Just like any company, the search for ways to increase revenues and lower costs to make more money never ends. In the increasingly competitive hosting environment, raising prices is rarely an option but finding ways to cut costs while making the experience better for the customer can and must be done on an ongoing basis.

We have achieved some success to date with the provisioning of nearly 10,000 servers; however, the end game is far greater as the ultimate goal is to become a multi-national corporation serving markets all around the world. In the hosting space, you don’t really have a choice, you either innovate and get bigger or you get out. The complexities are just too great to have the luxury of maintaining the status quo. The technology landscape is littered with companies that started reading their own press clippings and got fat, dumb and lazy. And keep in mind that copying your competitors only delays the inevitable; the “me-too” companies eventually go away. In the technology world, you must innovate and push the envelope to survive.

While we are constantly looking for new and better ways to serve the customer, a great deal of time is spent improving internal reporting systems. I work with a management team that understands the importance of budgeting and tracking various financial and operational metrics. To that end, we have made a substantial commitment in systems and people to gather data to help make the best decisions for us and most importantly, for our customers.

I would love to reveal all the data we have at our fingertips but for competitive reasons, I don’t want to give away too much but let me leave you with this tidbit: I wonder how many of our competitors’ CEOs can, from his/her desktop, drill down to any one of 10,000 servers in multiple data centers and know exactly how profitable each individual server is with the click of a mouse.

The best companies in the world are all supported by world-class accounting and finance departments providing pertinent financial and operational data to all its stakeholders. The right information gives you a tremendous advantage over your competition.

Find someone good to count and analyze your beans. Wal-Mart did and turned the world of retail on its head. With a little luck, we might be able to do the same to hosting.

Hosting and GAAP accounting go together like toothpaste and orange juice.

If you’re confused go brush your teeth and drink a big glass of orange juice. I’ve held out as long as I can, but I just cannot restrain myself from a post or two about the hosting business and accounting. So if this will make your eyes roll back in your head, please stop reading now and click here before you keel over.

In many ways, good ole GAAP just doesn’t treat the hosting business fairly. Relative to accounting, hosting is a new phenomenon with roots dating back only into the 1990s. This is ancient in Internet time but double-entry accounting dates back to the 12th century, and the first accounting textbook describing the double-entry system was penned by Luca Pacioli in 1494. The double-entry system was used because mathematicians denied the reality of negative numbers until the 16th century and the double-entry system was used as a workaround for the lack of negative numbers.

So, why must we account for paradigm-changing Internet businesses with an archaic 800 year old math system? It’s a classic example of the old “square peg – round hole” cliché. Toothpaste and orange juice.

Applying this 800 year old system to the hosting business often paints a flawed picture of the financial position of a hosting company. And there are a lot of folks in the financial world that either can’t understand this or don’t want to understand this by thinking outside the normal accounting paradigm.

I’ll blog about two examples of this: 1) Net Income and 2) Current Ratio. My next post will cover Net Income and we’ll discuss Current Ratio thereafter.

In this day and age of Sarbanes-Oxley internal controls, SAS 70 certifications, and myriad other regulatory, compliance, and audit issues that I won’t get into , business ethics might seem to be a lengthy and complex topic.

In reality, it isn’t. Back in the dark ages when I strolled the halls of SMU, a crusty Econ 101 professor named Jack Stieber proclaimed that there is only one ethical mandate in business: “Within the bounds of the law, maximize profit.” There are no more ethical rules necessary to follow in business.

I have heard others phrase a similar thought as “maximizing shareholder value”. I disagree with that approach because there are things that management can do to influence the stock price that aren’t necessarily tied to maximizing profit. Basically, if you can maximize profit, the stock price will take care of itself.

In response to Prof Strieber’s proclamation, there were a few students who responded, “But sir, what about ?” and Prof. Stieber shot them all down. Here is one of the more interesting objections:

“But sir, what about a business owner who hikes the price of bottled water to a ridiculous level in a disaster-stricken area that has lost its water supply? Are you saying he’s being ethical by maximizing his profit from price gouging?” Prof. Stieber responded something like this:

Assuming that his pricing policy is legal, he’s still being unethical because he’s actually not maximizing his profit. Sure, he may reap a short-term gain but when the water supply is back on, those forced to buy his extortion-priced water will take their business elsewhere. So in the long term, he hasn’t maximized his profit and thus has behaved unethically. An ethical decision during that time might have been to keep selling water at the pre-disaster price or maybe even donating some to build goodwill among his customer base. This could have cemented a long term relationship with the customers who would provide repeat business again and again and thus maximize his profit over time.

That being said, when a business maximizes it’s profit within the bounds of the law, it’s a “win-win” for the customers, stakeholders, and shareholders. In my next post, I’ll explain how SoftLayer earning profit is a win-win for both the customers and the company.

The term “Digital Super-Highway” seems to be quite prophetic as the monetization of the internet seems to be exploding from all angles. Monetization of the internet is something that we are always focusing on here since a good portion of our customer base turns our underlying infrastructure into a revenue-generating engine for them, be it through Value Added Services, enablement of SaaS business models, e-commerce activities or whatever focus our customers have (which are too many to list).

I always knew the monies on the web were staggering, but I was caught off guard the other day when I came across an article in Business 2.0, “The Man Who Owns the Internet“. The article is about Kevin Ham, who has built a $300 Million Dollar portfolio of domain names. $100,000 for Greeting.com, and $31,000 for Christianrock.com and so on. He’s a domain name mogul.

In a technology world, this seems to be the “day-trading” of the internet. The other portion of this article that struck me is the monetization of the typographical errors in domains, referred to as “Typo Squatting”. We have all accidentally fat-fingered a key here or there and after closing the 85 pop-ups, the monies are moving like a slot machine with triple 7’s across the board. In an article referring to the monetization of Typo Squatting, companies have built multi-million dollar producing firms on capitalizing on a misspelling here, a lack of dash there, etc. Just for reference, it seems that www.softlater.com is already taken, which means my dream of typo squatting my way to retirement has taken a drastic turn.

With the tools we have put in place through the API and the private network we have really streamlined the enablement of the monetization of the internet, which when we talk to our customers it’s at the forefront of both of our minds. The successes of our customers ensure our success, so putting these tools in place are essential. Not to give away the secrets of others, but I have peeked into the private back-end network and seen things like credit card processing gateways, server to server data transfers, licensing gateways and numerous other activities that are surely streamlining the money making processes for our customers.

So I am not sure that when the term “Digital Super Highway” was coined that we ever thought there would be toll-booths along the way, but its clear that these are here to stay.

As a side note, if anyone is interested in sharing their monetization stories, feel free to drop me a line at bizdev@softlayer.com