May 2004 - By Sam Lee
First of all, can you give us a general background of yourself and how you became involved in the web hosting industry?
Prior to becoming the Director of Sales and Marketing for CrystalTech I had a management position in the printing, reprographics and production mail industry with Pitney Bowes Management Services. I also worked as a web designer and developer, so I had an idea of the hosting industry from the customer side. Making the transition from being a hosting customer to actually working in the industry was a bit of a change, but a natural one. In terms of education, I have a Bachelor of Science in Information Technology from DeVry and a Bachelor of Arts in English from the University of Iowa.
The company is considered to be one of the largest Microsoft Windows hosting providers in the industry, what has attributed to this success?
There are several things, but I would have to say primarily our focus on quality and level of service. Customers come to CrystalTech based on our reputation of offering stable and reliable hosting solutions and 75% of new customers come to use via word-of-mouth. We spend little money on advertising and rely on our customers and our reputation to bring in new business, and this approach serves us quite well. Referrals and word-of-mouth are the best forms of advertising because they are based solely on your ability to deliver the services you market and not on advertising dollars.
In terms of service, we built the best Control Center in the industry versus using a pre-built third party system. Because of this our Control Center offers a complete integration with our infrastructure, something the third party products are not able to offer. When you add true 24/7/365 live technical support, where you can actually call and talk to someone in the middle of the night and not simply submit a ticket or leave a message, you can quickly win over a lot of customers. As an aside, it's funny how many times a call comes in late at night or early in the morning and the person on the other end says something like “I just wanted to see if someone answered.” When you’re able to provide that level of service you can really compete and grow, especially in an industry that is becoming more and more commoditized.
What do you believe differentiates CrystalTech from other web hosting companies and service providers?
Well, apart from the items I mentioned in the previous question (the level of service and support we offer and the amount of control we put in customers’ hands through our Control Center) I feel the amount of communication we have with customers is different than most and our adoption, integration and use of the latest technologies is also something that sets up apart from other web hosts.
With regards to customer communication, CrystalTech is a very open and honest company. In fact, if there was a criticism that could be leveled against us it’s the fact that we’re almost too truthful. However, we’ve always believed that customers have the right to know what’s going on, whether we release a new service or tool within our Control Center all the way to the recent Acquisition Agreement between Newtek and CrystalTech. Customers trust us to provide a certain level of service and provide a backbone that they can base their businesses and their futures on. To achieve that level of trust you need to let people know what is going on with your business and the direction you see your company heading. We do this and take this responsibility very seriously.
As for the adoption of technologies, CrystalTech was started by programmers, and we have kept the programmer mentality as a core philosophy. We know that people who use Microsoft or Macromedia products and scripting environments want to be able to upgrade their capabilities when new versions of ColdFusion or .NET come out. We were one of the first web hosting companies to offer .NET as a scripting environment after its initial release. In fact, we actually gave customers a choice of versions of .NET, either 1.0 or 1.1, prior to our conversion to Windows 2003. And speaking of Windows 2003, we were one of the first web hosts to offer a complete infrastructure based on Windows 2003, from mail servers to SQL servers to web servers. We already have our sights set on “Whidbey” and “Blackstone” (.NET 2.0 and ColdFusion MX 7 respectively) and are very excited about the changes we’re seeing in these latest versions.
Where do you think are the key growth areas over the next decade for CrystalTech?
Our affiliation with Newtek enables us to focus on a truly spectacular offering for the small to medium sized enterprise market. In addition, as CrystalTech rolls into becoming the Information Technology arm of Newtek the possibilities are endless. We are looking to provide a wide range of services to existing and potential clients, ranging from additions to our support options to further acquisitions. Without tipping our respective hats, the next decade will be very exciting for us.
What are your perspectives on the future of the web hosting industry and do you see further consolidation in the market?
Consolidation is never going to end. Large hosting conglomerates will continue to increase their numbers through the assimilation of smaller market hosts, and there are a whole lot of small hosts.
As for the future, the SME market is still largely untapped and hosts are just now rolling out specific hosting plans and services to meet the needs of that market. I also see more interest from Microsoft and Macromedia in the hosting industry as both are providing some decent co-marketing opportunities and are really starting to focus their efforts and product development to meet the needs of web hosts. In fact, CrystalTech will be an exhibitor at Microsoft’s TechEd conference at the request of the Microsoft ASP.NET Hosting Advantage program. I’d say that’s a good indication that Microsoft realizes the importance of the hosting industry. For their part, Macromedia is looking into making some changes to their Partnership Program specifically to suit the growing need for integration of ColdFusion in the shared hosting environment.
Now that you've been acquired by Newtek Business Services (in April 2004), what changes do you expect to happen over the coming months? More importantly, how have your customers reacted to this?
