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Right, but Atoms are also razor-thin margin products (as would 1230v2s @ $60/mo) -- there is a reason you don't many hosts selling at that price. Most of the magic formulas have been discovered.
To get workable density for Atom systems, I imagine you're looking at some sort of specialized or semi-custom case setup/layout. In any event, you're probably looking at a somewhat lengthy ROI.
I don't work in the hosting industry, but the company I work for has several datacenters and co-location facilities, it's not a trivial thing to manage. I hate to sound negative, but you have to take a hard, long and realistic look at these types of ventures.
@MIcrolinux: no hard feelings, I understand it's difficult. I'd rather have your honest thoughts than a bunch of sugar-topped bullshit about how easy this will all be.
I'm also finishing high school and need to make a couple dreams come true. I'm sure some of the things I plan to do in May will not happen, however I am determined to do my best. I already work really hard to get customers now, so that when I do have my own datacenter, it will be worthwhile.
Sounds like a killer
And about the L5420 offer, I would be happy with a /29 block, and KVM/IPMI or whatever to remote management/OS install :P
Well, I would be able to provide some sort of remote interface for reboots, for a small price, like $5/mo. But you'll always be able to email [email protected] for somebody to go do it
@shovenose said: I'm also finishing high school and need to make a couple dreams come through.
This possibly a bad one to pick, you're probably going to need a pile of operating cash on hand as well. My vote would be to take the next few years getting an education and experiencing life, then come back and apply that. Then again, there is the old saying "Nothing ventured, nothing gained", you have to balance it all out I guess.
This is life
Also I'm not doing this alone, I have a friend who is doing this with me. He's 21 right now.
PS I already have a reliable job that I work on Saturdays and on vacations during the week, and that will expand. I get way more than minimum wage.
Besides I have more money than my dad
Yes, but with low prices I will never have any idle servers. Besides the more servers I have provisioned the sooner it's worth buying/building an actual datacenter.
Careful there. There's an economic paradox that will work against you here. Psychologically, people associate low prices with poor service. Even if you offer the best service around, it may be more difficult to get respect from customers.
If you're willing to make very low margins on some servers to get early customers, that is one thing. But sometimes, raising prices causes you to get more customers.
A common marketing trick is to offer weaker deals that make the good deals look better. Saying $55/month for dual Xeons leaves your customers with no baseline. Instead, offer Atoms for $50/month, and then dual Xeons for $55/month.
All of a sudden, your customers might be willing to pay $60 or $65 / month when they see $50 Atoms as the baseline.
You probably weren't expecting to sell many Atoms anyway... and you probably aren't making much margin on them anyway. However, the higher prices earn you "street cred" with customers. Clearly, this guy has respect for himself if he's actually expecting to sell me an Atom for $50/month! The offer is there for the message, not necessarily to offer customers a good deal.
But indeed, a $50 Atom sitting next to your $55 Xeon makes the Xeon look like a much much better deal. Its just human psychology. Your customers will feel better for choosing the Xeon (which they should), and you might sell more Xeons than you would have normally. Win/win for all sides.
Interesting point. Rather than selling an Atom for $35 and the Xeon at $55? Wouldn't I want to get them in the door with the cheap server, then they like it and go for more? or is that not how it works?
Interesting point. Rather than selling an Atom for $35 and the Xeon at $55? Wouldn't I want to get them in the door with the cheap server, then they like it and go for more? or is that not how it works?
"Cheap Servers" are dominated by Linode, and will probably soon be dominated by Digital Ocean. You aren't winning that war.
I'd never purchase an Atom, even at $35/month. I'd much rather get a decent VPS from a big name provider... or even the multitude of low-end offerings that are all over these forums. VPSes give me more performance / cost than an Atom, for something like $10/month.
OK so I should sell a Pentium III with 128MB of RAM for $500/month?
Just kidding, but to be serious, I like your logic. It (sort of) makes sense.
OK so I should sell a Pentium III with 128MB of RAM for $500/month?
Just kidding, but to be serious, I like your logic. It (sort of) makes sense.
