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The "better customer service" niche may end up being a feature like serving people after 10 PM and end up not being plausible for big corporations.
The small market shops were able to serve that after 10 PM niche because they were making enough profit before 10 PM to keep them going till 2 AM.
Big corporations don't need to enter every niche to destroy the market. They just need to push small ones out of the business and "better customer service" feature will become unknown to the new customers in the next generation. They will think the service they are getting is the best possible since there is no other alternative. And the end user will actually be getting worse value out of this.
You are also ignoring the publicity that the big corporations are able to generate. You may make a living off your small shop by filling a niche right now but there is no guarantee that you can do that tomorrow due to big corporations creating the illusion of them providing better value to the masses. The general mass will only look at the hardware and network specs of the hosting service like our friend above and won't have any idea of some important feature he may be getting by going with another provider.
While being true, it's unfortunately the most innocent part of it as well. It's also how it should be maybe.
However, the big boys can also do nastier stuff like running a loss-leader for quite some time to eliminate competition like Digital Ocean did (sorry @jarland) when they first entered the market.
They provided free credits to the masses and took the hit because they had the capital to do it. Then this resulted in many providers going belly up because some if not most of their customers ran to Digital Ocean and enjoyed free hosting for many years.
Then once Digital Ocean was known and big enough, they stopped doing this free credits thing and even announced that they will reclaim these free credits if they weren't used until some time. This was because Digital Ocean didn't need to provide more free credits to increase their publicity as they were big enough and providing free credits would not actually do more good to them anymore.
Now (arguably?) Linode or Vultr is providing better value to the end users but Digital Ocean is much bigger than them and has much more publicity than them and therefore the average end user is just skipping the others and going with Digital Ocean and getting (arguably?) less value out of it.
That would suggest they were providing a service that was not really sustainable. There is a cost to running a business (staff, heating/air-conditioning, lights etc.). All of which would not exists if the shop closes at an appropriate time. If there is insufficient business to make running the shop beyond 10pm profitable during those particular hours, then why keep running the shop after 10pm? A competing shop could then perhaps close early while simultaneously lowering prices to attract new business.
This ultimately brings me back to efficiency.
As for the 'publicity', that comes at a cost. Advertising and Marketing is expensive. A small time provider can target niches with little or no marketing expenses, so they can still become known in parts of the market.
Now we obviously disagree on this but I just dont think (especially in the hosting industry) a true, full on monopoly is achievable in a true free market.
Barrier to entry in the hosting industry, I swear, has to be one of the smallest of any industry.
On the other side, banking/finance/insurance seems near impossible to get into given the ENORMOUS amount of capital required, and the regulatory hurdles. But even here you don't find monopolies.
The car industry has been dominated by just a handful of companies for DECADES. But looking at the profit margin on vehicles, it's hard to claim that such companies are abusing their position.
Unless there is a true monopoly, products will always find a way to either improve, or get cheaper, or both. There is always competition and competition will drive this forward. Smaller players may get driven out, but I still fail to see how this is bad for the consumer.
Another thing to consider is that if a big company like Hetzner provide a good (technical) service, but poor customer service, you can always resell Hetzner servers, and add your customer service to the product and sell it your niche....
It doesn't have to be a full monopoly. 99% of the market can be dominated by big corporations and 1% of the market can be held by small timers. 99% of the consumers may be missing something that may end up being better for them because they didn't know about the providers in the 1% part of it.
Check my Digital Ocean example above.
You can ask anybody who is over 30-35 about the interior quality of the cars 15 years ago compared to the ones on the market today.
Sure, safety of them is better now but that is not a result of the competition but is a result of end user education thanks to organizations like NCAP and IIHS.
Even now they are engineering their cars for only better rankings on those organization tests. That's why a car model may get a good result at NCAP but a terrible one at IIHS. Because that car was designed for European market and not the US one.
The most providers problem is, they don't understand market needs. They creating offers like hundreds others. So, how they would like to win with big players ? Mentioned 2GB is great example, same as mentioned $50 extra for 32GB Ram.
Can you tell me please, for which reason somebody need SoftLayer server with 2GB of ram and great network for $200, if is possible to cover USA/Europe/Asia/Australia/Japan and Latin America using just 4 providers such Vultr,DO,Linode,Amazon in much less price/latency and avoid single point of failure?
