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Why new providers should rent their hardware instead of buying outright
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Why new providers should rent their hardware instead of buying outright

taiprestaipres Member
edited June 2012 in General

Cost.

You should look at like leasing a brand car, it'll cost far less than buying that car outright, you'll get all the perks and benefits of using that cutting edge 2012 edition, and when you get tired of it in a few years you can trade it in for a newer model. So you get most of the upsides and very few of the downsides...because the truth of the matter is the second you drive the car off the lot it's lost value, same thing with server hardware...cutting edge hardware you buy today may have drop off tremendously in value, in just a few short years. So you're gonna take a net loss if you try and sell it later.


This also frees up lot of money for expansion . Though I understand some of the perks of owning ones hardware, but if you're a new provider I think the focus should be about survival first and foremost. Buying outright reminds me of that tv show "kitchen nightmares" where people dump their entire life savings, morgaged their house etc...to start a restaurant...a business which clearly has HUGE overhead to get started and the ROI(return on investment) is slow and long(can take years and years and that's if you're getting good business). To me this makes no sense, that's why i'm so against brick and mortar businesses for the most part. Only real exceptions are sure fire winners like mcdonalds, 100% you'll be getting repeat business with that.


Anyway I made this thread because i'm tired of seeing new providers bite the dust after few short months.

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Comments

  • Its exactly the same as renting a house or buying a house.

  • We currently rent over 100 servers. This has made it very easy for us to now fill racks with our own hardware for long term gains.

    There is absolutely nothing wrong with renting/leasing hardware, especially if you have favourable support arrangements.

    Thanked by 1taipres
  • @taipres said: To me this makes no sense, that's why i'm so against brick and mortar businesses for the most part.

    Against them how? O_o It's not as if many of them have a choice.

    On topic; owning vs renting is a double-edged sword. Unless you can prove that you're locked into a lease that cannot be easily negated/avoided, renting's biggest drawback is that ownership of hardware is a very strong indication that a company is serious about sticking around, and renting will always put you at the mercy of your host/DC (Portland was a harsh lesson for us; thankfully we did own our hardware then, or that very well might've been the end of Frantech).

  • DamianDamian Member

    Turning your statement upside-down could be called "Why customers should inquire if their providers buy or rent their hardware"....

  • @Aldryic said: Portland was a harsh lesson for us; thankfully we did own our hardware then, or that very well might've been the end of Frantech

    What happened?

  • taiprestaipres Member
    edited June 2012

    @Daniel said: Its exactly the same as renting a house or buying a house.

    Not quite, house values go up and down all the time, also you can fix up houses to increase sell value usually for not much. In fact before the economy took a nose dive "house flipping" is what many did, read about it a lot in "how to get rich books". They'd find a dump to buy, fix it up, and sell for far far more than what they bought it for, you can't do that with servers.

  • @Daniel said: What happened?

    tl;dr really sleazy DC that robbed us blind, had no end of issues, and even tried to steal a bit of our hardware.

  • CVPS_ChrisCVPS_Chris Member, Patron Provider

    For a new provider I agree, they should rent.

    Your thinking is wrong though in a sense. Lets say I build a machine for $2500. To Colocate it for a year would cost me lets say $1200. So for one year of hosting your cost on that one machine is $3700. Divide that by 12 months and that comes out to $308/month.

    For that same exact machine, lets say I wanted to rent it from someone. With the same specs its going to be between $350-$450 a month depending on the provider.

    So on the low end I would be saving $500 and on the high end $1704.

    I guess you can say that's the cost of reassurance ( $500 or $1704 ) to make sure your business works out.

    If you do have the capital and plan on being in it in the long run, owning is the way to go.

    Thanked by 1HalfEatenPie
  • netomxnetomx Moderator, Veteran

    @CVPS_Chris said: f you do have the capital and plan on being in it in the long run, owning is the way to go.

    This

    Thanked by 1marrco
  • +1 for chris

  • @taipres said: "house flipping"

    What on earth does that have to do with a consumer buying a house to live in versus renting a house to live in?

    House flippers didn't LIVE in those houses, and they never intended to; not to mention that renting is out of the question for that purpose.

