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I would agree that OVH having different brands was a particular stand out sign that they're trying to move into the higher end market, certainly they might continue to provide SYS and Kimsufi services, but it's likely they won't be prioritised like OVH itself, additionally SYS/Kimsufi is used/EOL hardware, something they've already made their money out of anyway.
The setup fees, I think it's quite obvious they weren't to prevent turnover, as they've always offered these setup fees on a pay by month basis (until recently for SYS/Kimsufi), that's hardly going to prevent turnover.
Of course there could be logical reasons for them, but this is what it seems like.
NAh, there's a Mexican saying: The money (profit) is on the poor.
Yeah ese.
Last time (about 2 years ago) I was in one of their facilities I saw a lot of Sparkle branded PSUs and did see a lot of Supermicro cases.
Why were you in a OVH facility?
@kcaj - Long story
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@kcaj - Its nothing that exciting, I was just invited for a tour of their facility. Their environment is completely different to most traditional DC configurations. Very cool/clever. But almost all their kit is standard commodity kit but they just do away with the excess and slap everything on a single plate as you've probably seen in their videos.
I did, until this morning
Anything that takes OVH in a positive direction is a good change and I'll be glad to roll with them through price increases should they come. I don't know how I can pay so little for what I get AND reach them instantly on the phone to get things handled, on top of the DDOS protection.
I'm a happy client, I look forward to seeing how they plan to grow.
What happened this morning?
Another dillusion shattered. That they are somehow special and can make their money selling for peanuts because of the magical fairy dust sprinkled on their 'custom' magical hardware which as you pointed out isn't custom at all.
The other funny one is "they buy in volume" as if that is the magical formula that nobody else can do and has never thought of and like there is 500% markup on computer hardware otherwise.
I've heard it all and just chuckle now. People will try convince themselves of just about anything if it means it saves them a buck.
Probably they will try to enter new, higher market segments, yes. But I strongly doubt that they will simply drop the cheap end. After all and no matter O. Klabas personality, they grew very, very big with that low-end market.
And yes, sheer size does help. Just try to ask for peering with a 2 Gb pipe and then ask with a 200 Gb pipe. Also the TB prices are considerably different. Similarly, buying 1000 boards, CPUs, disks, gets you a quite difference than buying 10.
Just calculate. How come, a colo can earn money (and lots of it)? One might as well put ones rack into ones basement. Or calculate whether a 5.000$ router for 2 Gb is cheaper or whether the 50.000$ box for 100 Gb is cheaper. And keep in mind that bandwith comes with base costs (which aren't that much different) and with per TB costs. And, of course, that 10 cents (or actually 1$) per TB difference is among the major cost factors of a provider.
OVH has managed to turn the costs of quite some layers, up to the colo layers, into money makers. They would win a pricing war with pretty everyone - and still earn money (where other went belly up).
Note: I'm not anymore their client but when I was, I was a happy one and their products worked just fine.
You have noooo idea what are you talking about, I've seen fortunes selling peanuts...
It's new CEO, whilst that will of course bring change it will be more about restructuring what they have before any significant product changes emerge.
They've done what they have by using investor money. It doesn't mean that its viable long term.
Once they eat through their investments, and even more investments, finally the investors are bound to see no real return... at that point, good luck
Total misunderstanding of what OVH is and did. They didn't raise funds (so no investor), they borrow money from banks. Totally different. Also no one lose his CEO position, he just left to focus on more interesting things (as he did in the past, for example to build beauharnois).
They just wanted to become number 1, so they are. In many markets.
@ItsChrisG
Don't know about you but I had plenty not at all funny meetings with investors, from small fries up to billionairs. They had one thing in common: They wouldn't give you money to burn over years.
What they would do is something like: OK, here you get x million. Prove your concept.
Then OVH (or whoever) would run relatively small scale and prove their concept, it'd be something like "OK, of course we lost money due to scale of economy. But, see, these are the operation costs now, this is what they would be in large scale, and this is how well the product sells".
The point would be: See, it works. If we would do it large scale, we'd earn about this and that margin".