Another example from my experience. I needed 6 servers in US (Seattle,Los Angeles,Dallas,Chicago,NY,Miami). Mentioned USDedicated.com lost own chance to sell me few servers (Los Angeles,Dallas,Chicago) only for a reason that I need to pay extra $50 for 32GB Ram on each server ($150 in total). So, it's like shot in foot with this kind of tactic.
Another example. Sydney.
I newer bought dedicated server in Sydney, only for a reason that no one provider offer 32GB Ram in reliable price. Now we have OVH in Sydney. And now I have another server with them.
And one more.
I have also server in Singapore but with less than 32GB but in really good price. So, I will try to deal with my server provider "buy down" for ram upgrade. If not, I'll change them for OVH too.
So, as you see, just in RAM niche (which is not so expensive as newest CPU) some providers at own wish loosing chance to get more customers.
@serverian
Maybe. I don't know about all the details of those stories re. digital ocean and others.
I simply follow two guidelines: a) stay away from anything us-american if any possible. I avoid us-american products and services of all kinds like the plague. b) As a company one should try to stay away from the lowest end and to offer some substantial added value plus be discernable by good service and other elements.
I mention this not for political reasons but to put some light on a spot you left quite in the dark: It's not simply capitalism and digital ocean and others making other players victims - nope, many of the victims all but begged for it. They acted themselves like herd animals (so they shouldn't complain now about their former customers acting like herd animas), they were all but indistinguishable, they sold what everyone else sold and at similar conditions and prices, too, etc.
You are comparing a dedicated server with VPS's here or am I wrong? Softlayer's 2GB VPS is $35/month. Not $200/month.
$35/month for 2GB RAM VPS is not that expensive even though there are other companies who offer better value in terms of specs, network and customer service.
You need to note that Softlayer's case is very different here as well. They market themselves as enterprise friendly and they have that image. So if a system admin would suggest Softlayer to his boss and then have a downtime with Softlayer later, he's most likely keep his job due to Softlayer's image. The same may not apply to Vultr or DO, etc. That's an example of extra value Softlayer provides which others don't.
Of course, Softlayer is not all about the image. They will send you an email even when they remove some cipher off their API server. Some people value that and give them the extra money.
Again, hosting is not just about the hardware specs you get. Hosting is a tool to achieve something for the end user. And not all companies choose to compete in the OVH, Online, Hetzner market.
In the US, the big hosting (as opposed to colo) providers that own their infrastructure tend to be ridiculously expensive. AWS comes to mind right away. Maybe OVH will fix that.
In the budget sector, it seemed to me that dedi hosts played pricing games so you could get good prices on any particular feature, but you couldn't get the combination you wanted without paying a lot, even if it was an obvious combination. For example, OVH servers with lots of disk had crappy CPUs while those with fast CPU had low disk. Or the big expensive online.net storage servers have lower ram than you'd expect from a server in that price class. This has eased up quite a lot (Hetzner got it right with hdd's) in the past couple years but colo still looks attractive if you're trying to optimize.
It could be that til not that long ago, making good dedi offers was about financing the hardware, so if you had a huge operation you could deal with a longer payback period. Now older hardware is almost as good as new stuff, so it's easier to make good offers.
I really don't think it is realistic.
Sorry, are you suggesting that interior quality was better 15 years ago or now?
I'm quite certain that every aspect of modern cars are better than their 15 year old counter parts, with the exception of some select materials feeling lighter and cheaper in order to reduce weight to meet efficiency targets. Of course that may not be true for all cars.
In any case, I'm not sure I see your point here. And that's not because I disagree with what you're saying, but because I really don't know what you're trying to say.. so feel free to elaborate.
Also... I noticed you haven't followed up on this comment:
I think the picture you're painting is becoming increasingly hypothetical and trending in the opposite direction. From my observations, the number of hosting companies that exist today is more than any time in the past. And this number seems to keep growing. You can start a hosting company with a little know how and a few hundred bucks, and you can build your own mini data center for really just a modest sum.. No more, I assume, than you would need to start any other business. Which other industry has a lower cost of entry?
