Overselling in Web Hosting

Overselling is not uncommon in the web hosting industry. MD of a young web hosting company cast a professional eyes on overselling within the web hosting industry, explored the implications from a providers viewpoint and from a customer’s viewpoint.

Excerpt from the article follows:
Overselling, put simply, is a term used in the hosting industry where a company advertises plans that are unsustainable if every one of their clients was to use the full resources of the package.
For example, a host may have a server with 300GB of storage space and offer plans with 50GB of space each at £5 per month. As soon as 6 clients sign up for an account, all space on that server has been allocated, however the company can see that those clients are only using around 10GB in total.
Here’s where the overselling comes in.
It is pretty much a certainty that not every client will use the full resources allocated to their account. With only 6 clients using 10GB of storage space, the hosting company can carry on selling accounts until the server starts to show signs of becoming full.

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Microsoft Live rollout on HP PC

From January 2009, Microsoft Live search will be the default search engine on all PCs made by Hewlett Packard for the US and Canadian markets. Microsoft had a similar agreement with Lenovo.
This deal is thought to be one of the ways Microsoft hopes to grow Live after calling off its bid to buy search engine Yahoo.  Microsoft hopes the deal will attract more people to live search because most PC users never change the default search engines from what the PC manufacture set for them when the PC is delivered.

Out grow your reseller hosting account, what next?

Success in any expanding business is all about transition. Part of that transition is a function of each company’s particular business model; essentially, it’s a matter of how big one is willing to allow his or her “small business” to become. That’s a series of decisions up to the owner to either follow or revise as circumstances warrant, but other motivating factors tend to get in the way. In a service-based industry, there’s simply no way to remain fixed while the individuals and businesses requiring said services have dynamic needs.

For instance, suppose you are running a small hosting business that focuses on basic website hosting. Maybe you’ve got a couple dozen clients paying you monthly hosting fees and hourly rates for website development, adding new content and so forth. Everyone is happy and there’s no pressing need to expand. That is, until a couple clients decide they want to move their internal email server off-site; they see no need to pay two different hosting companies when they could have both company email and web services on the same server for less money. Then a few more clients expand and hire their own part-time webmasters and want dedicated servers but will no longer need you to administer their sites. It is in this fashion that a high-tech business can become obsolete in the span of six months for very low-tech reasons.

The fact is that no business can safely remain static in a dynamic, world-wide market. In the hosting industry, competitors spanning the globe are constantly finding ways to offer more than anyone else, for less than anyone else, faster than anyone else. Whether your business is looking to maintain current clients or attract new ones, there’s simply no way to remain viable without always being prepared to expand when the need arises by answering the question, “What’s the next step?”

Moving beyond the entry level

Hosting has quickly become an easy entry level business. Without terribly much business experience or technical skill, reseller programs have allowed many a small upstart to gain footing in the global marketplace. At this level, simply having a relationship with a few small companies interested in moving to the web can establish a good base of clients and begin building cash flow.

The problem here is two-fold. One, those clients are inevitably going to need services that aren’t possible from a reseller. And two, this isn’t the 90s; most business are already utilizing the web and don’t have the time to “grow up” with their host. Clients certainly can’t afford for their hosting provider to be a bottleneck in their business operations.

Progressing beyond mere reselling, most hosting businesses move to using dedicated servers. This is neither a final step nor an easy transition, but it does give the host some needed breathing room for a time. It is at this point that answering the “next step” question gets more complex.

Location, location, location

The next step beyond dedicated servers is reminiscent of an old business proverb: it’s all about location. The twist on that old saying is that it’s no longer the location of the storefront that matters but a question of where servers will reside.

It doesn’t take much number crunching to realize that over a long stretch, it’s vastly cheaper to maintain and upgrade one’s own servers than to lease someone else’s for hundreds of pounds per month per unit. The problem is that servers aren’t the most pressing issue at this level of hosting. Redundant electrical resources, backup generators, air condition, proper ventilation, and a 24-hour staff to maintain them all are matters that will impact expansion at this point.

This is where the hosting business makes the vital decision whether to co-locate or host its own datacentre. Having a datacentre means managing everything from within the business, which is no small feat. In fact, in some cases it isn’t even possible depending on the costs and availability of utilities in certain regions, levels of broadband penetration, and so on. And again, staffing requirements are huge.

For these reasons, most hosts settle on co-locating with a professional datacentre. Professional datacentres specialize in all of those incidental issues that most hosting companies would rather not have to worry about. Dealing with such issues in large volume, they are able to provide server hosting at better rates that all but the largest of corporations can by managing their own datacentres.

Relationship is key

One of the difficulties of co-location is proximity to the datacentre. Cost savings aside, how difficult is it going to be to get on-site to make necessary server repairs and upgrades? This is why having a good working relationship with the datacentre is key; and, incidentally, why it’s a good idea to start co-locating even before it’s absolutely necessary.

There’s a good chance that such a datacentre will be outside easy driving distance, so having someone at the datacenter to act as ones “remote hands” is important. Not all datacentres offer this but at the same time some can’t imagine not offering it. By building and maintaining a good working relationship with ones datacentre managers and staff, things like replacing a failing processor or memory can become very minor issues even from many kilometers away.

Conclusion

Ultimately, co-location with a professional datacentre tends to be the best fit for hosting companies ranging from those with modest needs to all but the uppermost echelons of the industry. Unlike reseller and dedicate server scenarios, co-locating servers leaves hosts with plenty of room for growth both on theirs and their clients’ ends. For hosts that got into the business for their love of the technology, co-locating allows them to focus on the technology while leaving many of the irritations for someone else to handle.

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