Mike Feury
03-19-2002, 03:19 AM
Hi All,
I'm looking at getting into reselling over the next few months, and have been reading a lot of your comments, advice and experiences. Great stuff, I've learned a lot - thank you all :)
Maybe I can give something back to you, based on my experience in another Internet industry. I was heavily involved in an industry which began in 1999, flourished until April 2000, and then died a painful death after the NASDAQ DotCom collapse.
Observing the hundreds of companies which launched in that industry [guess ~300], I noticed a pattern which was repeated many times over. Mind you, that's what patterns do :D Anyway, using the 2 "hot" companies SplashHost [SH] and MCHost [MC] as examples, here's how I predict they'll play out.
SH & MC appear to be run by technically skilled people who are very responsive to their customers. This is very similar to the better smaller companies I've observed before, and typically generates a lot of enthusiasm and loyalty among a technically savvy and active [eg forums] sub-section of customers.
Both companies are in an early stage of development. SH seems to be very young, if Alan could run it on his own up to now. MC are a little less young, currently going thru their first major growth phase. What can we expect?
Nobody knows. It all depends on how the companies respond to various typical stress points they will meet over the next year or two. Each stress point will test whether the company is actually a sustainable business, or merely a good idea pursued with enthusiasm.
The first major stress point is when the customer demand outstrips the capacity of the company founders. That demand will appear mainly in 2 forms - increased physical needs [eg servers, bandwidth] and increased customer interaction [queries, complaints].
The typical response will be to hire people. Which is a whole can of worms in itself. Is good talent available locally? How good are the companies at judging talent? How long will it take to hire? How long to train? What level of supervision? How to maintain service to rising demand with the extra load of hiring, training, supervising? Does payroll compromise cashflow?
Do the founders understand that their new employees will not have their level of commitment and enthusiasm? That it'll take quite a while for the employees to 'get up to speed'. So that it's very likely that the initial excellent service will degrade to a more corporate level.
More importantly, will there be a customer backlash from people accustomed [spoiled :)] to prompt competent response from company principals? Will the savvy and active group move onto the next 2 'hot' startups, which strangely enough feature excellent service from the founders? Meanwhile, spreading reputation-destroying criticism around the forums.
If the companies can transition from enthusiastic and capable founders into developing business managers, then they could well weather this first major stress point. That's a big "if" though - the skills required are very different.
_ _ _
A big stress point which can happen any time after a company gains momentum is when their system structure comes under strain. This could happen due to malicious attack - potentially devestating if security skills or implementation are weak - or when they are forced to move to a new facility or change their network supplier for capacity reasons.
This will test the company's general, crisis and project management skills, its ability to react, plan and organize. Not to mention, keeping customers happy and/or informed while it's happening.
_ _ _
If this is indeed a good idea, competitors will leap out of the woodwork - the joys of Capitalism :) Will the company have built up a sufficient well of goodwill to keep most of its clientele, or will arrogance or inattention during the early corporate stage have destroyed early gains?
Will the business systems the company has put in place be flexible enough to respond to increasing competition? Or will there be fixed costs committed to which will be millstones from there on out?
_ _ _
Ultimately, this looks like a commodity business to me. Seems a natural for say ISPs to get into - they already supply bandwidth and hosting on a small scale to their end-user customers. When AT&T et al start supplying space and bandwidth to resellers, where does that leave companies like SH & MC?
The big guys will win the branding war hands down, which leaves service as the survival tactic for the smaller guys. That's when the well of goodwill will be a mainstay for our hosts. And the time to fill that well is now - from the beginning, and right on thru the growth phases.
And Resellers - what of us when we get squeezed by our own swelling numbers, and also maybe by increasingly simple end-user offerings from the big guys?
Service and added value will save those of us who survive. Service as per the hosts, and added value thru additional services like say web design, good information etc.
_ _ _
We can expect many hundreds of hosts like SH & MC over the next year or so - and many thousands more Resellers also. The presumed Internet recovery should make room for most of us for another year or two beyond that.
Then we can expect consolidation to kick in as the big guns spy money to be made, and the weaker companies start to wilt under competitive pressure. Lots of closures, takeovers and mergers.
In that climate, remaining Resellers will probably be well-advised to look at partnering with colleagues, mainly seeking to fill in gaps in their offerings. eg you're a whizz at customizing customers' databases, while I'm strong in web design - we could offer a more complete package together.
_ _ _
Anyway, enough rambling from a guy who isn't even in the game yet :D It'll be interesting to see how you folks in the trenches think it might all play out.