Of course I may be wrong but given the market and the trends observed, I think it unlikely to happen.
Don't take my word for it. Go ask anyone over 30-35 or even better go ask a car mechanic who's been in the business for long. Or go check any German made car from 15 years ago yourself and compare it to the modern model of it.
And how do you explain the safety ratings being different?
Exceptions don't make good examples. You cannot name any company who did this in the Western Europe (or Eastern Europe?) using their own capital and became big enough to compete with the capital giants. You can only name some companies who are not known and doing something small and will eventually cease to exist, either in the next year or in the next 10 years as the big corporations push them out of the market by lowering their share.
The number of people doing hosting business may be more than it was in 5 years ago. But the total profit made by the small timers are getting lower each year while the big ones are increasing their share. And they are doing this by doing unjust practices like creating massive peering networks and providing loss-leader deals to gain more customers.
Your average Joe with a couple hundred bucks going into the hosting business story may be true if you count that as being in the industry with his tiny market share. That same Joe was able to get into the industry 5 years ago as well and was able to succeed and grow with much better luck than it is now. This is the whole point I'm mentioning over and over and over.
My final words: Keep in mind that I don't have any economical education but in my opinion this situation would eventually bring the smaller players to an end at some point and the end user will eventually become a number on some big corporation's book. A number which can easily be replaced by some other number, too.
Strange. I feel like our company is competitive and we used our own capital... I don't know about @Cociu but I would imagine he's self made, and I can think of a couple of others in Hong Kong and UK with their own infra who built their businesses from nothing.
All successful business are the exception. No business is easy.
No, I am not comparing VPS to dedicated server. I am comparing 4 psychical cores with minimum 8GB of Ram. As I am said, with 2GB you can create "about me" site with static html files.
So, let's we compare Vultr vps to mentioned SoftLayer vps in Sydney:
With Vultr you get 8GB RAM, 6 CPU cores, 150GB SSD and ~5TB bandwidth for $80.
With SoftLayer you will get 8GB RAM, 1 CPU core, 25GB HDD and ~0.25TB bandwidth for $109.
Do you see the difference or I need underline it ?
Would you like to say that SoftLayer is better in this case ?
And now in Sydney we have OVH. 32GB RAM + E3-1245v5 + 3TB at 1Gbps + 2x480GB SSD with SWraid for just €89.
Who will win ? OVH of course. Same as did it in Europe. In same way.
I would like to add, that I am not fan of OVH or Hetzner, they just giving more value to end user.
Please believe me, only 1 per 1000 end users know, who is SoftLayer and know their reputation. Some companies prefer to make happy 1 customer with SoftLayer and fail in other fields. Such outscoring customer support in India, american's hate this tactic.
I am agree with you. Just they not become to be huge in one day. It was years of good marketing strategy. Where others try to sell just RAM for $50, Hetzner offered good server in less price. So, in long run their strategy was better. And all the rest will fail.
In business we still need to looking for new opportunities, I see great chance to hosting providers in Brazil. Who will enter there first with good offer, will be just winner. Because it's growing market. At the time, simple server in Sao Paulo cost $300+. This location offer only Amazon and SoftLayer. Where only SoftLayer offer dedicated server for $200 with 2GB of RAM. I can imagine what will happen when Hetzner or OVH will enter there. They become to be #1 in Latin America quickly. So, for what waiting thousands of hosting providers now ? And later they will be crying again.
Greg.
I am verified current SoftLayer offer in Sao Paulo. So, the "cheapest" server: 1270v3 + 8GB of RAM : $277. If you would like to upgrade to 32GB, additional cost of "only" $192 monthly. What in total giving $474 monthly. Also, if you living in Europe and you haven't a company, then minimum 20% up for Vat. In total: $568. Great offer.
That's because it was rewritten for Node. You really should get a quad core with 32GB minimum if you want to keep it running on two networks at once.
This cracked me up! Good one.
Thank you.
Those who have the ability to rise, rise. Those who don't bitch about getting subsidized.
That's like saying that physics depends on "the point of view". Wrong. Unless you want to go into meta-modernity and niche philosophy, shit is binary. I'm either right or I'm not.
By providing a better service fit/value to the customers.
