Complaint Review: Jason Piercy AKA Binary Blocks - Toronto Ontario

Although it has been some time since the closing of BinaryBlocks Inc. (over 5 years), I felt it has been necessary to answer some of the questions / rants / character assassinations that have been posted on the internet in reference to myself and the company. First off, I want to apologize for the inconvenience that the closing of this company has cause the numerous customers of BinaryBlocks Inc. I know that having to find your website data, domain information and transfer this to another server in a panic is not a fun experience. The loss of internet traffic justs adds to this experience. I also know that an apology 5 years after the fact is not going to make things right for the former customers of BinaryBlocks Inc., but I hope that the following summary of the situation below will bring some understanding to the challenges / mistakes I have made in running BinaryBlocks. The BinaryBlocks Inc. Summary: Started in 1998, at the start of the dot com boom, as a sideline to my application development business. I started as a reseller and provided hosting services to existing clients in the GTA (Greater Toronto Area). Because of the economic environment around internet companies, it grew overnight to over 1000 customers. In 2000, when BinaryBlocks Inc. reached its first 5000 customers, I had made the decision to go big, and service customers throughout the North America market (Canadian / USA). I had also decided to quit my application development / consulting and focus all my efforts in growing BinaryBlocks Inc. This was my first personal mistake, I should of stayed with the application development / consulting as well, to supplement my income and to help easy some of the stresses outlined below for BinaryBlocks Inc. Being a young (twenty something) business owner, I have decided to aggressively price BinaryBlocks services at a gross profit margin of 5 to 7.5% in order to make BinaryBlocks the lowest priced provider on the internet in order to become the biggest hosting provider (in terms of number of customers). The economic environment at the time was such that this thinking was correct grow dot coms in numbers of customers versus hard dollars and cents. In hind sight this was the first fatal mistake I/BinaryBlocks made. I had started hosting BinaryBlocks customer accounts through several providers, DataPipe, Cobalt Racks and more. We did not reseller these companies hosting plans, but instead leased / rented dedicated servers from these companies, developed our own hosting packages / accounts and supported them ourselves. We have also signed up with Open-SRS as a domain register to provide domain and SSL certificate services to our clients. In late 2001, when moving some of our client sites around between our servers/data-centers/providers, we ended up creating an outage and deleted some 3500 customer sites. While this was a human mistake on our part, we made it right to our customers via our SLA. We introduced the first 5 nine (99.999%) guarantied uptime SLA (service level agreement) in the hosting industry that was backed by a full year credit on account for any downtime incident. (i.e. 15mins downtime = 1 year credit for hosting) This has not been done before by any hosting provider at that time or by hosting provider since. (For a good reason) My thinking was that BinaryBlocks Inc. would not only have the best prices, but also the best SLA agreement, turning a bad incident into a positive for both BinaryBlocks Inc. and the affected customers. We automatically credited all customers that were affected by the outage above without question. This aggressive SLA, while being great for the customers was BinaryBlocks Inc. second fatal mistake. In doing the math today, it takes approximate 35 new hosting accounts to cover the costs of each hosting account that was compensated under this incident. Business went on and we continued to grow at the rate of ~ 225 new accounts per month. BinaryBlocks also stated developing our own server platform including writing our own control / management panel. This new platform was going to put us finally on the map as a true hosting company versus the current leasing/renting servers from competitors. With the new platform in place it was also estimated/budgeted that there was going to be an additional cost savings equal to an additional 10% of gross margin. We had made arrangements to co-locate our servers within several data-centers. The new platform would pair servers together at different locations to provide redundant fail-safe hosting. Providing a platform that allow us continue with our aggressive SLA without worry. Now with the new platform, BinaryBlocks Inc. would have not only the best prices, the best SLA, but now the best hosting platform on the internet. Like many development projects the control / management panel project took longer / costed more than estimated to complete and took most of operation revenue from the company. About 6 months into the SLA compensation period, mentioned above BinaryBlocks Inc. started to feel the pressures of these compensation credits. While still growing at a steady rate, it was not enough to cover the costs of operating, and developing out the new hosting platform. On top of this the Canadian Dollar was starting to climb against the US Dollar. This slight climb wiped out the majority of the gross margin the company was operating on. After review of this current situation, we decide to add some new services like dedicated server hosting, and got more aggressive in our marketing efforts to turn things, including expanding into the UK and AU markets. This think was against a traditional business approach of changing our SLA to a more industry standard one, and adjusting prices to reflect the current economic situation. Again this was inline with the thinking of the time as far as dot com business was concerned. This was BinaryBlocks Inc. third fatal mistake. We continued to grow at a good rate and had ~ 15 dedicated server customers by the end of year. Up to this point, I have invested all of my time and savings into this company. I was still driving an old 1990 ford F-150 (bought for $700 CDN). The office was a home office. My personal life was not existent and in fact suffered greatly as I spent every waking minute / dollar into the company to get through the year of compensation credits. To this day I am surprised that my wife and kids are still with me. Anyway, I still enjoyed servicing the customers and I could see the end to the economic pressures once the 1 year credits for compensation came to an end. (October 2002) So I happily continued on. In early 2002, in reviewing both my personal situation, and BinaryBlock's economic situation, I made the decision to move ourselves and BinaryBlocks Inc. back to my hometown in Fredericton, New Brunswick. In doing this I could eliminate my personal cost of living, take advantage of lower wages and finally get setup in a proper office. We moved in May. During the move there were several servers that went offline for various reasons and again we compensated the ~ 1500 affected clients under our SLA. I leased 2400 sq ft office in downtown Fredericton, furnished it, outfitted it with computers, setup phone lines and internet access and got operations up and running in a proper environment. All was moving along as planned and all we had to do was make it to the end of September 2002, when the last of the first round of compensation came to an end. In September the new platform would be implemented and we could really staff up as we would realize the full revenue from our client base. Then BinaryBlocks Inc. was hit with a three situations out of it control. The first was the dot com bust. This economic down-turn in dot com / technology market slowed down our sales, and instead of growing in numbers of customers we actually start losing customers including the bulk of our bigger customers (customers with accounts over $250 USD per month), the bulk of our dedicated customers, the bulk of the customers which we had development projects started/ongoing with. A majority of them closed their accounts as they lost funding for their companies. The amount of un-collectable receivables for these customers was in excess of $ 37,350.00 USD. A secondary credit card processor supplier disappeared in June 2002 (not our primary WorldPay) with not only $ 7437.21 USD of BinaryBlocks money but an additional $ 23,876.53 USD which we processed on behalf of clients through our payment gateway services. We paid our clients these monies as per our contract/agreements with these customers. Then Revenue Canada (the Canadian Taxation Agency) in their infinite wisdom decided to assess our company 7% GST (Good and Services Tax) on our revenue from US Customers. Under the taxation law if goods and services are sold to US customers they would be exempt from this tax, but they did not understand the internet hosting business and assessed BinaryBlocks anyway, thinking that the services was bought and used in Canada. An example of their thinking on this assessment was that we were like a Canadian gas station and we needed to charge GST to US customers buying and using gas while on vacation in Canada. I started to fight this assessment but realized it was going to take years to straighten out. With the above loss of cash flow, I had to start robbing Peter to pay Paul. In this case delaying payments to my suppliers in order to give the above customers their credit card monies first, then paying the suppliers about 10% to 15% on the dollar for a couple of months. My suppliers got unhappy with these payments and would not work with me/BinaryBlocks Inc. over a period of 3-6 months until I got back on a level footing. They shut down servers etc. I do not blame the suppliers for their decisions; it was just a business decision on their part. With all of this happening at once, I had no choice but close the doors and walk away from the office, etc. I spent the next 3 years of my life doing nothing other than fighting with Revenue Canada to resolve the GST assessment issue and to finalize and close the company. This experience has taken a big toll on me. I basically crawled into myself, spent 4 years doing nothing but feeling depressed and only recently (last 2 years) started to play with computers and the internet again. Last week, I have decided to google myself and my former company BinaryBlocks Inc. In doing so I see that there is a fair amount of complaints about my conduct in running BinaryBlocks. While some of this information is understandable some of the personal attacks and misinformation are definitely not warranted. I would like to clarify some of these points: I really did enjoyed serving BinaryBlocks customers, at that point of my life it was my passion. For the customers that I met in person (some travelled up from the US) and the countless others than I talked to in the middle of the night during a support calls I miss serving you! Businesses fail every day, and allot of internet companies did back on the dot com bust. I am truly sorry that BinaryBlocks was one of them. I did not take the money and ran. In fact, I sank all of my personal savings (over $71,000.00) into this company and I did not draw a dollar for wages period. I did everything with the attention that the company would be around even today, growing and serving its customers. Yes, I made several mistakes as outlined above but did not know I was making mistakes at the time the decisions was made. I am not was affiliated with ARACTELNETWORKS. They were a reseller of BinaryBlocks Inc. and decided to take advantage of the closing of BinaryBlocks Inc. by stealing the BinaryBlocks website. I certainly did not attend for BinaryBlocks to close and force any hardship / stress on its customers. If I had any monies available to me/BinaryBlocks at the time of closing I would have done everything in my power to make the transition to new hosting providers allot easier for the customers. I know that this statement/apology will not change the past and/or relieve the hardship / resentment felt by our former customers, but would help bring some understanding to the situations that I was faced with. Sincerely, Jason D. Piercy [email protected]