I'm looking at getting into reselling over the next few months, and have been reading a lot of your comments, advice and experiences. Great stuff, I've learned a lot - thank you all :)
Maybe I can give something back to you, based on my experience in another Internet industry. I was heavily involved in an industry which began in 1999, flourished until April 2000, and then died a painful death after the NASDAQ DotCom collapse.
Observing the hundreds of companies which launched in that industry [guess ~300], I noticed a pattern which was repeated many times over. Mind you, that's what patterns do :D Anyway, using the 2 "hot" companies SplashHost [SH] and MCHost [MC] as examples, here's how I predict they'll play out.
SH & MC appear to be run by technically skilled people who are very responsive to their customers. This is very similar to the better smaller companies I've observed before, and typically generates a lot of enthusiasm and loyalty among a technically savvy and active [eg forums] sub-section of customers.
Both companies are in an early stage of development. SH seems to be very young, if Alan could run it on his own up to now. MC are a little less young, currently going thru their first major growth phase. What can we expect?
Nobody knows. It all depends on how the companies respond to various typical stress points they will meet over the next year or two. Each stress point will test whether the company is actually a sustainable business, or merely a good idea pursued with enthusiasm.
The first major stress point is when the customer demand outstrips the capacity of the company founders. That demand will appear mainly in 2 forms - increased physical needs [eg servers, bandwidth] and increased customer interaction [queries, complaints].
The typical response will be to hire people. Which is a whole can of worms in itself. Is good talent available locally? How good are the companies at judging talent? How long will it take to hire? How long to train? What level of supervision? How to maintain service to rising demand with the extra load of hiring, training, supervising? Does payroll compromise cashflow?
Do the founders understand that their new employees will not have their level of commitment and enthusiasm? That it'll take quite a while for the employees to 'get up to speed'. So that it's very likely that the initial excellent service will degrade to a more corporate level.
More importantly, will there be a customer backlash from people accustomed [spoiled :)] to prompt competent response from company principals? Will the savvy and active group move onto the next 2 'hot' startups, which strangely enough feature excellent service from the founders? Meanwhile, spreading reputation-destroying criticism around the forums.
If the companies can transition from enthusiastic and capable founders into developing business managers, then they could well weather this first major stress point. That's a big "if" though - the skills required are very different.
_ _ _
A big stress point which can happen any time after a company gains momentum is when their system structure comes under strain. This could happen due to malicious attack - potentially devestating if security skills or implementation are weak - or when they are forced to move to a new facility or change their network supplier for capacity reasons.
This will test the company's general, crisis and project management skills, its ability to react, plan and organize. Not to mention, keeping customers happy and/or informed while it's happening.
_ _ _
If this is indeed a good idea, competitors will leap out of the woodwork - the joys of Capitalism :) Will the company have built up a sufficient well of goodwill to keep most of its clientele, or will arrogance or inattention during the early corporate stage have destroyed early gains?
Will the business systems the company has put in place be flexible enough to respond to increasing competition? Or will there be fixed costs committed to which will be millstones from there on out?
_ _ _
Ultimately, this looks like a commodity business to me. Seems a natural for say ISPs to get into - they already supply bandwidth and hosting on a small scale to their end-user customers. When AT&T et al start supplying space and bandwidth to resellers, where does that leave companies like SH & MC?
The big guys will win the branding war hands down, which leaves service as the survival tactic for the smaller guys. That's when the well of goodwill will be a mainstay for our hosts. And the time to fill that well is now - from the beginning, and right on thru the growth phases.
And Resellers - what of us when we get squeezed by our own swelling numbers, and also maybe by increasingly simple end-user offerings from the big guys?
Service and added value will save those of us who survive. Service as per the hosts, and added value thru additional services like say web design, good information etc.
_ _ _
We can expect many hundreds of hosts like SH & MC over the next year or so - and many thousands more Resellers also. The presumed Internet recovery should make room for most of us for another year or two beyond that.
Then we can expect consolidation to kick in as the big guns spy money to be made, and the weaker companies start to wilt under competitive pressure. Lots of closures, takeovers and mergers.
In that climate, remaining Resellers will probably be well-advised to look at partnering with colleagues, mainly seeking to fill in gaps in their offerings. eg you're a whizz at customizing customers' databases, while I'm strong in web design - we could offer a more complete package together.
_ _ _
Anyway, enough rambling from a guy who isn't even in the game yet :D It'll be interesting to see how you folks in the trenches think it might all play out.