So, in your own example, the big chains are providing so much more net value to consumers, that there are not enough left who prefer to pay more to sustain businesses that stay open after 10 PM.
Hadn't thought it that way, had you?
I'm not making it personal and I don't see how you took it that way. I suppose this is your attempt for a preemptive response on me doing so in the future.
You are projecting big time again.
And how would you know that? Why would you assume that well positioned arrogance hasn't actually earned me a ton?
You have forgotten to calculate the information cost. In simple terms, there is a cost associated with changing your state from "hosting at GoDaddy" to "snatching dedis at amazing prices on LET".
Sometimes, this cost is paid by the consumer ("is there anything out there other than GodDaddy... let's try this BlueHost?"). As you can imagine, the opportunity cost is non-trivial for the average person and this is why LET is a boutique community and not a mainstream.
Other times, by the wonders of capitalism, a company pays that instead (and for) the consumer. In your DO example, the capital DO spent was exactly for this cost.
@deadbeef,
I'll avoid replying your ad hominems so that you can gain more using your arrogance, as you claim.
You assume there are only 2 sides and the population is not diverse.
You look at 2 point of views only: Big corporations and average consumer.
I know this is the view of capitalism as well. It eliminates the consumers who would value other stuff than the average consumers. Then once the "problem" consumers are eliminated, big corporations can control the market with populism. In the end, the average consumer wouldn't even know if they would want something other than what's being offered.
Everything you say just compliments what I say for the point of view I have.
In this system, what you'll have as an end product is exactly what big corporations want: Masses of consumers who wouldn't know any better.
The difference of our views is just you think this is a good thing and I think this is a bad thing.
@serverian Big companies in most have problem with customer support. For example, Amazon have 3 working days for response to simple ticket. And also, after those 3 days they not will resolve your problem, because no experience. I'm created only once ticket there. After mentioned 3 days I am canceled all cloud services without longer conversation. I can't imagine that site not will be working for one week only for a reason of Amazon very poor support. It's perfect example how big companies fail with simple things.
@deadbeef Godaddy is really bad example. "hosting at GoDaddy" meaning that site is extremally slow, also with few second response time to just dns query. It can't be faster, because they hosted more than 10.000 sites on single server.
Did CC sell LET to WHT or am I missing something?
Yes, you missing a lot. In this age 18 sites with static files and minimal traffic I can run on 128KB Arduino with SD card. Do you mean what I am talking about ?
Just nobody not buying dedicated server for just 2GB of ram, because in much less price can buy good VPS.
Uhm, no... I was illustrating the fact that you don't need 2Gb at all to run a modest site so you kinda made the same point I did.
The KS1 is one of the most popular Dedi's around though. Don't get me wrong but most people just get off by the idea of having lot's of ram and resources available while in reality they don't need shit to run their site. Apart from that, you can't really compare a VPS with a dedicated. It all depends on your intented usage.
Pfft, you just demonstrated that you don't know what La Idlér Connaisseur really means.
Thanks! That put a smile on my face and I really needed that!
I will repeat for the second time - there are no sides or views. There is "how things actually work" - think Physics.
See point above.
Apart from the point you should be well aware of by now, this is a very funny sentence coming from you.
"eliminates the consumers". Is this some kind of new age woo woo "view"?
Oh, I see. It's the "you are too stupid to have desires, THEY have planted them on your stupid ass" age-old nonsense.
You do not have a point of view, for the are no "views", there are only how things work. What you do have is a deep lack of understanding how things work.
Those stupid sheep just don't get you, it must be upsetting they are so naive, right?
We do not have a difference in views. There are no views. There is only how things actually work.
This is the second time I'm saying this here today.. I'm not really sure if you are trolling but...
Might be a big surprise for you if you're not trolling but Economy/Marketing, etc is not Physics. Physics is not affected by human psychology or behaviour.
There are a lot of views in economy. They change from time to time and country to country. There were other systems before your beloved capitalism and there will be many more other systems after that.
If you want to ignore everything and just focus on the western world's economical model for the last few decades and think it as the ultimate system and has been there since the history of human kind, it's fine. Say so and then I wouldn't bother replying you.
Repeating something makes it true?
That's your view ;-).