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January 14, 2008

Growth is a Good Thing. No Really.

The high-pitched whine of a drill sends a shiver down my spine. I jump a little in my seat at a loud bang followed by shuffling feet and mumbled voices. I involuntarily cower at the unmistakable sound of a saw blade spinning—gaining momentum—biting. Nope, I'm not sitting in a theater watching Eli Roth's next installment in the Hostel franchise. In fact, I'm at the office.

That's right. I'm sitting at my desk. Sitting at my desk and trying hard to ignore the plethora of singing power tools and crooning contractors who for the last two months have been busy putting up dry wall, wiring electrical outlets, installing locks, and occasionally setting off the fire alarm. It's the sound of growth. And at the risk of conjuring up images of bad 80's haircuts, guys in jeans way-too-tight, and shirts where the collars just wouldn't seem to stay down-- one might dare refer to the ruckus as "growing pains".

Make no mistake about it, growing is painful. Take it from me. I think I was 19 before I managed to grow enough facial hair to require the use of a razor. Combine that tidbit of info with the fact that I had every 8-bit computer known to man proudly on display in my room right next to my impressive collection of latex Hollywood style monster masks and you'll start to get the picture. Growing requires a lot of work and allows almost no planning as humans have a habit of blossoming in their own sweet time. Companies are no different.

So while management did everything possible to make the required building expansion as unobtrusive as possible, well, it's still construction work within earshot of a whole team of developers, technicians, and engineers. That's just the way it is. And while I may complain about the noise and distractions now and again, there is also something very comforting about knowing that I am working at a place that is growing. Growing phenomenally, in a time when not all technology companies are fairing so well.

When the dust settles there will be a lot of new space.

More space means a lot of new hires. More space means more opportunity for existing employees. And yes, more space means more work for everyone involved. Having worked for three failed ventures in as many years, I can tell you I am more than happy to be putting my time and effort and energies into something that is successful; something that continues to be more successful every day. It feels good to be on the winning team for a change. Hearing what some of the other engineers here are saying I don't think I'm alone in that sentiment.

That's not to say I'll miss the noise when the construction is all said and done. Which in case you are interested sounds to be winding down. As for SoftLayer, well something tells me we are just getting started.

-William

Categories: 
January 11, 2008

I Need a Whataburger!!

Somebody...Anybody...I need a Whataburger!!

If you haven't been to a Whataburger, I'm sorry. It's an amazing fast food chain that sells not only the freshest made-to-order burgers, but they're also open 24-hours a day, and their breakfast is second to none (Chris Menard has a clinical addiction to their taquitos). The problem with this is that they only exist in the South. I'm in the North. In Seattle, Washington to be precise—accompanied by our go-live team to manage our newest datacenter and make sure the launch goes smoothly.

On the bright side (no pun intended, it hasn't stopped raining since we landed), it has. We have assembled an amazing team, the datacenter is absolutely spectacular, and the locals have been very friendly. Efficiencies we have built into our normal daily operations over the last two years have basically allowed us to "drag and drop" our datacenters as needed, where they are needed without having to reinvent the wheel every time we launch. Since the deployment is simple, we can focus on service upgrades—like the latest 40-Gigabit rack-level connections—while we roll out a new facility. Connectivity you could use…say…to look for a Whataburger near you http://www.whataburger.com/one_near_you.php (I look every day). We've already flown through our first historic Seattle Truck Day, and had a second one to boot. We're provisioning droves of machines for new and current customers who are taking advantage of our network architecture, tools, and StorageLayer to create their own custom solutions. In a nutshell, we have brought a new DC online and maintained the ability to provide our customers with the same cutting edge hardware and innovative utilities that they have come to expect in Dallas.

On the darker side, with everything is going so well, it leaves a lot of time to sit and think about a tasty Whataburger. With jalapenos. And bacon. Ugh.

-Joshua

January 10, 2008

SL "Spa"

SoftLayer Sales Office = SoftLayer Med Spa & Wellness Center

It takes a lot to be a SoftLayer sales representative. We sit long hours at our desks staring at the computer screen. I should probably attribute this to the reason I cannot stand more than 4 feet away from the microwave at home, if I want to be able to tell what time it is by its digital clock. Sitting at a computer for a miminum of 10 hours per day, and a minimum of 5 days per week can really create stress and tension on your shoulders and back. Well, thank goodness Lance, Steven, and Mike are here to help. Around September 21st, a sales incentive came our way that would change our sales office forever. If we reached a certain goal, we would all receive comfy, cushiony, vibrating massage chairs for each of our desks. And being the *excellent* little sales team that we are, of course we received the prize. The funny thing about it is, they are quite loud. So you know when one of us is "getting our massage on," as Doug Jackson likes to put it. Respectively, we have to turn them off when answering the phones. No customer wants to hear, "H-h-h-h-h-e-e-e-l-l-l-oooo, S-o-f-t-L-a-y-e-r S-s-s-a-a-l-e-ssss...."

