BUSINESSWEEK ONLINE : NOVEMBER 20, 2000 ISSUE
BUSINESS WEEK E.BIZ -- PERSONALITIES

Making Her Own Luck
Three years ago, Ellen Hancock's confidence was shot. Now she's building a Web-hosting empire

Photo by Brad Trent
Ellen Hancock, CEO Exodus Communications Inc.
It was nearly three years ago, on a warm December morning, that Ellen M. Hancock hit rock-bottom. Fired five months earlier as Apple Computer Inc.'s ( AAPL) chief technology officer by boss Steven P. Jobs, Hancock was still out of work. She had bucked long odds to become one of high tech's brightest female stars, but she was spending her days reflecting on three years of bitter disappointment: being run out of IBM ( IBM) in 1995 by CEO Louis V. Gerstner Jr. after 29 years, getting passed up a year later for the vacant CEO job at chipmaker National Semiconductor Corp. ( NSM), and being pushed out by the cocky Jobs, who had dismissed her as a ''bozo.''

No wonder Hancock's confidence was shot. As she huddled with longtime friend Dan Lynch at shabby Hobee's restaurant in Cupertino, Calif., just a mile from Apple headquarters, she wondered aloud if she should bother to try to find another job. Did she have the skills to lead in the fast-moving Internet market? Was her reputation ruined after grappling with Jobs? Lynch, an investor in startups, poked at his Mexican-style hash browns before interrupting her: ''Now you're somebody! Getting fired by Steve is a badge of honor.''

Take the helm. It was like a slap on the back--rough, yet heartening. Hancock, who had always prided herself on her toughness, found her courage. She decided that she would look for another tech-industry management job, and asked Lynch to help her spot one. Amazingly, on that winter morning, Hancock's fortunes began to turn. Within weeks, she had her answer. Exodus Communications Inc. ( EXDS), a small company that hosts the Web operations of other companies, was looking for a new CEO with big corporate knowhow. Lynch was on the board and made the introductions.

Hancock has made her own luck since. After taking the helm of Exodus on Mar. 10, 1998, and leading the company through its IPO just nine days later, she has guided the company to an anticipated $810.2 million in revenue this year, up from just $12.4 million in 1997. That's sure to get much bigger. On Sept. 28, Hancock announced the $6.5 billion acquisition of rival GlobalCenter Inc. When that deal closes early next year, she will oversee a vast empire of 46 data centers and 5,000 customers--making Exodus by far the leading player in the up-and-coming market for hosting Web operations.

Success like this is a personal vindication for Hancock. Her stake in Exodus, worth about $100 million, is twice as valuable as Gerstner's IBM stake. ''Revenge is sweet,'' says the 57-year-old Hancock gleefully. She's not satisfied, though. Her aim: to become the most powerful woman in computing. That's a tall order, especially with a star player like Hewlett-Packard Co. ( HWP) CEO Carleton S. Fiorina just a stone's throw away in Silicon Valley. ''I always do better with a goal out in front of me,'' Hancock says.

Exodus gives her a straight shot at her goal. With a steady stream of companies handing computing jobs off to hosting services like Exodus, the potential for reaping profits is tremendous. Nobody knows exactly where this nascent Internet outsourcing movement is going. But if Hancock can take all of the lessons she has learned from past successes and past mistakes, and keep Exodus on the crest of this emerging market, she will gain a reputation well beyond the borders of techdom. ''If Ellen can pull this off, she will be the First Lady of U.S. business,'' says former Apple exec Marco Landi, who now runs NavLink Inc., a European data-center company.

It also would cap a remarkable career that could serve as an example for other women to follow. The Bronx (N.Y.) native bucked convention from the start, developing an affinity for math and logic while attending all-girl Catholic schools. Unlike many women of her generation, Hancock poured all her energy into her career, rapidly climbing IBM's corporate ladder to become Big Blue's first female senior vice-president. Hancock, who is conscious of being a role model and has mentored several other women, draws accolades from female executives. ''I have a lot of respect for Ellen. She has made it easier for the rest of us,'' says Ruann F. Ernst, CEO of Digital Island Inc. ( ISLD), which competes with Exodus.

Still, some of Hancock's biggest challenges lie dead ahead. Most daunting, Exodus' business model requires some major adjustments. Companies install and run their own computing systems in Exodus data centers, essentially renting space, power, and network bandwidth from Exodus. Renting data-center real estate has worked fine for Exodus as demand for data-center space still far outstrips supply. But, over time, such services are expected to be readily available, and pricing is expected to be plummet.