  • @taipres said: also you can fix up houses to increase sell value usually for not much

    The danger with that here is, while fixing up a house can greatly increase it's value, it will also make it unsellable. If you purchase a house for 50k and fix it up, you'll learn the hard way that nobody wants to buy a 150-200k house in a neighborhood full of 50k houses.

    @taipres said: They'd find a dump to buy, fix it up, and sell for far far more than what they bought it for, you can't do that with servers.

    Aye, one of the dangers of owning the hardware is the cost of upgrading. Although amusingly enough, @Francisco manages to purchase most of our gear at usually 80-90% of cost, and eventually after we upgrade he finds a buyer that'll pay more than what we originally spent. The star of David burns bright for that man <_<

  • CVPS_ChrisCVPS_Chris Member, Patron Provider
    edited June 2012

    Thanks @netomx and @djvdorp :-D

  • taiprestaipres Member
    edited June 2012

    @CVPS_Chris said: For a new provider I agree, they should rent.

    Your thinking is wrong though in a sense. Lets say I build a machine for $2500. To Colocate it for a year would cost me lets say $1200. So for one year of hosting your cost on that one machine is $3700. Divide that by 12 months and that comes out to $308/month.

    For that same exact machine, lets say I wanted to rent it from someone. With the same specs its going to be between $350-$450 a month depending on the provider.

    So on the low end I would be saving $500 and on the high end $1704.

    I guess you can say that's the cost of reassurance ( $500 or $1704 ) to make sure your business works out.

    If you do have the capital and plan on being in it in the long run, owning is the way to go.

    Yeah but that's still upfront money you're putting in the pot, where as leasing, you can grow as your business requires you to without the huge investment. That inital investment money saved can be used for many many other things it also gives you more breathing room, say you lose 100 customers for whatever reason, you can simple cancel a server or a few you were renting, consolidate your business and direction you want to go, and focus on the other servers and customers you have, no big deal. But if you spent thousands to build that server...well now you're in trouble. This has happened to even giant corporations like legos, they tried to expand into unfamiliar terroritory and almost went under as a result, so they had to cut back, cut off the fat and downsized. Now they're stronger than ever.

  • @CVPS_Chris said: Your thinking is wrong though in a sense. Lets say I build a machine for $2500. To Colocate it for a year would cost me lets say $1200. So for one year of hosting your cost on that one machine is $3700. Divide that by 12 months and that comes out to $308/month.

    For that same exact machine, lets say I wanted to rent it from someone. With the same specs its going to be between $350-$450 a month depending on the provider.

    So on the low end I would be saving $500 and on the high end $1704.

    For a new provider who is not near the DC, you will also need to factor in support/replacement hardware costs in addition to networking equipment. These are often the barriers to enter into colocation arrangements for a new provider

  • CVPS_ChrisCVPS_Chris Member, Patron Provider

    @ShardHost said: For a new provider who is not near the DC, you will also need to factor in support/replacement hardware costs in addition to networking equipment. These are often the barriers to enter into colocation arrangements for a new provider

    Touche.

  • CVPS_ChrisCVPS_Chris Member, Patron Provider

    @Taipres

    Thats why I said this:

    "I guess you can say that's the cost of reassurance ( $500 or $1704 ) to make sure your business works out."

  • @DimeCadmium said: House flippers didn't LIVE in those houses, and they never intended to; not to mention that renting is out of the question for that purpose.

    That's not true at all, some do indeed live in the house, but invest some money in fixing it up when they get tired of it, then turn around and try and sell for more they put into it so they can buy a new house or whatever. In fact there was tv show on this very thing(again pre economy issues).

  • FranciscoFrancisco Top Host, Host Rep, Veteran

    @ShardHost said: you will also need to factor in support/replacement hardware costs in addition to networking equipment.

    One of our offers on the east coast doesn't include any admin time so, if we decide to roll with them, we're just making sure to ship already burned in equipment as well as fully maxed out with whatever configuration we can come up with.

    @Aldryic said: The star of David burns bright for that man <_<

    You know better than I do that I base some of our sales rounds around how cheaply I can source gear :) Our latest builds I build for 40% less than list price.

    Fran

  • taiprestaipres Member
    edited June 2012

    @Aldryic said: The danger with that here is, while fixing up a house can greatly increase it's value, it will also make it unsellable. If you purchase a house for 50k and fix it up, you'll learn the hard way that nobody wants to buy a 150-200k house in a neighborhood full of 50k houses.

