SoftLayer, The Planet Outline Merger Plans

SoftLayer Technologies and The Planet are discussing a blockbuster merger that will make the combined entity one of the world’s largest providers of web hosting and cloud computing services. The new company will have more than 25,000 customers and manage more than 78,000 servers.

SoftLayer CEO Lance Crosby will head the merged company, which will be based in Dallas but continue operating The Planet’s offices at its Houston headquarters. The companies, which are both owned by private equity firm GI Partners, expect to complete the transaction in the fourth quarter of this year.

Automation Transforms An Industry
The merger is a microcosm of larger transitions gripping the hosting industry, as customers shift from legacy hosting products to automated platforms that offer improved scalability and management tools. Crosby said the merger plan envisions shifting The Planet’s huge base of dedicated server and managed hosting customers onto the highly-automated SoftLayer platform.

“We have a unique opportunity,” said Crosby. “When we built SoftLayer, our ambition was to build a platform that could scale globally. We envisioned SoftLayer would have hundreds of thousands or millions of servers around the world. This merger will accelerate that process.”

Word of the deal comes two days after SoftLayer announced that GI Partners had acquired a controlling interest in the company, partnering with management on a buyout. Crosby said those discussions prompted larger conversations about how The Planet might fit with SoftLayer.

Doug Erwin, the CEO of The Planet, said he and his team are working hard to bring the merger to fruition and build a combined company that it is more than the sum of its parts.

‘A Cleaner, More Automated Service’
“SoftLayer has spent a tremendous amount of time building tools to help customers manage their products,” said Erwin. “The customer is going to get a cleaner, more automated service. We will have a much broader geographic distribution of data centers. And when you take SoftLayer’s network and The Planet’s network, the customer ends up winning.”

Combining two huge hosting companies is no picnic, as Erwin can attest. He oversaw the post-merger integration of the Planet and EV1 Servers after GI Partners acquired both companies in 2006. “One of the things we’ve struggled with is that we inherited three different systems,” said Erwin. “It doesn’t make you very agile. We finally got ourselves to one system after four years. The migration to SoftLayer’s systems will be much easier.”

Bain Will Assist in Integration
SoftLayer Chief Strategy Officer George Karidis will direct the integration process. Erwin said that Bain & Company has been hired to assist the companies in architecting a smooth transition of systems, customers, employees and facilities.

“We believe that adding our automation and provisioning capabilities adds some significant growth potential,” said Karidis.

The Planet’s Erwin agrees, and says the scale of the new entity offers advantages. “This industry is growing’” he said. “We will probably double the size of the companies in the next two years. With more than 75,000 servers, it gives us more buying power in everything that we buy – servers, network equipment, everything. We also picked up some tremendous DNA on both sides. It’s a win-win-win situation.”

Many of the details of the staffing and transition will be worked out in comning months, Crosby said.

“We announced this to give our customers a heads up and to reduce the anxiety and address some of the rumors,” said Crosby. “We don’t have all the answers today, but as soon as we have them will communicate them.”

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About Rich Miller

Rich Miller is the founder and editor-in-chief of Data Center Knowledge, and has been reporting on the data center sector since 2000. He has tracked the growing impact of high-density computing on the power and cooling of data centers, and the resulting push for improved energy efficiency in these facilities.