As I have started to settle into my new role with SoftLayer, we have spent a lot of time meeting with various vendors and partners to discuss our overall vision and plan for 2008. In almost every one of those meetings we get to the same question: “What does a typical SoftLayer customer look like?” Or, the other version of that: “What is SoftLayer’s target customer?”
You would think this should be an easy question to answer. After all, we have over 4,500 loyal customers that rely on us each and every day to deliver on-demand, world class IT infrastructure. Surely, there must be some common thread among these customers. Being responsible for “Strategy & Marketing” I decided to look into this to come up with a standard reply to that question. The standard ways to do this from a marketing text book (i.e. “in theory”) perspective include:

• Industry – financial, manufacturing, retail, distribution, etc.
• Geography – typically regions within a country, or countries themselves
• Customer Size – normally based on revenue or employees
• “Retail” or “Wholesale” – are we selling to the final consumer of our products or to a reseller

The next step — look at our customer database and start to build up a profile based on those criteria. A relatively simple process, but the problem we found was that the four metrics above did not adequately define any of our customers. Some examples:

• Industry — we serve all possible combinations of traditional and new industry classifications; from large manufacturing, to Web 2.0 start ups and no single segment is more than 5% of our business
• Geography – we have customers in over 100 countries. Even in the US our customers come from every corner and every state in the country
• Customer Size – 1 employee to 50,000+ employees and everything in between; $0 in revenue to $10 billion and more
• Retail and Wholesale – almost an even split between the two groups

Being inquisitive by nature, I could not let this end with an answer like: “we have a very diverse set of customers that represent all industries, all geographies, and all customer size categories.” It did lead me down a path to start asking customers some questions like:

• Is IT infrastructure a critical component of your business?
• Do you need highly scalable IT to adjust for seasonality or growth in your business?
• Do you want a simple and flexible management tool to allow complete control of your data center infrastructure?
• Are enterprise grade solutions of value to your business, but something you cannot afford?
• Are you looking for innovative solutions to help drive your business forward?
• Do you value standards based processes and controls?

To steal a quote from a very, very distant relative… Eureka! While this might not be as significant a discovery as the wheel, fire, or the Archimedes’ screw, it did finally bring some clarity to our little customer debate. The vast majority of our customers answered “yes” to many or all of those questions. It also led me to understand what our customers do not want from us:

• Specialized application support
• Highly custom solutions that scale poorly
• Up-front fees and long term contract commitments

The net result is that our customers are segmented very differently than traditional methods would suggest. They are clustered around a common need that spans across all demographics. The customers that come to us are looking for a very special thing – the SoftLayer approach to IT management. If you belong to a company that can resonate with the questions above, you have come to the right place.

As you may have guessed SoftLayer isn’t just sales team members, Datacenter Managers, and Development team members. There is also a pretty important group of people who hideaway in their cubicles and can be seen running around our state of the art server rooms from time to time. I am of course talking about us DC Techs; you might know us from our ticket signature “SoftLayer CSA.”

I had a question brought up for the first time while on a phone call with a customer, his question was,

“What is it like to be a Datacenter Technician?”

I could only laugh just a little bit as I looked around the office and saw several of my co-workers engaging in the organized chaos we call Datacenter Operations. You see, with datacenter operations there is no “daily routine” to follow, there isn’t a “what to expect” sheet posted somewhere to prepare us for the day. We have to rely on experience and each other to keep our beloved customers happy. So would you like to know my answer to this customer?

“It depends on the ticket I’m working!”

I say that because this particular customer was calling about a networking issue. In this instance I was his “network engineer”, helping him resolve an issue with secondary IP addresses. As I said before, not every issue is the same from one minute to the next so it keeps us on top of our game. One second I am a networking engineer, the next a hardware technician, the next a Systems Administrator. On some occasions we DC techs can be all three at once! It’s because of this fact that I enjoy coming to work each and every day. I never know what problem will arise or what I will learn in the coming hours.

I decided to write this after a very long shift, because I think a lot of our customers and people who read this blog would like to know what exactly it’s like. Of course there are good days and bad days, sometimes we make mistakes or take a little longer to reply to a ticket than we should. But for the vast majority of the time, our phone calls are ending with “Thanks so much!”, and our tickets are ending with “Great Job, You guys are awesome!”, and our customers are going to sleep knowing their server is in good hands.

Now what question do all of us DC Techs have? That’s simple:

What is it like being a SoftLayer customer?

Judging by everything I have seen recently, with our company expanding to Seattle, building new datacenters, and shattering several of our own sales records, I think we’re doing a pretty good job of putting everything you want from a dedicated hosting provider at your fingertips. There is always work to be done, and I speak for everyone here in the office when I say the most important thing to a DC Tech and the company as a whole are our bosses, and we currently have around 4,500 of you around the world and growing!

I’ll see you in the tickets soon!

For the two people who actually read my posts, you know that I blogged about how I look at the value of a server. Basically, it should be valued by the cash flow it produces. Without a customer to use the server, the cash flow it generates is negative, i.e., less than $0 due to the costs of keeping it racked up, powered up, and connected.
So, how do you place a value on a customer? Customers and servers are not a one-to-one connection because many customers have more than one server. They also buy more than just servers, such as additional software and/or backup services.

Like most of us in the industry, I spend a few minutes each day scrolling through the customer forums, both ours and 3rd party sites – you probably know which ones :). I look at the customer comments and sometimes I wonder if the folks in our industry understand the value of these customers judging from the way some customers are treated.
Granted, some customers are abusive and need to be fired, so to speak. Others appear to be high value customers with multiple servers and solid business models where someone has dropped the ball and caused them to seek greener hosting pastures. If companies understood the dollar figure valuation of each customer, they might think twice about their next course of action with a particular customer.

To value a customer, I look at the statistical expectation of how long that customer will stay with the company, how much the customer currently buys with us, the statistical expectation of how much additional business they will place with us, the gross profit generated by the customer, and that old stand-by — the minimum acceptable rate of return for an investor in the company. From these data points, I do a simple Present Value calculation and arrive at the value of the customer, which is the amount of cash that would have to be invested to yield the economic equivalent of the expected gross profit that the customer will produce. I’d give you a sample calculation, but a) it would make this post even more boring, and 2) some things we like to keep secret :).

This is important because it can make the growth of a hosting company less “slippery” — sort of like when Eric takes off from a red light in this:

For example, if you sell 100 new servers but customers release 90 back to you during the same period, your growth doesn’t have the traction it would have if only 10 servers were released back to you. By retaining valuable customers, you don’t spin your wheels as much. Spinning the tires at a hosting company is not nearly as much fun as watching Eric drive.