    Don't see why they'd be an issue at all, many neighborhoods have houses that range hundreds of thousands of dollars apart all the time, sometimes millions. That neighbor could get the "nice" house and be the envy of the others. Though it makes no sense to pay a lot more for a nice house if all other houses around it look like dumps, as that hurts property value and just isn't very appealing.

  • FranciscoFrancisco Top Host, Host Rep, Veteran

    @taipres said: Don't see why they'd be an issue at all, many neighborhoods have houses that range hundreds of thousands of dollars apart all the time, sometimes millions.

    But they're planning to stay there. You're not going to be able to build a million dollar house in the hood and expect it to sell at full price right after it's finished. If your high priced house is there it'll slowly raise the value of the neighbourhood.

    Francisco

  • taiprestaipres Member
    edited June 2012

    @Francisco said: But they're planning to stay there. You're not going to be able to build a million dollar house in the hood and expect it to sell at full price right after it's finished. If your high priced house is there it'll slowly raise the value of the neighbourhood.

    Francisco

    That's why I said

    @taipres said: Though it makes no sense to pay a lot more for a nice house if all other houses around it look like dumps, as that hurts property value and just isn't very appealing.

    If the neighborhood looks decent and only 1 house is for sale it's possible the buyers won't have any idea what the owners of the other houses payed for theirs. Also if someone bought their house say 10-20 years ago(like some family of mine did in california) obviously they payed far less than what someone today would have to pay, due to it being a desirable location. Early adopters usually always come out on top.

  • @taipres said: That neighbor could get the "nice" house and be the envy of the others.

    Aye, that'd be the ideal for someone that wanted to keep the house.. just not a good move (here, at least) to significantly improve a structure solely to resell it unless you can get ahold of either remote property, or it happens to already be in a nice neighborhood.

    @taipres said: Though it makes no sense to pay a lot more for a nice house if all other houses around it look like dumps, as that hurts property value and just isn't very appealing.

    Yeah, that's what I was referring to. I'm in an interesting location (this city got the bulk of the Hurricane Katrina evacuees, and a good number after Rita passed through), so more often than not the initial price of the house very much reflects the surroundings. You won't find any real estate here in a decent area for under 100k... house flippers either need to be well seasoned to afford the good homes, or simply purchase the cheaper houses to fix and use as renthouses (very common here).

  • MrAndroidMrAndroid Member
    edited June 2012

    If you rent a house or buy a house, the experience is the same for those inside the house. Same for servers.

    From the outside, you can't tell if its rented or brought, of course when you buy a house its a long-term investment, same when you buy a server(s), its a long-term investment.

  • To be quite honest, @taipres, what gives you the right to dictate how people should run their businesses?

    Thanked by 1DimeCadmium
  • miTgiBmiTgiB Member

    @Francisco said: Our latest builds I build for 40% less than list price.

    I don't think list price is relevant when dealing with 3-5 year old parts. Granted they are still perfectly usable, as you are using them, just list price is what? Retail, current value, some other number pulled out of your backside? :)

  • FranciscoFrancisco Top Host, Host Rep, Veteran

    @ElliotJ said: To be quite honest, @taipres, what gives you the right to dictate how people should run their businesses?

    The same one that gives him the right to run the wambulance for VPS6.

    Francisco

    Thanked by 1TheHackBox
  • taiprestaipres Member
    edited June 2012

    @Francisco said: The same one that gives him the right to run the wambulance for VPS6.

    Francisco

    Keep showing the world jelly you are of VPS6 :) and they'll keep succeeding because they're a terrific company.

  • miTgiBmiTgiB Member

    @ElliotJ said: To be quite honest, @taipres, what gives you the right to dictate how people should run their businesses?

    This was my first thought, and I decided to stay quiet until the trolling became just too easy, but honestly, @taipres please show me your experience at this or that business model, as I have been doing this since 1995 and have leased and owned hardware over this period, and currently own 100% of my hardware.

  • netomxnetomx Moderator, Veteran

    @Francisco said: that I base some of our sales rounds around how cheaply I can source gear

    interchanging computer parts with a tiny, obscure part of your body... do you have medical insurance? You'll need to get your part fixed, it will not retain the poo

    =P

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