Not too much should change over the next few months, much less in the future. The Agreement that was signed gives CrystalTech the ability to act as more or less a separate entity underneath the Newtek umbrella. We are keeping everything, from our current infrastructure and data center to all of our employees. Specifically, Tim Uzzanti, our CEO and CrystalTech’s owner, is staying put and will remain as CEO after the acquisition. As such, we will have the ability to set the direction of CrystalTech and to make decisions, to a certain extent, on our own. This is not a customer base acquisition or a data center acquisition. Newtek knows what has made CrystalTech successful and has no intention of doing anything that would either negate the hard work we’ve done over the past 7 years or prevent us from continuing our growth and our direction.
As for customer reaction I’d call it optimistic, but tempered with concern. As many people know the web hosting industry is not known for seamless and smooth transitions of ownership. Many people have been burned by a host or have faced a situation where one day they’re hosted by one web host and the next they’re hosted by someone completely different. Therefore, our customers have a right to be a bit concerned. However, we will be the exception rather than the norm because this acquisition is so much different than the others our industry has seen. We are being acquired by a company who specializes in a particular niche within the business community, and we just happen to fit perfectly within that niche. Newtek provides products and services that are geared towards and marketed to the small to medium sized business. When you put CrystalTech into the mix along with the other services offered by Newtek, specifically merchant services, small business loans, financial services, small business insurance, and others, you can see how all of the pieces fall perfectly into place. We will be part of a company that can meet the needs of the SME market, moving beyond simple “business hosting” into a more robust offering. In addition, our customers understand that CrystalTech is simply changing ownership, not direction or vision. The people who have made CrystalTech what it is today are remaining and will continue to provide the service our customers expect. We have taken great pains to make sure our customers are aware of everything that is going on, going so far as to not only email all customers when the initial Agreement was signed but to the creation of a separate area on our Forum where people can go to ask questions or express concerns and receive answers directly from our CEO, and this has helped alleviate the majority of their concerns.
Which party was first to initiate contact regarding a buy out agreement and what prompted you to agree to it in the end?
CrystalTech has long been a target for acquisition. However, we were never approached with a “business plan” that we felt matched our own levels of customer care, support and service. With Newtek, we have a company that operates with the same focus and has the same mindset as we do. They have a vision that closely resembles our own, and they have the desire to build their business based on quality of service and quality of product offering. That is a very key point and is the reason why initial inquiries turned into serious discussion.
Do you expect your future management decisions regarding CrystalTech to become less influential or limited because of this acquisition?
As I’ve stated before, we are going to be able to act more or less as an independent division. In fact, we will be able to help Newtek with their direction and goals and help shape the future of the company as a whole rather than simply standing back and being given a list of tasks and milestones to reach. We are looking to be a very influential entity and to having a very vocal presence with Newtek, and I believe they would be disappointed if we didn’t take that approach to all of this.
Presently, CrystalTech's product and service lines are based on a primarily Microsoft platform. Do you have any plans to expand this to other platforms i.e. Linux or FreeBSD to increase market share?
We’ve felt it’s a good business decision to stick with what you’re good at, and we’re experts in providing web hosting based on the Windows platform. In addition, with the way the open source community is expanding their own offerings into the Windows environment we’re in a pretty enviable position as we can offer PHP, MySQL and other open source tools along with ASP, .NET, ColdFusion, and Microsoft SQL all within a single network infrastructure. We don’t have to cross pollinate out network with FreeBSD or Linux in addition to Windows in order to provide those products and services. Now, all of this being said, would we consider adding a new platform to our infrastructure? Anything is possible.
Now the hosting industry is very competitive and is infused by changing customer trends and new technologies. So, what really keeps you up at night?
In the past it was how to bring the services CrystalTech offers to the SME market efficiently and inexpensively. Our acquisition by Newtek is going to allow me to sleep now as we will have an association with a company who is already laying the groundwork and already has a menu of services that are currently being marketed to SMEs. Therefore, we will be able to share in marketing costs versus bearing the burden ourselves.
Where do you see CrystalTech, or specifically Newtek's IT division, in 5 years time?
I don’t think it would be presumptuous of me to say that we’ll be looked upon as a company who “did it right”. We started with a focus on product and service rather than customer count, and have continued that line of thinking throughout our existence. With the acquisition, we’ll have a full suite of tools and services to offer customers of all levels, from the web designer to the business owner. The Information Technology division of Newtek has an unlimited growth potential, and we are already planning the direction we’re going to move in. Again, I can’t really discuss any future plans as some are in the planning stages and some are still in the discussion stage. However, rest assured we are approaching the future with our eyes wide open and with a clear vision.
Finally, what personal or business advice would you give to smaller web hosting companies struggling to compete in this industry?
Stick with what you know and what you’re good at. If you know Linux, offer Linux and only Linux. In addition, do not get into this business and try to compete on price alone. The hosting industry is inundated with startups and with the high availability of low cost dedicated servers it is impossible to compete and offer a high level of service when your hosting plans cost $20 per year. Providing the service, versus simply providing the commodity of hosting, is what will allow people to remain viable and will enable you to stick around. Finally, keep up on the industry: read newsgroups, read hosting review sites and forums, subscribe to industry newsletters, check out your competitors. Keep abreast of the issues others are having and try to be proactive in your offerings rather than reactive.
For more information regarding the company and its products, please visit the website at http://www.crystaltech.com/.
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