To avoid that fate, Exodus is expanding the scope of its services to match a new breed of Internet outsourcers. These so-called managed service providers offer soup-to-nuts services covering all of a customer's Internet needs, including tending the servers and software for Web sites and e-commerce applications. Exodus is raking in just $300,000 per customer each year, while managed-services players such as Loudcloud Inc. and Digex Inc. ( DIGX) have contracts approaching $1 million annually per customer. When it comes to providing buffet services, Exodus is playing catch-up. ''Hancock hasn't been leading the market with new products or offerings,'' says Jeanne M. Schaaf, a Forrester Research Inc. senior analyst. ''That's why Digex and Loudcloud will eat their lunch.''

Indeed, Hancock has never been considered a visionary. As IBM's networking chief, she saw Big Blue demolished in the emerging high-speed networking market by a then-upstart called Cisco Systems Inc. ( CSCO) She also was knocked at IBM for being slow to grasp the Internet. And while Exodus remains the hosting market's 800-pound gorilla, with powerhouse customers from retailer Albertson's ( ABS) to eBay ( EBAY) to Yahoo! ( YHOO), its command over the industry is under fire. If Hancock can mastermind new services, she may silence naysayers once and for all. If not, Exodus could slip to bit-player status, and Hancock's reputation could be tarnished again.

The urgency is palpable. International Data Corp. predicts the market for managed services will jump from $17 billion in 1999 to $36 billion in 2004. By contrast, the market for basic hosting services--the major chunk of Exodus' business--will grow from just over $1 billion this year to just under $6 billion in 2003, according to Robertson Stephens.

Hancock isn't panicking. She announced Exodus' first managed-services bundles last month. One offering includes a database, servers and routers, and other critical components. Not only does Exodus build and install the software in its data centers, but customers no longer have to set foot in an Exodus facility. With its customer ranks jumping 70% so far this year, to 3,700, Exodus has a strong customer base to offer these more lucrative services. Furthermore, with GlobalCenter soon in tow, Exodus should span enough of the map to start looking really attractive to multinational corporations seeking to outsource their Internet operations.

Photo by Jay Reed
Hopmans: "I could never hire the people to handle the site."
So far, Hancock's bet on selling new services to existing customers seems to be paying off. Its average take per customer grew 15% from last quarter. That means its customers are expanding their Internet operations, consuming more power and bandwidth, and turning to more help from Exodus. ''I could never hire the people to handle the site 24 hours a day, seven days a week, 365 days a year,'' says customer Wes Hopmans, head of Internet operations at Crane & Co., a papermaker.

Hancock isn't shying away from the task ahead. In fact, she sets a rigorous pace for the entire company, regularly chalking up 80-hour workweeks. Even when ducking into the gym for a weekend workout, Hancock typically brings a stack of paperwork to the treadmill. ''I'll send her an e-mail at 6 in the morning, and I'll have a reply 15 minutes later,'' says B.V. Jagadeesh, Exodus' co-founder and former technology chief, who now runs NetScaler Inc., a company that boosts Internet traffic speed.

Hancock has made sacrifices in her personal life. Her husband of 29 years, Jason, a retired 33-year IBM veteran himself, lives across the country in the couple's primary home in Ridgefield, Conn. The two cross paths only two or three times a month, either when Ellen is on business back East, or Jason makes it out to the Bay Area. Younger brother Peter J. Mooney Jr. says the couple's relationship is remarkable. ''With both of them trying to move up at IBM, it could have been very tense,'' says Mooney. ''But even when Jason realized Ellen's career at IBM was on a higher plane, he was always extremely supportive.''

The long hours and sacrifice are part of a tireless work ethic Hancock has stuck to all her life. Born Ellen Mooney in 1943, she was the oldest of four siblings. Her mother, Helen, who emigrated from Ireland as a teenager, stayed at home to raise the children, while her father, Peter, an Irish American, began climbing the ranks at a New York advertising agency, Audio Productions, rising from errand boy to president. Peter expected no less from his children. When the family moved to suburban New Rochelle, N.Y., he scouted out all of the kids' schools a year or two ahead of time, letting the teachers know the Mooney children were on their way. ''My father expected all of us to do well. He didn't care about gender,'' remembers Hancock.

The rest of the world did. So Hancock swam against the current from the start. After harboring thoughts of becoming a nun in her teen years, Ellen caught business fever when her father and his pals came to the family home for dinner. ''I couldn't cook, but I was just fascinated with the conversation and the range of topics. I remember saying, 'I want to be like this when I grow up,''' she recalls. Between her father's influence and the all-girls school that she attended, Hancock never had doubts about what she could accomplish. ''I never knew anything was wrong with me,'' she quips.