I virtually have that spreadsheet in from of my inner eye. 50 servers, 1000 VPSs, next row the same times 10, and the last row the same times 100 or 500. revenue rising linear, cost rising considerably less.
If, on the other hand, they'd fail with their first 50 or 100 machines, the money pipe would go dry very quickly. And hey, in the mid and high end, economy of scale is about margin luxury. It's exactly in the low end, where economy of scale buys you a big, fat, warm place, where ll the smaller ones would die off quickly.
Nice try... but if you think about it logically; how many companies or "whatever" they were who tried their best end up folding even with a ton of investors and cash (not just hosting, all the "internet" craze).
The proof is in the pudding, and I assure you there is no limit to stupid or uneducated investors who get excited at the terms "internet", "cloud", etc. In the end, guess where almost all this investor money comes from -- its all dudes who are NOT versed in the industry and the environment but think that "OMG ITS THE INTERNET, ITS GONNA BE A HIT" and they put in.
There's no "MAGIC" behind OVH. Everyone can get a rough estimate for their capital cost PER server, their operating cost (power (and not just server power draw, but the power to COOL that draw), rackspace, bandwidth, etc).
No, they do not get magical "volume" pricing. The hardware distributor game is very, very slim margin.
If you do the math, and stay realistic, you will see that their margins/profit is also very, very slim. You cant evade, hide, or ignore simple math.
Once you account for paying employees (support, billing, management, accounting, HR, and ON and ON when you are that size) on top of all their other costs just to provide you the service - it really isnt feasible -- otherwise, why didnt anyone else do this before and why isnt anyone else doing it now? Because OVH has magic that no one else can get?? Do they have their own personal wizard or genie? ............
I haven't had money
Let's also not forget that while you are looking for a cheap server to save on spend, get your project off the ground in a small budget, or whatever....
The guy running OVH is RICH, taking home MILLIONS A YEAR, because he gets a salary that he gets no matter what because its backed by investor funds.
So while you are sitting here, trying to get your cheap hosting for as long as it lasts... that guy is going home every single day, earning minimum $3000 (based on a measly $1 million/year salary, which I'm sure he gets more), including weekends or days he doesn't feel like working.
The REAL game is setting up a company like OVH that draws a ton of attention and clients, but then draws a ton of investors; and then whether or not it is actually viable long term doesn't matter. The person (or persons) at the top, still make a shit ton of money either way, and when it ends -- who cares? I still have millions in the bank.
Not quite. They raised the funds through capital pooling, yes it was through banks but the effect is the same as outside investors in that they still have a vested interest in not just the repayment of those loans but the performance of the company. Loan agreements will have many clauses tied to performance and direction.
Loans are not just made on a simplistic basis of we lend you x and you repay y over z until paid. This is the basic agreement of course however those banks are investing in OVH's ability to grow not just infrastructure but profit to ensure the security of those loans.
If at any time they have concerns about the company direction or it's forecasts that led to the agreements to lend then they very much can direct the company to change or risk the calling up of those funds before they are due.
Pardon me, but I'm interested in a discussion about the matter, not in a pissing contest.
Well, I happened to be involved in a large Colo and cross-Atlantic fiber startup shortly before tha internet bubble blew up around 2000. And that is not what I saw. Yes, they were excited, very much so. But before signing anything, we had to pass their finance guys and they were as greedy as they were unnecessary-risk averse. What you tell me may be true in the couple hundred thousand $ range but not when you're talking about millions and millions. They will want to first run a first stage test if any possible (and it's almost always possible).
Again, not my experience. I know of cases where buying hundreds of machines led to solid 2-digit rebates.
Furthermore:
You don't need 50 times as many accountants, technicians, etc, when you run a 50 times larger operations. Additionally, you can reasonably afford automation that is just beyond a small operations capabilities.
OVH also, for instance, runs their own DCs. Most other providers have to rent racks or suites, i.e. their costs will include the margin of their colo provider. So OVH doesn't need margin on only the machine like the others. They have multiple margin sources/levels.