The SoftLayer Med Spa comes with other services as well. We all sit in a very close range to one another. This leads to all sorts of possible problems, in regard to spreading colds, etc. On any given day you might find myself or Michael Miller stealing Daniel's Airborn or Mary Hall bringing in cough drops for everyone "just because." Basically, you can always find the cure and remedy you need in one cubicle or another. It has always been a huge mystery as to why Daniel has Febreeze and Lysol at his desk. I like to think he is spreading the love, and expanding our wellness center. "THANKS, DANNY!"

As you can see, we are very well taken care of. The healthier we are, the more time is spent helping our beloved customers!

-Amanda

January 9, 2008

More "GAHAP"

Our CEO said “so when will our next blog post on GAHAP come out?” By GAHAP he means “generally accepted hosting accounting principles.” He asked for it, so you get it :). If GAHAP bores you, try this on your iPhone. It’s fun!

I could probably squeeze everyone left reading at this point in a Dodge Viper and we could discuss this over lunch. But SL doesn’t provide Vipers to executives so I guess I’ll post it here for you. A balance sheet by definition is a snapshot of the current financial condition of a company. Here's a formal definition. A GAAP balance sheet simply doesn’t portray an accurate picture of the financial condition of a hosting company.

Probably the most important value that a GAAP balance sheet completely misses is the value produced by monthly recurring revenue. By implementing some sort of fair value accounting as I mentioned before this value gets captured. But on that part of the balance sheet, it still doesn’t help someone looking at the dreaded current ratio. So here’s a way to get a measure of this value that matches up to current liabilities on the balance sheet and get a current ratio that better reflects the company’s true financial position.

Since current liabilities include debt that must be paid at any time over the next 12 months, I would propose using statistics to walk forward 12 months and add “Future EBITDA from Existing Customers” as a current asset on the balance sheet. I can sense the shudders of all accountants who are reading this because you’re thinking that this completely abandons the revered principle of conservatism. In hosting, however, this can be done with conservatism in mind by employing statistics. Public accounting auditors employ statistics every day in their work, so the use of statistics is not a foreign concept to accountants.

Here’s how I’d propose hosting companies do this. First, look at the behavior of the current customer base at the beginning of each month regarding customer churn and the purchase of incremental business by remaining customers. Ignore all new customers acquired during the month and add them to the customer base for next month’s analysis. For each month over the past 12 months, analyze how much revenue is lost from customers who leave and net that from how much revenue is recognized from the existing customers who remain. The results of this analysis can be statistically boiled down to give you an idea of how much revenue will come in over the next 12 months even if you do not gain a single new customer during the next 12 months. That’s the principle of conservatism coming into play here. Let’s call this “statistically stable anticipated revenue.” By the way, at SoftLayer, the incremental business from customers who stay is greater than the business lost from customers who leave us.

Second, take a look at EBITDA margins over the past 12 months and work the statistical mojo to get an idea of EBITDA margins going forward. Multiply this margin against the statistically stable anticipated revenue to arrive at “Future EBITDA from Existing Customers.”

Third, add this category as a new line in the Current Assets portion of the balance sheet as well as adding it as a new line in the Stockholder’s Equity portion of the balance sheet. The resulting balance sheet is much closer to the true financial condition of a hosting company than a traditional GAAP balance sheet.

Why is this view more accurate? 1) A hosting company isn’t like a retail store. Like a hosting company, retail stores have repeat customers but the repeat behavior is more sporadic. The customer may decide that the weather is too bad and they’ll run out and get that new pair of shoes another day. Or the weekend may have been too hectic for a grocery store run so they’ll eat out for the next week. With hosting customers, mission-critical things live on their servers and they are usually set up on automatic monthly billings. Repeat sales are much more predictable than for customers of retail stores. This consistent cash flow has real value, and to not capture it on the balance sheet negatively distorts the financial condition of the company. 2) Putting this statistically solid future EBITDA as a current asset allows a better picture of the current ratio because it is from this EBITDA that the current portion of the company’s debt will be paid. This gives a banker, etc., a clear view of whether the company will struggle over the next year to pay them back.

Here’s how a sample summary balance sheet would look before and after this adjustment.

