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I don't really know if Server Fault is the idea place to be posting this, but I'm more interested in people's opinions than anything else.

We currently outsource a datacenter to a 3rd party who, for the last 5 years, has provided us impeccible service at a really good price. In the last 12 months however the service level has dropped and dropped as he is focussing his energy into other endevours (non-IT related), until yesterday when our connection was down for over 9 hours, and he didn't check his voicemail, emails, or smoke signals, followed by (what we suspect are) lies about where he was and why he didn't respond.

We figure it will cost about $10,000 to purchase the equipment and licenses that are currently with him and chuck them into a colocation facility on our own, but of course then you have all the added bonus of having to manage it, and re-configuring everything (DNS, etc)

If we offered him $50,000 for his business, we suspect he would take it and run, because he doesn't want to really be doing IT hosting any more (and our business accounts for about 75% of his companies revenue). That way we get his staff (and thus their knowledge and expertise), plus his other clients.

I'm not interested in ROI calculations (I havent given enough detail for that, and anyway we can do that on our own), but I'm more interested to see if anyone else out there has done a similar thing? Been involved with the purchase an outsourcer? Or even bringing outsourced services in-house?

The services he provide for us are in line with our core competancies. The only reason it's outsourced at the moment was a political decision that made sense 5 years ago.

Clarification: The main issue we have is his lack of attention (he has taken up being a project manager for construction and renovations). He schedules downtime without telling us, and is uncontactable for days on end. His internal staff are great (although I think there's only one person left), and the actual hardware and ISP links are fine. Mainly we're looking for a way to remove him from the equation. We'd love to keep his Volume Licensing agreement he has with MS as it's pretty damn good (not sure how he swindled it).

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2 Answers 2

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Okay... so its not really his "staff" its his "assistant" you want and clearly the assistant doesn't seem to be able to help much.

That being said, if you're REALLY 75% of his business I see no reason at all to offer him $50,000 for his business. I'd be more inclined to add up the value of his hardware, licenses, etc, remove YOUR income from the equation, and see what's left.

Also ask yourself the hypothetical question of, "If he wanted to sell his business (quickly) how much could he get for it?" (once again, remove the income from YOUR company from the equation).

Based on what you've mentioned, I'm guessing you could "take over" the business from him for little more than the value of the hardware, licenses, etc.

A business is only worth its revenue stream and its potential to generate revenue. From what you're saying... he doesn't seem all that interested in keeping this business. Its seemingly dying a slow death.

Who knows, you might be able to get it for next to nothing.

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Iiinteresting. I hadn't thought of it like that - by removing the value of our custom, that greatly devalues his company. I guess that's what our business managers are for! –  Mark Henderson Aug 7 '09 at 2:38
    
An easier way to visualize it would be to think of it like an apartment building. Its only worth what its cashflow (ie. tennants/rent) is. Yes, I'm oversimplifying here but real estate guys know what I'm saying. What if 75% of the tennants were to move out? The value of the building would drop HUGE until something was done to replace that lost cashflow. –  KPWINC Aug 7 '09 at 14:39

If you've received bad service from him in the past, why would you want to merge his operations into yours? There are many reasons for poor service, and you'd be inheriting all of them (personnel, servers, network infrastructure, poor service from ISP, etc). I'd suggest pricing out fully managed dedicated hosting options, then compare that to managing the servers yourself if they were in a colocation facility.

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Well, the bad service has only been very recent. The bad service has ONLY been related to him, sorry I should have made that clear. The hardware, services, bandwidth, and his staff, are great. It's just HIM that's causing the issues. –  Mark Henderson Aug 7 '09 at 2:07
    
Things like, he doesn't tell us when there's scheduled downtime, he takes 7 days to respond to emails, he's uncontactable by phone and email for days on end. The 9 hour downtime yesterday was because of an upstream issue, but because he was not avaliable, we could not get him to investigate and lodge a ticket. Once we got onto him it was fixed in 15 minutes. –  Mark Henderson Aug 7 '09 at 2:08
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Doesn't that indicate that the operation isn't capable of running (well) without him? If it were as simple as buying him out, I think you'd expect the staff to be able to handle filing tickets for upstream issues and answering emails. –  KnipSter Aug 7 '09 at 2:18
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Haha, well spoken. It doesn't run well with him, so it's not likely to run well without him either... Good point –  Mark Henderson Aug 7 '09 at 2:38

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