SingleHop Extends the Dedicated Servers Trend

Another webhost upgrades its service to offer more to high end customers, part of a trend that is changing the industry.

by Alex Goldman ISP-Planet Managing Editor [January 18, 2007]

"We started in mid-2003," says Zak Boca, co-founder, with partner Dan Ushman, of shared hosting provider midPhase and, more recently, dedicated provider SingleHop, both based in Chicago.

"We started with $1,500 in credit card debt. For the first few months, we put everything back into the business. I was holding down a pizza job and attending college. We worked 80, 90 hours per week, and were growing at a phenomenal rate. For 2003, our revenue was $120,000 (of course, that's for half a year). For 2004, it was $1.4 million (that's when we made our first hire). For 2007, we're predicting $10 million in revenue."

Humble beginnings
Founded in Bowling Green, Ky., while Boca and Ushman were in college, the company is now based in Chicago, where it has prime data center space in Equinix and recently added some more at RCN Business Solutions.

Boca and Ushman brought banner ad and search engine experience from building a Bowling Green-based company called Nexads (now part of Seattle, Wash.-based Marchex).

"Given our limited capital, our marketing experience helped us make the most of it," Boca says.

He's proud to have avoided investors and venture capitalists. "We're entirely self-financed. We have no outside investors. We're a debt-free company."

The company had always planned to sell dedicated servers. "The goal was to get into higher end services, but that was not feasible with our startup capital. A year and a half ago, we started picking up dedicated customers. Over that time, midPhase picked up about 500 upsells. These were upgrades from our midPhase shared customer base to our midPhase dedicated server product."

Although SingleHop was launched in 2006, Boca and Ushman had already learned the business through these upsells.

A new idea
Boca says that SingleHop is different because it offers transparency. Customers can price each element of the dedicated service and can choose only the items they need. "For example," he explains, "many of our customers use CPanel. We offer CPanel management, but many of our customers already have CPanel experience on staff and don't need us."

With SingleHop's menu of services, they don't need to buy a service they won't use. "If they're already paying someone in house to manage the server, they don't have to pay us to manage it too."

One item SingleHop offers for free is a security audit. ISP-Planet sees many ISPs, in all businesses, offering some security services for free because the product protects both the ISP and the customer.

But Boca says that's not why SingleHop offers the service. He says that many of his customers need the service, whether they know it or not. "Many merchant processors won't even allow you to sign up with them unless you comply with some security standards. VISA now offers zero liability for hacks, if you meet their security requirements. It's basic stuff, like using SSL, like having certain ports closed (or being able to justify them being open)."

The future
SingleHop is small but growing. midPhase is huge, with about 75,000 customers, Boca says.

The plan is to add more services to SingleHop. Boca says it's easier to add services to a menu than it is to add services to a bundled offer. "When EV1 adds a service, they have to offer it to their entire customer base. It's easier for us to roll out new services. Our next service will be IDS."

Does the company have any specialty verticals? "We're seeing a lot of Web 2.0 companies, with video streaming. We're big on Windows clusters (even though about 90 percent of our shared customers are on Linux."

Will ISPs reading this article be able to resell your services? "We will offer a full-blown control center, hopefully in the Spring."

Finally, Boca returns to the idea behind SingleHop. "If you come to our site and have no interest in our services, fine. Just buy a server right off our website. You'll find our prices are competitive. Then, if you decide to add services later, you'll find our prices for those are competitive too. I feel we're in a good position."

Just about every ISP in the U.S. wants to upgrade its services, in part because shared hosting is becoming a commodity, and in part because customers are becoming more comfortable with relying on ISPs to manage their data. ISPs can choose to follow this trend—or to be defeated by large enterprises utilizing economies of scale to offer services at half the price the smaller ISPs can afford.

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