                                                  <b>GAAP</b>            <b>"GAHAP"</b>
Cash, A/R, Other Current Assets                $33,218,805     $33,218,805
Future EBITDA from Existing Customers        <u>           $0     $26,575,044</u>
Total Current Assets                           $33,218,805     $59,793,849 
 
Fixed Assets                                   $90,355,150     $90,355,150
Other Assets                                    $9,301,265      $9,301,265
                                             =============================
<strong>Total Assets</strong>                                  $132,875,221    $159,450,265 
 
Current Liabilities                            $55,807,593     $55,807,593
<strong>Long Term Liabilities</strong>                          $67,766,363     $67,766,363 
 
Stock, Paid in Capital, Retained Earnings       $9,301,265      $9,301,265
Future EBITDA from Existing Customers        <u>           $0     $26,575,044</u>
<strong>Total Stockholder's Equity</strong>                      $9,301,265     $35,876,310
                                             =============================                                                                                   
<strong>Total Liabilities and Stockholder's Equity</strong>    $132,875,221    $159,450,265 
 
Current Ratio                                         0.60            1.07

-Gary

Categories: 
January 8, 2008

Are Your Leaders Scalable?

Over the last two years, SoftLayer has grown from nothing to over 10,000 servers and by the end of this year could surpass 30,000 servers if growth continues on its current track. A key component in managing this growth is finding leaders with the ability to scale as the company grows. More often than not, entrepreneurs are good at starting businesses but not good at growing them. In that vein, if you are the leader of a startup, what traits does your management team needs to have if one is to build the biggest, baddest and most valuable company in an industry?

Battle wounds: We all have read the stories about Bill Gates quitting Harvard to start Microsoft, Michael Dell selling servers out of his dorm room, and Larry and Sergey leaving Stanford to start Google. It is very rare that someone can come out of college and start something that becomes the dominant player in an industry. The majority are an amalgamation of our experiences of years of operating any one of a number of businesses. Look for the managers with some scars. Even the aforementioned entrepreneurs are pretty much battle tested by now.

Visionary: As fast as SoftLayer is growing, we better have a pretty good vision of where we are going so we don't run this Porsche off a cliff and into an abyss. We have seen many potential customer IT managers come to us in a panic upon their sudden realization that no more servers can be added to their datacenter because of inadequate planning for power and cooling. And I am not just picking on IT; this applies to the finance function as well. As the CFO, I have to have a vision for what my organization is going to look like all along the way, from the startup phase to an IPO, merger or acquisition or whatever other path this journey takes us.

Communication skills: Today's CFO must be more technically proficient than his predecessors; however, this does not negate for the financial or any other executive to be able to communicate not only with company staff, but customers, vendors, bankers and shareholders as well. As discussed in other blogs, the internet has given all of us the ability to communicate in so many different ways than in the past. The challenge of any manager is to figure out which method of communication is the most effective in a given situation to get the job done and keep the organization moving forward.

Je ne sais quoi: It's a French phrase we as Americans have used over the years to refer to a certain quality someone has that cannot be explained. A good manager has to have this “Presence”. While the internet and email and all forms electronic communication have made the world smaller, to have an impact a leader still needs to be out communicating, listening and understanding to keep the team on the right track. The leader who sits in his office all day can review a lot of data but needs to get out to find what is really going on inside a company. The “Ivory Tower” manager is doomed to failure in today's fast paced business environment.

Rock in times of adversity: For all of us who have participated in startups (and I have done four now), there are going to be tough times. You can count on that. How you react in those situations sends a message about your ability to lead to your staff. As a leader, you have to be the go-to person in tough times. Are you prepared to handle the adversity?

The team: Much like a professional hockey team (I would use football but my son plays hockey and this is my blog), you can't do it all alone. From the general manager on down, the owner/president of a team has to have the ability to attract top notch staff to who he can delegate the work of moving the organization toward the ultimate prize in hockey, The Stanley Cup. If he can't and tries to keeps all the work for himself, he will find himself on the outside looking in.

Do we have the team to scale? So far it appears that we do. Are we going to have to add additional leadership along the way for us to achieve our goals? Absolutely. We have just added a Chief Strategy Officer to the executive management team.

We continue to be confident our management team can provide the leadership needed to grow SoftLayer into an industry leader.

Are you as confident in your team?

- Mike Jones (Who?)

January 2, 2008

Soft Rock

I remember when I figured out that I wanted to be different. My mother took me to see Elvis in concert a year before he died. I knew at that moment I wanted to be a part of something great.

Because of that concert I spent years learning how to play every musical instrument I could get my hands on.