A straight-A student (except for a lowly B-minus in physics), Hancock went on to study mathematics in college, earning a master's degree from Fordham University in 1966. One month later, she took a job as a junior programmer at IBM, hoping to parlay that into an engineering job with the U.S. space program. Instead, Hancock vaulted up Big Blue's ranks, becoming the first female to crack the venerable company's senior vice-presidential ranks.

Breaking the glass ceiling was--and sometimes still is--lonely for Hancock. She has honed a tough management style, demanding top results from her employees and doling out gruff reprimands when they fall short. ''Maybe she was a little rough with people once in a while,'' concedes Terry Lautenbach, a retired IBM exec and one of Hancock's former bosses. But she quickly gained the acceptance of her peers. Her secret: Just be one of the guys. ''You have to build up trust and then assert yourself,'' she says. That often translated into grabbing a couple of drinks after work or playing some poker on the weekend.

Not that she needed arm-twisting for all that ''guy stuff.'' For instance, Hancock took an immediate liking to motorcycles, purchasing a pair of Hondas in her late-IBM days. Only after taking a spill over her handlebars on a Connecticut back road, taking gobs of skin off her elbows and forearms, did she finally decide to sell the motorcycles. ''I had to wear long-sleeve dresses for days,'' she says.

With a reputation as a fierce competitor and a straight shooter, Hancock had little problem making her viewpoints known, even inside Big Blue's male inner circle. In the early '90s, running IBM's networking division and overseeing 15,000 employees, Hancock set her sights on the corner office. When Gerstner was brought in from RJR Nabisco in 1993, Hancock's hopes were dashed. The ambitious senior veep and IBM's new chief did not see eye-to-eye. Hancock refuses to discuss the feud, but colleagues call it a classic personality clash. When Cisco came in and bested IBM in the high-end networking business, Hancock's fate was sealed. ''I list that as one of the failures in my career, no question,'' says Hancock, who insists she has developed a healthy level of paranoia thanks to Cisco. ''I've learned you can't leave open white spaces around your business. You have to beat people to the punch.''

Hancock declined a diminished role at IBM, packed up her office, and began working on the first resume of her career--at age 52. According to several of her friends, it was an anguishing transition. ''After 29 years, she defined herself by IBM. If you stuck her, she bled blue,'' says Yankee Group Research Inc. Chairman Howard Anderson, a longtime Hancock friend.

She would sink even lower. She careened through two tumultuous years at National Semiconductor and Apple--both stints ending on sour notes. At Apple, her key job was to produce the next great operating system for the Mac. But she irked staffers when she used a two-pronged approach: looking to acquire an operating system, while at the time making them push ahead on an internal rewrite.

Hancock's hard-won lessons are serving her well at Exodus. Like a construction foreman, she has directed the nuts-and-bolts strategy that underlies the company's rapid growth. Her management philosophy: delegate authority to force her lieutenants to become independent leaders. They're now in charge of responding to site outages. In the company's early days, a breakdown would set off a fire alarm of activity, pulling in all of Exodus' top brass, even though it usually was the customer's own software or staff at fault. Hancock quickly put more power in the hands of field managers to tackle these situations--and do it quickly.

Hancock also has adapted in some respects to the speedy nature of the business. For example, Exodus' growth prospects always have been based on getting data centers up and running fast. The faster it can add capacity, the more success it likely will have. Hancock was hesitant at first when it came to pulling the trigger on these costly new centers. ''One day, I told her we had to go to 21 [data centers] by the end of the year. It sent chills down her spine,'' says Exodus co-founder K.B. Chandrasekhar. Throwing off the ''indecisive'' tag that plagued her at Apple, Hancock got the message and ordered the new data centers. Exodus is slated to have 36 in operation by the end of the year. ''Now she's moving a lot faster,'' says Chandrasekhar.

Perhaps Hancock's biggest test will be avoiding an ambush from upstart competitors--the way Cisco got IBM. There are plenty of potential Ciscos out there, and to figure out how to deal with them, Hancock has her staff keeping tabs on both the newcomers and shifting market conditions. ''I've never been accused of being a visionary. But I surround myself with the smartest peopleand I love to listen to them,'' she says. In the end, however, Hancock is the one who makes the crucial decisions. And the fate of Exodus will determine whether she punctuates her career with an exclamation point, or a question mark.

By BEN ELGIN
Contributing: Peter Burrows

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