Compaq, Red Hat Score Win

Web hosting company RackShack inks $20 million deal to buy ProLiant servers loaded with Linux.

In another coup for Linux distributions in the enterprise, Compaq Computer Corp. last week announced a $20 million deal with Web hosting company RackShack.

RackShack, a dedicated hosting subsidiary of Everyones Internet Ltd., an Internet and digital subscriber line service provider based in Houston, agreed to equip its data centers with some 1,000 ProLiant DL320 servers running Red Hat Inc.s Red Hat Linux and Ensim Corp.s Webppliance, which transforms a ProLiant into a high-volume Web hosting appliance.

RackShack will buy 8,000 to 10,000 more servers over the next two to three years, said Robert Marsh, CEO and president of RackShack and Everyones Internet.

RackShacks hosting business was centered on Sun Microsystems Inc.s Cobalt RaQ server appliance until last November. But Sun "was not as in tune with the hosting provider relationship as the Cobalt team had been in the past," said Marsh, referring to Suns December 2000 acquisition of Cobalt Networks Inc.

"So, whereas we had bought about 1,000 Cobalt RaQs in the first half of last year, those numbers dropped dramatically to the point where we are not making any purchases today from Sun Cobalt," Marsh said.

In November, RackShack launched a Linux-based solution: a traditional white-box, or generic, server, paired with an Ensim control panel, which gave more power than the Cobalt solution but with the same ease of use, Marsh said.

As the companys server purchases increased to 500 a month, RackShack started looking for a premium name-brand Tier 1 product to add to its hosting fold.

"We held open discussions with Dell [Computer Corp.] and Compaq and tried to open serious discussions with IBM and Sun, Marsh said. "IBM was not interested in opening serious discussions, and Sun Cobalt, a Sun unit, wasnt interested in putting an aggressive deal on the table despite the huge volume of Cobalt products we had previously purchased."

RackShack was pleased and surprised at the quality of the ProLiant servers, especially their cooling and fan systems, which were ideal for data center environments.

"[The servers are] also more stable and faster than the white-box alternative," Marsh said.

While there was a price difference between the white-box and ProLiant servers of almost 300 percent, Compaq had put aggressive financing on the table, Marsh said. "If you take the increased reliability, the lower cost of maintenance and the lower cost to finance this, the delta became much smaller and a very doable deal at the price point that we put these servers out there," he said.

Judy Chavis, director of the Compaq Corporate Linux Program Office, said that its clients are under financial pressure due to economic and market conditions and are looking to cut costs.

"We are aggressive on every single deal we do, from the enterprise space all the way down to the [SMB, or small and medium-size businesses] now adopting Linux in their space. We scratch and crawl for everything," Chavis said.

RackShacks Marsh said the aggressive solution offered by Compaqs SMB organization, Compaq Financial Services, and Ensim and Compaq reseller HPM Networks Inc. provided the best solution for RackShacks business and technology needs.

"We took the ProLiant server and the Ensim Unlimited Control Panel, with a combined retail price of about $3,000, and threw that together in a hosting relationship with better bandwidth than a T-1 line and are able to roll this out to our customers at $129 a month and a setup fee of between $99 and $349," Marsh said.

RackShack itself has some 4,000 dedicated servers and 8,000 virtual clients, while Everyones Internet had 200,000 dial-up customers, Marsh said.