I live in America, and as any American knows, we pipe Christmas Music and Christmas TV and Christmas Movies directly into the brains of as many people as possible to attempt to keep everyone safe during this difficult shopping season.

Admit it: when you and your neighbor are running to Electronics in hope of getting the last Wii from the shelf, sometimes the only thing stopping you from dumping a bag of Skittles in front of him or knocking over a Lego display is the constant barrage of Rudolph and Frosty and other Christmas cheer over the PA.

Unfortunately, unless you are content to give everyone a copy of Dryping for Dummies (By Steve Kinman, SoftLayer Press), you will have to wade into the shopping rush to eek out your Santa sized bag ‘o goodies.

Never fear, however! The Retail Industry is there to help! For those who don’t want to dive head first into the excitement of Christmas Shopping (which can make even a foray to pick up some toilet paper from Wal*Mart into an exciting 2 hour adventure), nearly every retail outlet is willing to give you a 2″ x 3″ credit card like piece of plastic stamped with their brand. Yes, the Gift Card.

It’s been said that over 60% of American adults have either bought or received a Gift Card, this year. It’s a very convenient device. For example, if I figure out that Lance really likes Outback Steakhouse, I can buy a $10 gift card from Outback Steakhouse, wrap it in a $1 Hallmark card (although, sometimes the retail outlets already have such cards (stamped with their logo) available), and give it to Lance. “Merry Christmas!” Sometimes you can even get the card gift wrapped.A gift-wrapped credit card!

We’re to the point, now, that simply handing somebody a plastic card is actually considered a thoughtful gift. On the way to work, I heard that any fishing lover would prefer to receive a Bass Pro Shop Gift Card over, say, that Bassomatic ‘76 they’ve been talking about.

But, lets be honest… it doesn’t take much to choose a gift card. I overhear Lance say he likes steak, I see a Outback Steakhouse card, and bam! Before you can say “Impulse Purchase” I now have an instant gift! Sure, it’s not as fulfilling as, say, a box of prime steaks… but this way you can give him more gift cards! And more is better, right?

But the comedy doesn’t end there. Have you ever seen a gift card in a usable denomination? Usually I find cards with a value between $10-50. Can you even get a steak meal for $10 at Outback Steakhouse? (Don’t forget to include the State and Federal Wallet Excise Tax.) And I’m not talking about that free bread, either. No, what happens is you end up either leaving a trifling amount of money on the card (Your balance is … twenty five cents), or you end up wrapping your card in a sizable amount of cash. See how neat this is? I bought a $10 card, and Lance will pay the balance of the meal… AND STILL THANK ME FOR IT!

Retailers make MILLIONS of dollars off the trifling amounts that just sit, unused, on gift cards. And gift cards aren’t usable at another store, so if I want to buy a $20 book, but I only have a $10 Half Priced Books gift card (and a $10 Outback Card Lance gave me as a Thank You), I’ll use the card + $10. You can almost never just spend what’s on the card.

Here’s some friendly holiday advice: If you know what your friend wants, buy it for him. If you don’t, ask people close to him. Even Aunt Myrtle’s sweater contains more holiday cheer value than the sweater’s monetary value in McDonalds Gift Cards.

Is there a way out of this trap of value-locked slivers of plastic? Indeed there is! If you wish to transfer value to another person without locking them into one choice, give them… CASH! Yes, greenbacks, bucks, dead presidential portraits, green… whatever you call it, United States Federal Notes are accepted by all retailers, in any denomination. Value not used by one retailer can then be spent at another. This value can also be stored up where it may earn interest and combine with more legal tender until a large item can be bought. The best solution for any gift giving problem where “Gift Cards” are suggested as a solution is CASH, such as when you absolutely can’t think up something to buy. And it makes a great stocking stuffer. In Bulk. Hint, hint.

Yes, you in the back? What does this mean for SoftLayer? Just because this is a SoftLayer Blog doesn’t mean it has to have a SoftLayer moral! But lucky you… I’ve got one right here: (this weekend only, special holiday financing available!)

Like Gift Cards, each SoftLayer server comes with a bloc of value attached: bandwidth. This valuable commodity makes the servers work. You can have all the processing power in the world, a RAID 75 array with 100 petabytes of space, 40 terabytes of onboard memory, and if you don’t have any bandwidth… it’s all moot.

Unlike gift cards, however, SoftLayer attaches some real value you can actually use. For many users, even touching the top of the 2 Terabyte bandwidth pipe is a real exercise.

However, sometimes, like gift cards, a customer buys a server with value attached… but simply cannot use it all. Or they put the server 100% on the private network and never use the bandwidth at all (Like that $20 gift card from Sludge Emporium your Granddad gave you last year). Is there any way to salvage this value?

Indeed! The SoftLayer Secret Labs rolled out a new feature a while back: Virtual Dedicated Racks. These VDR’s (as we cool SoftLayer Secret Lab Technicians like to call them, because TLAs are cool) allow you to virtually rack a group of servers behind a virtual bandwidth meter. All the attached bandwidth value of those servers are lumped together, like a good ‘ol pile o’ cash, and the aggregate amount attached to the rack. An example:

Each server comes with 2T bandwidth (generally).

Without VDRs, if server bassomatic.76.example.com only uses 1T of bandwidth, and server auntmyrtle.sweaters.example.com uses up 3T, you end up with a full 1T overage on Aunt Myrtle’s site, even though you have a full 1T worth of value on the other server not being used!

With VDRs, the two servers pile their value together, making a 4T rack. Bassomatic.76.example.com uses 3T this month, while Aunt Myrtle’s site only uses 1T. Combined, their “rack” uses 4T of 4T, so 4-4 = 0!

Like cash, but unlike gift cards, with VDRs you are able to pool your value to allow the usage of more value at one time. Now how awesome is that?

If you would like to experience the excitement of pooling your bandwidth, talk to your SPS (as we cool SoftLayer Secret Lab Technicians like to call our SoftLayer Professional SLalespersons, because an acronym is still a cool TLA as long as only three letters are capitalized), and get yourself a Virtual Dedicated Rack (make sure to call it a “VDR” when you order it to sound cool).

And let ‘em know this post by Shawn got you interested. If I get enough referrals, I’ll get the December SoftLayer Referral Outback Steakhouse Gift Card!

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.