Essentials of Entrepreneurship: A Practical Approach

Rackspace Managed Hosting

In 1998, when Web hosting was in its infancy, three technologically-savvy friends from San Antonio, Texas, had a great idea for a new e-business – managed hosting.  Richard Yoo, Dirk Elmendorf, and Patrick Condon were former classmates at Trinity University in San Antonio, and were all pursuing careers in IT when they came together to discuss creating a new e-business that would lease and administer customized, dedicated Web servers from a secure, central data center.  They named their new company Rackspace Managed Hosting.

Needing to acquire additional funding for their new e-business, the trio pitched their new hosting company to two experienced San Antonio businessmen, Graham Weston and Morris Miller, who immediately liked the managed hosting concept.  Weston and Miller invested their own money in the new company and soon took responsibility for its overall management, allowing Yoo, Elmendorf, and Condon to concentrate on the technical aspects of the business.

One of the first problems the new management team at Rackspace had to solve was how to differentiate Rackspace from the hundreds of other companies that were entering the Web hosting market space.  To do this, the Rackspace management team asked themselves “What do our customers really want?”  Surprisingly, the answer was not rooted in server technologies.  The answer was “extraordinarily responsive customer support.”  The Rackspace management team then developed the company’s trademark – Fanatical Support—to express its commitment and unique approach to serving its customers.  The Fanatical Support approach included a 99.999% server uptime guarantee and 24 x 7 customer support provided by highly trained and qualified technicians.  And the commitment to Fanatical Support paid off handsomely.  In four years, revenues at Rackspace grew from $1.7 million (1999) to $40 million (2002) and the company has been profitable since 2001.

From its early beginning serving small-to-medium-sized local e-business, Rackspace has grown into one the larger Web hosting companies in the market.  Today, Rackspace provides managed hosting services to more than 4,000 customers, including Microsoft, Hershey’s, General Electric, U.S. Robotics, Columbia House, and Schlumberger, from four state-of-the-art secure data centers:  two in San Antonio, one in Herndon, Virginia, and one in London, England.

Source: Discovering the Internet: Complete Concepts and Techniques, p. 486 by Shelly, Cashman, Napier, Judd, Kaufmann

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