Most providers pay for upstream, which includes a rather fixed fiber cost and a volume cost. An operation like OVH can carry lots of their traffic over peering. Yet another margin source.
A giga-operation like OVH can achieve levels of automation - and uniqueness btw. - most other providers can hardly dream of.
Yes, maybe they might have succeeded burning risk money in their first operations. But bet your ass, that the 2nd and 3rd DC was already built with cheap capital, cheap because of low risk and proven economy.
My guess is a few of these big and cheap places running on loans or investor capital or whatever rather than actual earnings will be folding/consolidating in the not too distant future. Just enjoy the ride while it lasts.
Far too many people think this is sustainable and are basing their business plans on it. It most definitely is not. What is going on right now is about getting customer numbers....not making an actual profit.
Sorry to put it somewhat bluntly but in fact economy of scale is the best way to earn money and to grow.
Reason:
Having a rack full of machines, which translates to being a small but not insignificant provider, I can sell 1000 - 3000 VPS, depending on whether I seel a decent product, say 256, 512 and 2014 MB KVMs or an overbooked OpenVZ pig farm.
Looking superficially it might seem that selling for a not dirt cheap price is the smart way because it brings you, say 12.000$ revenue, while dirt cheap VPSs bring only, say 4.000$. Assuming that the ultra cheap player is using second hand hardware his costs (exc. labor) will be somewhere around 2500 while the other guy (who sells a little less cheap) will have costs around 4000 - 5000$.
The ugly part comes in human labour. Providing reasonable support means that there are min. support personel. How much do you pay those people? 2000$/mo each? Well, then the ultra cheap provider either must rapidly scale up (and have some cash reserves ready for the start) or he will go belly up. The more reasonable one will have 12k - 4.5k - 2*2k -> 3.5, i.e. he can live from his VPS farm, if somewhat modestly (in usa and western eu).
Now, scale that up. With 10.000 VPS's you won't need 10 times the support people. Having, say 4, will do nicely and that will dramatically change your total costs/VPS.
Scale up to 50.000 and peering will start to come into the equation in your favour. Moreover you'll have lower rack costs.
So, maybe you'll save only 20% on hardware (assuming new). But you'll dramatically save on human labour/VPS, BW and rack cost/VPS.
The real cost/VPS for the 500 or 1000 VPSs guy will be around 70 - 90% of his revenue. For the 50.000 VPSs guy that factor will be more in the area of 50% although he sells cheap.
Wow I didn't hear about this one. Hope the new person can bring some improvements to the company.
@ItsChrisG Finance of big companies and investing is not working as you think, especially in high capitals. In OVH's case, there were an investor's pool in early 2013 that participated mostly huge bank institutes (HSBC, Citi etc.) giving them over 190 million euros, and the interest could raise the investing money over €300m. THey did that with a certain plan they presented of a decade, willing to become one of the biggest players in the world providing datacenter and traffic. They are participating in IT developing programmes with the French government and had a revenue of €240m last year. Is there any chance they fail? Yes, the same chance Google could fail in some years, or Yahoo or any other IT or not IT company. But atm., they are getting bigger and bigger gaining more international power and have a huge role in controlling the market.
Kimsufi status changed for all dedi
Victim of its success!
Available soon.
I agree. I saw this coming, but what I did not see was the ability of OVH to raise even more money. I expected them to fold this february the longest, but they got 9 figures again, somehow.
Don't get me wrong, I want OVH to stay on, same as online.net and all the people which offer very cheap services, soon there will be a big need for capacity in countries where democracy still breathes somehow, the french people will not agree easily to mass surveillance and censorship and OVH is one of the most resistant companies today, however, it was obvious the old model was not working, that the former CEO was far from understanding management and marketing, in places even basic economy and budgeting. I have now hopes they will improve and will be come sustainable.
I do not hate OVH per se, just their bias and racism (coming from poles in france it was even more idiotic). An economist should run a business, especially big business, a CTO can at most run a small family business with an acceptable degree of profitability in the long run.
I don't speculate, but a lot of people do.
So, with one move, they got two bigs: