Budget Server Market [Archive] - HHO -Web Hosting Forums

Mark

08-05-03, 11:10 AM

Well, if they were any more expensive, where would the kids find money to pay for the templatemonster template. I could take weeks to save up that much allowance.

On a more serious note. I think its getting kind of ridiculous. Its like the wht request forum. But hardware is cheap these days, and there is obviously a market, so live and let live i guess. I surely don't plan to compete in that market as I am sure many others around here won't.

beley

08-05-03, 12:17 PM

I think you can build a server in a white box and sell it for $100/month and up with a reasonable setup fee and make money, because in just a few months you'll pay for the cost of the server. If the customer cancells you can resell it with yet another setup fee... instant profit.

However, the $50 servers with no setup make me wonder... how can a company build a server and profit for $50/month? Are they using P133's?? If they can't profit, they'll eventually go out of business... and take your server down (most likely unexpected) so why is it worth the risk?

I think there will always be budget server companies out there like RackShack, but they'll always have to be able to make a profit sooner or later. As soon as it gets so cheap that you question if they can make money... walk away.

Chicken

08-05-03, 04:34 PM

Well, as with hosting plans, I think you have to look at what's offered for $50. People are quick to bash the $25/yr. providers, however if that $25 got you a 10MB hosting account with 500MB of transfer a month, then $25 is pretty reasonable for a starter account. At least it isn't completely unreasonable.

If the $50 server is a dual Xeon with 2GB of ram and 700GB of transfer then I'd say you're nuts. If it's a P133 then that's another thing. There are plenty of uses for a P133 server (an account that has the resource needs of a shared account, but the security needs of a dedicated machine, mail server, etc.), and if that's what there are selling (with maybe 10-30GB of transfer), then it's just an alternative to a VPS.

Relativity my dear Watson...

tranz

08-05-03, 06:14 PM

Originally posted by Mark:

I am sure many others around here won't.

Agreed...

I have people ask me why my servers cost more then say RS or the others. Because I provide QOS or Quality Of Service. I just dont toss out hundreds of 4U towers that arent even rated by the manufacture as web servers.

I get an order and like Dell will build you a custom solution. Most of my servers are also fully managed. I have found that I am getting a number of clients that are unhappy with RS at the level of services that they get.

What I feel will set us apart from the $49 guys is the level at which we deal and service our client, the quality of products we sell and the agreements that we stand behind.

To all of us that are unwilling to sacrafice our pricing models to try and compete with the likes of RS. I say BRAVO and contiue on our efforts to show that there are quality people and quality companies that are out there.

beley

08-05-03, 06:20 PM

Actually, most of the cheap places like RS offer unmanaged servers... which mean's you're lucky if you even get anything from them. RackShack has been great to me... they've gone way beyond the scope of unmanaged support. Of course, I understand that it's unmanaged... :rolleyes:

I should note though that not everyone needs managed servers. People that can manage their own server should have the option of a lower-priced solution with less support.

tranz

08-05-03, 06:30 PM

Originally posted by beley:

I should note though that not everyone needs managed servers. People that can manage their own server should have the option of a lower-priced solution with less support.

I agree and we do provide unmanaged solutions as well. It is all in what the client needs.

allan

08-05-03, 07:53 PM

Originally posted by beley:

I think you can build a server in a white box and sell it for $100/month and up with a reasonable setup fee and make money, because in just a few months you'll pay for the cost of the server. If the customer cancells you can resell it with yet another setup fee... instant profit.

And that price allows you to hire data center staff and network admins -- its hard to see how you can do that on $50 a month.

allan

08-06-03, 05:08 AM

Joe, how very prescient of you ;). I just got the following press release from our buddies at CI Host (this is just a portion):

BEDFORD, Texas, Aug. 6 /PRNewswire/ -- Again leading the industry, C I Host has expanded the minimum amount of bandwidth it allots to its dedicated server customers -- its fourth expansion of bandwidth capability in three months. The latest increase takes the minimum bandwidth to 1,000 GB from 800 GB.

In addition, C I Host (www.cihost.com) is continuing its "Crazy Deals" offers, including dedicated server prices starting at $29 -- an incredible savings since the average server is $199 -- and a price that gives more value for the dollar, even within the sub-$99 server market.

$29 a month? I am sure there are all sorts of strings attached, but still there will be people who sign up....

StLHosting

08-06-03, 05:28 AM

29 a month? jeezs.. Whered you see that at I was looking at their site yesterday, errr maybe its not out in the public view :D . At 29 a month, that should put a damper on those who want to compete, I won't though, not worth it to me lol

allan

08-06-03, 05:35 AM

Originally posted by StLHosting:

29 a month? jeezs.. Whered you see that at I was looking at their site yesterday, errr maybe its not out in the public view :D . At 29 a month, that should put a damper on those who want to compete, I won't though, not worth it to me lol

I just got the press release this morning, so I am guessing it is not live yet -- but it probably will be today. I don't know how worrisome it will be to competitors, as I don't think they are setup to really sell a $29 server, so I am sure there will be a lot of caveats associated with this deal (kind of like buying a cellular phone: Nights and weekends are free as long as you sign a three year contract and promise to tattoo the cell phone company name on your forehead ;)).

StLHosting

08-06-03, 05:41 AM

hmm im nosey Ill watch for it see what kind of strings is attached to that deal... curiosity kills the cat ;)

allan

08-06-03, 06:01 AM

Originally posted by StLHosting:

hmm im nosey Ill watch for it see what kind of strings is attached to that deal... curiosity kills the cat ;)

Cool, let us know!