Fast forward thirty something years later and I find myself working with my best friends to build the most innovative hosting company in the world.

I learned after many of my own concerts that it was "making a difference" and not a hit album that I was truly in love with. To steal a line from my favorite book, "I who knew not that I knew not, now know that I know not...and that's progress."

Not unlike the Beatles, SoftLayer is a phenomena that is larger than life. It's a culture. It's a way of life. It's how you do business. It's a necessity.

It is to be continued.....

I now know why Elvis left the building, it was to make room for SoftLayer.

-Chris

Categories: 
December 24, 2007

SLales Fun

As the leader of the SoftLayer Sales team, I like to think of myself as a well respected yet lovable boss that my employees loves to work with. However as all managers are from time to time, I can sometimes be the least liked person on the team due to the difficult decisions I have to make. So when my beloved team decided to create the JibJab snowball fight and post it on the SL forums, it was no wonder I ended up being the one who got hit where the sun doesn't shine with a snowball.

After seeing their video, I decided to make my own little JibJab video to show the sales team that I know what really goes on in the sales area when I am not around.

-Steven

December 21, 2007

It Takes All Kinds...Well, Four Kinds Anyway

Over the years I've had a chance to see a number of different organizations in operation – churches, non-profits, clubs, public companies, and private companies. I've found that in all these organizations, four types of people are needed in order for them to thrive.

I made this observation of four types of people about 20 years ago. I honestly don't remember reading this from a business book or hearing it at a seminar so I don't have a source to cite. But since there's "nothing new under the sun" according to Ecclesiastes, I apologize in advance if you're reading this and this list originated with you over 20 years ago.

Some may think that comfortable new buildings, plush surroundings, or artistic furnishings can help an organization thrive. I'm reminded of the IBM "Innovation Station" commercial. I couldn't find it on their site and the best I could do elsewhere is this Italian version. The surroundings of the people are merely surface cosmetics. The people are the soul of an organization, and each one has a different mix of gifts and talents. It is this mix of gifts and talents that I sort into four groups and the people of the organization must draw from their fundamental gifts and talents for an organization to thrive, regardless of the environmental cosmetics – especially if this is your environment.

Innovators
The first group of folks is the smallest in number. They're the innovators. They can approach a blank whiteboard, pick up a marker and brilliance flows through them onto the board. They're so in touch with markets that they don't just sense the needs felt by the market that need to be filled – they know the needs of the market before the market even feels these needs. The innovators cast the vision for what can be. However, if you ask them to make the vision better, deliver the vision, or maintain it after delivery, more often than not the vision will not be realized because making the vision reality is not a part of their gifts and talents. Making the vision a reality depends on folks from the other groups.

Refiners
These are some of the folks who approach a blank whiteboard and they pick up a marker, but the board remains white. It isn't within them to come up with new and innovative solutions to market needs. But if there's a new and innovative idea on the board, they'll grab a marker and make it better. Maybe the original idea has a logistical problem that keeps it from being viable. They'll solve that logistical problem. Maybe a proposed process is inefficient – they eliminate the bottlenecks. They perhaps can put together a great project plan and GANTT chart. But if you ask them to deliver the project or maintain it in a production environment, you may see failure and frustration. This is where the next groups come to the rescue.

Deliverers
Hail to the Project Managers here. These are the folks that can take a new idea that's been boiled down into a viable plan, marshal the troops, juggle dependencies, assign resources, balance budgets, tackle key tasks personally, hit deadlines, and declare victory when the idea is a reality. Project Managers also need some deliverers to work for them. These are the folks that gobble up a chunk of work on the project plan, put their nose to the grindstone, complete the task, and then return for more. But after the victory party to celebrate successful delivery, asking them to go to the whiteboard and think of something new or asking them to keep what they delivered up and running may be unproductive.

Maintainers
These are the folks that hate to see things break down. Their greatest joy is to do things over and over to keep production up and running and on pace. They love checklists, routine tests, and a predictable work day. I once worked as an automobile insurance underwriter, which is a fancy way to say that I sat at a desk and processed one application after another all day long, day after day, entering data and rating risks. I lasted about a year. This isn't part of my gifts or talents, and I gained a whole new level of respect for this group of people. Without them, the organization breaks down and ceases to function. And as anyone in hosting knows, keeping systems up and running is a key fundamental of the business. The coolest new features don't matter a bit if there's no electricity in the data center.

