do you see Hostopia and yourself 5-10 years down the road?

Hostopia’s vision is to provide all of the technology and services to enable a Small and Medium sized enterprise to create and manage a world-class online presence. Hostopia is an ASP and our ability to serve this market is only limited by the imagination of our customers and ourselves.

Where this leads to 5 years from now is anyone’s guess but I can say with complete assurance that we will be there leading the way for our partners. I love this business and as long as I can make a difference I will be here.

 

Feel free to send any questions or comments about this article or other related topics to Matt Alland.

Interviews:
Franc Nemanic
Founder & President of Hostopia
Richard Yoo
Founder of Rackspace & ServerBeach
Joel Kocher
CEO of Micron PC
Robert Crull
CEO of Catalog.com
Jim Reese
Chief Operations Engineer of Google.

Dmitri Simonenko
CEO, Plesk.

Graham Weston
CEO of Rackspace
Craig Newmark
Founder of Craigslist.com.

Christopher Faulkner
CEO of C I Host.

Doug Kaye
Author of Strategies for Web Hosting

 

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Good interview
Posted on 13-11-2003
Nice interview matt. I like it.