I just notice something, there are reseller, reselling to other so that they become resellers. does this not become a house of cards at some point ?

mike

I'm a little new to this business, so someone might want to back me up on this...

I don't think you can resell forever down the line. My impression is that as more people dip into the same pot, you start to lose cost effectiveness. In other words, when you get to many people reselling from the pool of resources, eventually the price gets to high and people go with competitors.

There seems to be a kind of standard food chain I've noticed:

1) Main Tier 1 (AboveNet, etc) ->
2) Renter/Leaser of Above Space (Verio, RackShack, etc) ->
3) Renter/Leaser of Small Space (Many of the hosts here like splashhost, ventures online, mchost, etc.) ->
4) Renter/Leaser of Servers (Many more hosts on here) ->
5) Resellers

In this crude diagram, person 5 buys from person 4 and 3 and they in turn buy from person 2 and they all buy from person 1. My guess would be once person 5 tries to resell reseller packages, they can't be cost effective - thus insurring there are only so many levels to the "house of cards".

Everyone - feel free to correct me, this is just what I've observed in my short time in this business.

Dave

couldnt of put that better myself!

let me make an adjustment to my post.

what happens when level 3 fails in the house of cards. what responsiblities does 2 have to pick up the cards?

mike

The short answer is none. If I eat at a restaurant, and the restaurant leases it's premises from a property owner, and the restaurant goes bust or stops paying its rent, the property owner isn't obliged to get into the kitchen as start cooking my meal.

The longer answer is that the person selling to the reseller *may* try to come in and pick up the pieces and try and help out the reseller's customers and try to move them onto their books, or they may just inform the reseller's customers that their hosting will cease. It's up to the leasor/owner of the server the reseller was on.

Originally posted by ADEhost
what happens when level 3 fails in the house of cards. what responsiblities does 2 have to pick up the cards?

I have thought long and hard about this over a long period. I see it like this;

Say you have a hosting company with 1000 clients, and they fall over. What will the company up the chain do?? If they were smart they'd pick up these 1000 clients themselves and honor the already paid for component of the hosting, then once the packages become due they have 1000 new clients they have paid nothing for.

I know for a fact if any of our resellers fell over we'd gladly take over their clients, as we have paid nothing to get the clients in the first place, and any new cutomers are wroth having.

Am I seeing this too simply perhaps??

the above is interesting, but then you open yourself up to property rights and customer grabbing issues ( this is not funny let me chat )

if a firm fails to pay there debits, it a liability against the firm, but since the only assests are the customers, you would have to attempt to take them. this is where you need a good lawyer. now you got the clients, reseller joe comes up with the money 3 months later and demands his clients back. you have to surrender the clients over. ( but you get to charge him the management fees for what happened .... ) if you don't you could get into big trouble.

as for another point. because information is in public domain ( web space ), does not mean you have a right to that information. some interesting legal cases are pending about this.

Mike

side note; yes I woudl hold those accounts for the client, would I surrender them. maybe, depends if his legal consul is better than mine.

It's confirmed then, I was looking at it waaaaay to simply.

ADEhost you make some excellent points. I need to rethink where I am at with this.

Originally posted by dancies
I'm a little new to this business, so someone might want to back me up on this...

I don't think you can resell forever down the line. My impression is that as more people dip into the same pot, you start to lose cost effectiveness. In other words, when you get to many people reselling from the pool of resources, eventually the price gets to high and people go with competitors.

There seems to be a kind of standard food chain I've noticed:

1) Main Tier 1 (AboveNet, etc) ->
2) Renter/Leaser of Above Space (Verio, RackShack, etc) ->
3) Renter/Leaser of Small Space (Many of the hosts here like splashhost, ventures online, mchost, etc.) ->
4) Renter/Leaser of Servers (Many more hosts on here) ->
5) Resellers

In this crude diagram, person 5 buys from person 4 and 3 and they in turn buy from person 2 and they all buy from person 1. My guess would be once person 5 tries to resell reseller packages, they can't be cost effective - thus insurring there are only so many levels to the "house of cards".

Everyone - feel free to correct me, this is just what I've observed in my short time in this business.

Dave EXACTLY the way it is!

Originally posted by davehooper.net
It's confirmed then, I was looking at it waaaaay to simply.

ADEhost you make some excellent points. I need to rethink where I am at with this.

Whooh, before you take my word as anything firm, take it to your lawyer. I'm right nw looking for a good lawyer to draft up my tos / aup. but they are so hard to find ( even in this economy ) internet contract law people at fair prices.

but the point I brought up, I quite sure on that.

mike

Start Small. I know of some resellers that make decent additional income. Next, as you grow, lease a server. As time goes on lease more servers. Once you've grown enough and have enough capital (key element..your business must be run with both long term goals and profitability in mind) Lease some office space and some data pipes and start your own humble datacenter.

This plan takes patience and planning. Mostly patience, however, if you put your mind to it, and offer the best possible customer service, you will grow.

Just my 2 cents (there goes my profit for this month)

Kind Regards