Dangers of "Pigeonholing"
An organization needs to know which category their folks are fulfilling in their current roles. But in reality, people often have gifts and talents that lend themselves to more than one of these groups. A smart organization will recognize this and allow people to grow and develop rather than sticking them in one spot forever. For example, I'm about equal parts Refiner and Deliverer, and don't ask me to innovate or maintain – you'll be sorry. I'll do best in a role that requires both refining and delivering. When an organization pigeonholes its people, they'll only keep the people so long. They have a way of leaving to find organizations with more fulfilling opportunities.

I can find all four of these groups here at SoftLayer. We also allow some crossover into the functions of other groups. We've found that a good number of our Deliverers are also good Innovators for example. Consequently, as a company, we've lost a grand total of three employees since our beginning.

-Gary

Categories: 
December 18, 2007

Relationships Are Key

Relationships are, well, key. This is true in all walks of life. It is especially true in a business environment. At SoftLayer, we understand this. There are two very important types of relationships that we continually try to maintain.

1. Customer Relationships - This is an obvious one. We constantly want to know what our customers have to say. We try to set aside time to call our customers, get to know them, gather feedback, and find out what makes them tick. If there is a way to improve, we want to know about it. Some customers prefer to deal with a specific person, whether it is a Salesperson, Support Technician, or Accounting Representative. While all departments work as a team and we do not specifically assign customers to certain employees, we do enjoy working with you if you specifically enjoy working with one of us! If there is not a little bit of personal communication, we would be your typical, cold corporation. We do not want to be labeled with this stigma. There is no denying that SoftLayer is rapidly growing into a major corporation. But we want to be the major corporation with a small company feel. Each of you is our favorite customer - keep dishing it, we can take it!

2. Employee to Employee Relationships - We would not be where we are if we did not get along well with one another. In fact, we work extremely hard at keeping the utmost respect for one another. Our technicians are some of the best in the industry, our Accounting Representatives some of the most personable, and our Sales team is quite the group of go-getters. So it is easy to keep a good lasting relationship with each and every employee. I can speak for myself, by saying that sometimes I am not the most technical person. It is great to have someone to go to at the drop of a hat to find out about a specific application or hardware question for a customer. The Sales Team is here for anyone to ask about pricing, or to help a customer with an upgrade. And Accounting is always there for any sort of billing need.

In a nutshell we are one big, happy family - that goes for customers and the entire SoftLayer team.

-Amanda

December 16, 2007

The Night Before Seattle

‘Twas the night before Seattle and all through the office
people were stirring, even the bosses.
The Dev guys were grinding on code one last time
in hopes all the errors for sure they would find.
 
The servers were powered and cabled and racked
and it took us a while to get them unpacked.
And Mike with his checkbook and Gary his stash
both paid our vendors a whole lot of cash.
 
When out in the parking lot the bass was a thumpin’
I sprang from my chair cuz I knew he was coming.
Over to the window I flew like a flash
pulled down the blinds and made a loud crash.
 
The lights on his truck gave off a strange orange glow
and I could see some weirdness just down below.
When what to my tired overworked eyes did appear
it was a great big guy and a whole lot of beer.
 
With his size and his stature, so calm with a grin
I knew in a moment it really must be him.
Faster and faster he came up the walk
he was hootin and hollerin and popin a top.
 
“Now, Miller! Now, Bud! Now, Coors! and Coors light!
On Corona! on Busch! On Lonestar! and Red Stripe!
To the top of the stairs! To the top of the world!
Drink away! Splash away! Slosh away all!”
 
Like molasses before a new fallen snow
he made his move to the door, be it very slow
Up in the elevator to the top he flew
with all of the beer and some pretzels too.
 
And then in a flash I heard in the hall
a pop and a fizz, did he drop them all?
As I ran down the way in hopes for a beer
I stopped in the hall for I knew he was near.
 
He was dressed in a pimp hat and humming tune
and his clothes were all black with 3 bars on his plume.
A few cases of beer he was trying to hold
and he kept grumbling something about it being cold.
 
His eyes how they stared; his eye brows so slanted
the beer must be heavy; cuz as he walked he panted.
I knew right at that moment; and just had to pause
I knew at that moment I had seen Lancey Clause.
 
He handed out beer with a groan and a scowl
he dropped one on his toe and screamed OOUU!
He spoke not a word but kept to his work
he filled fridges and coolers; with nary a burp.
 
After leaving a trail of beer all around
he went back to the elevator and headed down.
A clank and a thud as he dropped his keys
He went through the door and banged one of his knees.
 
I heard the door slam on his truck down below
and the tunes of the 80’s started to flow.
But I heard him yell as he drove out of sight
"sell a Seattle Server, Sell them all tonight!"

-Skinman

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