I have mentioned before that hosting Rails applications is one of those great opportunities to avail yourself of assistance. The guys behind Engine Yard saw their chance to help the community and build out a solid foundation for a business. I had a chance to talk with Lance Walley, CEO of the San Francisco based hosting company about Ruby, Rails and their business model.

Sazbean: What problem is Engine Yard solving?
Lance: We make deployment and scaling of Ruby on Rails applications easy and largely hands-off. Our customers pay for great infrastructure and excellent people running it, all focused on Rails apps. In the end, they see us as inexpensive payroll on top of great hosting infrastructure. Some of the basic technologies (Ruby and Rails) can be improved or augmented our support of Rubinius and Merb are helping both move forward and grow to answer customer needs. We are hosting + expertise + software development to make Ruby and Rails better for all!

Sazbean: So how can EY help the average B2B company?
Lance: B2B companies will certainly want to develop web apps to support internal needs and external needs (customers). Ruby on Rails is great for fast development of those apps. Engine Yard is great for no-thinking, just-get-it-done-without-me deployment and management of those apps once they’re developed.

Sazbean: Obie Fernandez wrote in a January 2008 article that there was a waiting list for new customers. Is this still true?
Lacnce: We massively built up our support organization, which includes sys admins, Rails experts, and database admins. That solved the waiting list issue. We now have a queue of about 5 days, mostly because customers take time getting info to our guys that our guys need to deploy customers’ apps.

Sazbean: Does EY consider itself a silicon valley startup?
Lance: We’re a Sacramento / San Francisco startup. We modeled this business to be profitable and not need VC [Venture Capital ~ed]. We later took VC to pursue areas that represent a huge opportunity, and which we could not pursue quickly without VC and we’re about 2 years old and didn’t take VC until we were 1.5 years old so I’m not sure if that all adds up to traditional valley startup.

Sazbean: Unlike startups with a software product, hosting solutions like EY have a large barrier to entry. You need hardware, you need specialized skills and you need capital. So, why hosting?
Lance: It was a natural outgrowth of a previous business. We have an older company that does consulting; we saw that clients didn’t want to do this stuff, but they wanted really good solutions run by top-notch people. We created Engine Yard. while it did take some capital up front, we knew from the experience of others that it’s a quick cash generator vs. some other businesses. We literally saw it as a pretty quick path to cash generation and profitability. We’re now doing a lot of stuff that goes beyond that original idea, but we always saw hosting as a good business in which to start in a new market like Rails.

Sazbean: Many B2B companies are untrusting of startups and of new ventures. It means something that you are profitable and stable and up front about it.

Lance: Yeah, we experienced some of that back when we started in 2006. People had to get to trust us and our financial footing also helps when they know that we founders are all small business guys in the past… never huge companies, but real, profitable, decade or more companies each Now, of course, with pretty big VCs involved, that’s also a good thing, but I suppose VC makes some people suspicious, too. We have still kept our basic business philosophies of running a tight ship, not burning cash without need, etc.

Sazbean: You mentioned your people a few times tonight. Do you consider your people the distinguishing part of the equation?
Lance: There are 3 distinguishing parts.

1. The infrastructure we designed is extremely solid, very redundant, etc. We’ve been at it for 2 years and the architects are incredible people. Customers are buying that.
2. The staff that supports our customers directly is top-notch. There are between 35-40 people in Support now, spread from CA to NY to UK to Australia. Customers are paying for the ability to get help and wisdom from this staff 24/7. As well as stuff like database tuning, etc. The people component is very important to customers.
3. We have some of the best people working on those open-source projects that promise to improve Ruby and Rails for everyone. Our customers are indirectly buying into those people, too. There is a general feeling by customers that they get all this expertise for a relatively low price in terms of human costs.

Sazbean: Any well known Rails websites using EY that you can disclose?
Lance: Sure If you check out http://rails100.pbwiki.com/ we are literally involved thru Engine Yard or Quality Humans, Inc with 33-50% of those sites. Hulu (#3) for instance is NBC + Fox we helped them build that site back in 2006 or 2007. Seeking Alpha is a cool financial info site, they provide data to Yahoo Finance. Kongregate was a VERY early EY customer. I think they just took an investment from Jeff Bezos, who does not invest lightly.

Sazbean: Impressive.

Lance: It’s not yahoo or google, but they’re coming.

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