Just note that I wasn't educated in Sales / Marketing (although I have a few friends who did get degrees in that who told me about these paradoxes in human behavior). So I don't know the optimal price spread for ya (nor the math behind that sort of thing). You'll have to figure it out yourself.
"You'll have to figure it out yourself"
Completely understood; I'm not asking for you to set up my business, (in fact I hope I didn't sound like I was.
I totally appreciate the advice and will factor it into my calculations on pricing. But I think I can make the three mentioned servers above a possible (Dual L4520 for $55, Xeon E3 for $60).
Raising prices works on both ends of the scale btw.
Look at the pricing of the current proposal:
$50/month Atom
$55/month Dual L4520
$60/month Xeon E3
Compare it to:
$50/month Atom
$65/month Dual L4520
$100/month Xeon E3
$300/month Xeon E5
It is clear what the best deal is. The $65/month Xeon. Bam, I just tricked your human psychology into buying a $65/Xeon, when you were planning to only sell it for $55.
You need a weak deal on both ends of the spectrum for maximum effect. And if you manage to sell E5s at $300/month, all the better for your business.
I would buy the $65 one in that situation too; it's a no brainer!
Well, I'm actually going for a different point. I mostly agree with MicroLinux here.
Indeed, education is key here. As you venture out to the business world, you are actively competing against people who are far far smarter than I am in Business / Economics. They know many more paradoxes in human behavior, and the smart ones will figure out how to abuse each paradox.
I'm not saying you have to choose that path, but its best to know who you're up against out there.
After all, College only gives you the opportunity to learn these sorts of things. Some people do much better in college after doing "real world" stuff for a while. So after a few years of some business experience, you'll have a better idea why you're going to college in the first place, instead of being a braindead dumb dropout who can't even remember the reason he's studying in the first place. (Happens too often).
If you're young, and you've got an opportunity... I'm almost willing to edge you on cautiously however. Its an opportunity that I missed. One great thing about being young is that now is the time to take big risks in your life, because you are young enough to recover from your mistakes. And if you end up doing the college thing later in life, you'll be wiser from practical business experience.
Just be sure to figure out all the legal stuff so that you can fail safely in the unfortunate case you do. I'm not an expert on LLCs or whatever that law stuff is.
At very least, when you start looking at the prices chosen by your competitor, the reasons behind their price structures are far more complex than just "offering good deals to the customer". At least... it should be... if they are a decent businessman of any sort.
Since you're a neophyte to the field, don't make the assumption that you know better than a business yet. Try and figure out the real strategies they are employing... such as the secret of the $50/month Atom I told you about... and why so many providers are offering such a bad deal.
But also try to be ethical about it too. Don't do anything you innately disagree with. Aight?
@shovenose said: Besides I have more money than my dad
That should be a wake up call. Your Dad is probably paying for things you don't. Independent living costs money. I hope your day job has good and inexpensive health insurance, for one.
@shovenose said: already have a reliable job that I work on Saturdays and on vacations during the week, and that will expand.
You're going to need a full-time job that pays your own bills, and provides a steady, continuous stream of capital for your business. It's unlikely you will do anything but re-invest all your profit into the business for the first few years. You'll be balancing a full-time day job, a full-time night job and life.
ROI is going to be long, which means when you sell out a rack, you'll be paying for the next one out of pocket . . . and you still haven't paid off your original investment. It can be a vicious cycle until you reach self-sustainable revenue levels. As a young guy with little to no credit history, getting commercial financing will likely be difficult. I will again point out there is a reason relatively few hosts cater to the extreme budget market, and they nearly always have higher margin products subsidizing.
Don't forget to divide your eventual profit margins by two, since you have a partner. If you're lucky, you'll still be friends at the end of your first year . . .
A few more things to consider, if you haven't already.
Although I agree with you Microlinux, I think you're focusing too much on a pricing structure for a startup and although it's important, the focus should be in quality to price ratio (especially catering those here at LET).
It all depends on the market and a $50 Atom will shy most buyers from this community. Honest business is good business. The only time one should consider a complex pricing structure, is when their marketing is on pair with a non-educated market where support is the focus.