LiftNw8

08-08-03, 07:19 AM

I just looked at CI Hosts site for this deal, here are the specs straight from the site

64 MB RAM, 2.5 GB HD, P2 200MHz, 1 IP address, 20 GB xfer, ***NO SETUP FEE***

Now tell me what anyone could really do with that, I mean if you were hosting one site that wasn't very resource intensive maybe.

tranz

08-08-03, 07:39 AM

WOW!

Looks like we have nothing to worry about after all.

Robert

08-08-03, 07:59 AM

When you are a webhost and rent/lease/colo servers from a DataCenter, such as RS, ServerBeach, Server4u, etc., you will get people asking where your servers are located. Of course you'll say "In a Mutli-Million dollar facility in Houston, Texas that houses over 14,000 servers with connections to 5 large backbones providers, floor airconditioning and so on and so on". Some people may even want to know WHO it is, for us, it's colo4dallas.com. Now, should they visit the site and see they offer dedicated servers at $50/monthly or less, and realize you are charging THEM $20, $30, $60 a month, and be able to read the specs of the system (ie. 64mb of ram, 200mhz, 20GB bandwidth) and realize that your page that says "Dual 2.6Ghz Xeon with 3GB DDR PC2700 Ram and 2 x 250GB Hard drive with over 1TB of Bandwidth" is a lie. It's something that is wrong and will hurt your company in the longrun.

People who cheap products for their company, basically are saying that they think very little of their company and their clients.

LiftNw8

08-08-03, 08:03 AM

I would have to agree with you Robert, on all points but RS, I use them for my equipment, and yes I do say I use their facility but I make no bones about lying to anyone about it. I don't however resell their servers I use DedicatedNow for that. And if asked I would make no bones about telling people I resell their servers either. I prefer the honest route rather than giving people a bunch of lies.

rusko

08-08-03, 10:39 PM

guys, you are stuck back in the 20th century. the devil is in the details, or in this case the wording. a business needs to make money in order to survive. however, making money does not necessarily mean turning a profit wrt solid debt to equity ratios.

all hardware purchased by cheapo providers is financed through cheap long term loan facilities. the presumption is that their line of credit is practically infinite for the intents and purposes of this discussion as long as they do not reneg on their obligaations.

when you take that into account, you realize that they no longer need a 6 or 12 month roi on hardware. all they care about is that they have positive cashflow, ie enough cash to pay the service fees on their credit facilities when required. in the case of rs, they have no trouble bringing in new sales which cover these obligations.

paul

tranz

08-09-03, 07:36 AM

Paul,

True, the smaller guys that arent RS in some cases either do not choose to lease their gear and spread the cost over long term. In some cases due to the fact they are smaller 1 or two guy opperations find it difficult to gain a lease in the first place.

RS of course with 1000 units per week for one isnt paying anywhere close to list and then they place that on their lng term lease solution. Thus the unit costs them next to nothing monthly.

Think about it people, a $500 server on a lease over say 12 months. Would cost roughly $41 per month. Now take into account that RS is no where paying $500 for a server and you can start to see how it adds up.

When people sign up with them and have a setup fee plus the first month. The client has paid for more than 80 to 90% of the inital server cost.

This is of course only talking about the hard fixed costs not the soft costs that would also have to be factored in running the business.

In the long run people if you get yourself a nice lease option over 12 to 24 months then you can start to offer $1 setup fee promotions because in the end it is costing you very little on a monthly basis for your gear anyways.

OK, did any of that make sense? LOL

rusko

08-09-03, 08:36 PM

well, it depends on the boxes. and no, rackshack does not lease the servers - they buy them cash. the cash comes from a large line of credit of course.

lets do some math:
rackshack pays $1100 for their dual xeon boxes (fact). this $1.1k costs them about 22 bucks a month. they give you 1tb transfer with that, which costs them about 125 bucks if all used up (tops). they end up paying about $150/mo tops for the box, leaving them with $50-$110/mo in profit before operating expenses. now factor in the fact that their bw costs are probably lower (my estimates are conservative, as i dont know how high they peak and just how much of the costs their dialup/dsl business is absorbing), most servers dont use anywhere near the full amount of transfer allocated to them etc, and you arrive at the conclusion that they can indeed do very well. they are mostly automated and operating costs are low. the math works.

now you take a place like burst, who are investing into kit that they wont be able to sell in a year or two, promise management, dont have automation in place and are not using their ingress bw capacity and you arrive at the conclusion that at some point the train is going to crash.

naturally, we dont know enough about certain variables to pass a judgement, but this should be a good start to analyzing the business model behind cheap servers.

paul

proxy

08-10-03, 04:28 AM

I remember when people would have grinned at $49 being associated with the price of renting a brand name hardware server, however i feel that everything is getting so cheap there is no longer the sence of quality over business like there used to be, in other words they dont make em' like they used to, maybe i will write an article on this seems like quite an interesting subject.

regards,

rusko

08-11-03, 01:07 AM

i would disagree. our whole business model is based on catering to the mid-market that is both quality and cost conscious.

paul

proxy

09-03-03, 02:01 PM

I think its getting to a point where not much money can be made from dedicated servers. We dont even sell budget servers because its just a waste of time. $49 for premium hardware and premium network? Get real!.

regards,

tranz

09-03-03, 02:50 PM

what will seperate the budget server box houses will be quality of product and more so quality of services.

We have set ourselves apart from the rest due to our customer service that we provide to our clients.

We will go the extra mile if needed and it doesnt always have to cost the client.

I had a client ask me for another server and told me he got a quote from RS for $89, I told him to go for it. He did and came back to me for a $200 solution the next month.

Getting the client isnt that hard is is what we do for that client that makes the difference.