"You can have everything in life you want if you'll just help enough other people get what they want." - Zig Ziglar
@Shovenose, my only suggestion is to get into any business with your heart in mind... never for the money or your own bottom line. Embrace failures. Also, personally, I wouldn't display your age publicly (you shy away most buyers). Experience is measured in age most seem to think. Good luck.
@Noxter said: Although I agree with you Microlinux, I think you're focusing too much on a pricing structure for a startup and although it's important, the focus should be in quality to price ratio (especially catering those here at LET).
I'm not sure what you are referring to?
I'm not advocating any price structure, just pointing out the reality of capital cost for such a venture, and the need to generate revenue to support ongoing growth, and eventually income for the principles. That's a very difficult thing to do with the proposed business model and the entire purpose of operating a business.
No, if I just was in it for the money would I care this much? No, I don't, I'm passionate about this!
Just took out a second dedi for my web hosting customers. I have more than 50, it is nice
Looks like someone beat you to it and beat your prices as well. Only difference is they claim to be using SuperMicro Chassis. Same board/CPU/Ram/HD setup though.
http://www.lowendbox.com/blog/commercialmedia-35-00month-16gb-ram-intel-dual-xeon-l5420-in-ashburn-virginia/
Have to admit, it made me chuckle, because I actually didn't notice this thread till after I saw that offer. Good luck anyways!
Cheers!
Why not open up a DC? It is pretty cheap to get started if you want to offer low low end. All you need is an empty basement, some racks that you can pickup from old departmental stores, a nice contract with Verizon and your power company or go green with water and wind , use a turbine and dynamo, setup your own power supply. Get some sandybridged node and drop the casings. Old cisco routers costs around 100-200$ on ebay. For cooling, get one of those portable AC.
Your startup costs will be around 2-5K, monthly costs will be around another 2 K and you can hold up more than 42U
You do not need redundant power or backup bandwidth. I think burstnet resells bandwidth for really cheap price.
Edit: I believe road runner already has native ipv6 available.
@NHRoal: very funny.
No
@shovenose that's a pretty good idea if you want to make a small one, maybe do like Joes datacenter, rent a place, renovate it, puts some servers in it, get racks, etc.
Well, a couple years back I sold web hosting from a Dell P4 in the garage on AT&T residential DSL, running EHCP (free open source control panel) on Ubuntu Server...
It was a pain though to keep the network up and keep DNS working because it was a dynamic IP not static IP. At least I had a UPS; more than Joe's Datacenter could say.
I'm much happier after getting all my servers with OVH and Hivelocity and DataShack.
$50 for that, L5420? No, not interested. 500GB? That's rather small these days.
Think it's prudent to at least bundle a few drives in any offer. Places like Wholesale really push single drives out the door too much. That has to end up in failure often with no remote self-management and requiring hands on to deal with it.
I'd make customers sign off on any single drive systems for their own liability and playing with fire.
As for Atom offerings at $50, that seems like too much. Definitely pricing confusion.
@pubcrawler - I'm guessing the idea with offering single drive configurations is to have a low price offering to get people in the door, and then get people to upgrade to multiple drives for $10 or $20 once they have decided. For some of the stuff I am doing, reliability really isn't a big deal - if the server crashes once a year, it's really not a huge deal. For other stuff I am doing though, I would definitely upgrade to multiple drives. I appreciate being able to save a few dollars, and purchase a cheaper server.
Yes, for something simply single drives is fine IMO. But sure, RAID is great, and if the customer is willing to pay for that then, well great for them.
Could you not purchase a static IP from your ISP, I have residential DSL and they charge something like $4/month for 1 IP or 6 IP's for $10/month.
Nope, I can't. Neither AT&T nor Comcast will. AT&T was my DSL provider back then. If I could, right now I would have a couple servers at my house, but even if I go Comcast Business Class which I can get a max. of 13 static IPs, I am disallowed from reselling the bandwidth in any way, shape or form.
LOL.
Even though it would be nice to sell some dedicated servers from my closet for like $30/month
http://business.comcast.com/smb/services/internet/plans
Two servers at $40/month with unmetered 10Mbit and I could use my old laptop Core i5 Quad Core, 8GB RAM, 500GB HD, and built in UPS
But no, it will never happen that way. I wish!