I am drawing up plans for a small web hosting business. I don't plan on overselling my bandwidth at all. I was wondering, since in reality I know my clients all won't max out their usage, is it common practice to oversell?

What's a good figure? or should I Just Wait And See? Overselling bandwidth/space is an easy way to increase revenue per server. So its something I'm exploring....simply because otherwise some of my server resources are going to waste.

Thanks,

Eric

I don't think it's a common practice for companies to NOT oversell. It's kind of hard. If you sell all of your bandwidth but only 10% of it's being used, are you really going to let it sit there? I think you'd might as well sell it if you're current customers aren't using it.

I think its a requirement to sell bandwidth that you're not using - you can't just leave it sitting there... to control that problem, most companies by burstable links... so you pay by usage.

Burstable here :)

I have it capped though so I don't get "surprised", cap is 2 X 95% peaks.

well im starting out small with a dedicated server that has a monthly limit.... not my own servers with my own contract with an upstream provider (yet) so I'll just have to see I guess.

We don't oversell at all. Genius Hosting has a no-oversell guarantee and we tend to keep it that way. We think it's safer for our customers. If they buy 40GB transfer, we want them to be able to actually use that much. :)

I oversell my transfer by 10%. I do however refuse to oversell hard disk space, as that is a psysical resource, and I dont want to put myself in a position to have egg on my face.

Originally posted by .::DefCon::.
We don't oversell at all. Genius Hosting has a no-oversell guarantee and we tend to keep it that way. We think it's safer for our customers. If they buy 40GB transfer, we want them to be able to actually use that much. :)
:eek: So do you have that same policy for your disk space?? It's hard to oversell your bandwidth as you can get as much of that you need really. Disk space is however a fixed limited resource.

Originally posted by .::DefCon::.
We don't oversell at all. Genius Hosting has a no-oversell guarantee and we tend to keep it that way. We think it's safer for our customers. If they buy 40GB transfer, we want them to be able to actually use that much. :)

Your situation is a little different since you deal with reseller accounts. Resellers are much more likely to use up all of their resources, plus, you offer a "buy what you need" system, so they're even more likely to use up all of their resources. Also, even though you might not be overselling, your upstream most likely is, otherwise you wouldn't be able to offer as cheap as you do. :)

It's tricky to even talk about this, because GB/month and kB/sec are apples and oranges. A 24/7 saturated T1 will transfer 400+ GB in a month, but traffic patterns spike at different times during the day.

I think overselling is a bad business practice...

Well right now, I am not selling much of anything...

I have close to 100% free space, which is great - it keeps my resources free. :D

I have several reseller accounts, with one we oversell a bit, but the other 2 are Cpanel and that wont let you oversell if your supplier has given you a fixed amount of diskspace and bandwidth

I personally would not oversell space, it's not a true and honest business model. What if in all the customers on the server used the full amount of disk space? Well they wouldn't be able to if you oversold the space. Bandwidth can't really be oversold as long as you're on burstable bandwidth lines and you haven't stupidly sold many terabytes of bandwidth for one server.

If you sell a package, and it offers 'X' MB of disk space, then no matter what happens, the customer shuld have X amount of space on the server to store their files without finding out after a while that your hard drive is full and you couldn't fulfill the legal agreement between you and the customer.

Just my thoughts :).

Alan

Originally posted by eric650
I am drawing up plans for a small web hosting business. I don't plan on overselling my bandwidth at all. I was wondering, since in reality I know my clients all won't max out their usage, is it common practice to oversell?

What's a good figure? or should I Just Wait And See? Overselling bandwidth/space is an easy way to increase revenue per server. So its something I'm exploring....simply because otherwise some of my server resources are going to waste.

Thanks,

Eric

Eric,

Don't oversell Drive Space, if you promise and can't deliver....That's Fraud.

Only oversell Transfer if you buy a burstable qty. When doing your breakeven analysis, calculate your costs based upon every customer using 100% of what you promised, then base your prices off your costs. Purchasing a transfer package that is less then 100% of the transfer you've sold is ok as long as your not "transfer capped".

Don't offer unlimited space or transfer!
Always Be Honest!

What is "overselling of Bandwidth" Anyway?

A) Selling more bandwidth then you can deliver.
B) Selling more bandwidth then you actually pay for, but could deliver if necessary.

Answer A will get you into trouble.
Answer B is just plain good business.

All our yearly projections and figures are assuming that we're underselling bandwidth and space actually. I suggest you do that when planning everything.

When you start out, just try to break even. The last thing that'll be on your mind is how many sites you can cram into every possibly inch of space of your server.

You'll be surprised at how far you can get by staying within your limits.

I'll tell you what. By the time you've filled up your first server. You'll be content with what you've got. If you want to keep a clean business, then a second, third, fourth server will be nothing.

I just did the maths then, I don't know how well I went, but I figured that one server, at the full mark, will be generating around 600%-1000% Profits.

Do you really need to oversell to make decent profits? Judging by that, I think not.

DefCon...If you don't mind me asking but if you don't oversell at all then how can you make a large enough profit to keep running. If it's $1 per 1GB transfer then the highest you can make is $400 correct on one server.

I just thought that you'd beable to make a larger profit than this on a full server or am I mistaken?

Thanks

I think over selling bandwidth, disk space and Unlimited this and that will only hurt hosts in the long run. Customers simply move to another host when they realize they are not getting what was promised.

jtr

Overselling doesn't mean that you aren't providing what you promise.

I'm underselling right now :-P

Overselling is not a problem until you get an account which uses all the stuff and maximum server resources. :rolleyes:

I think that its all a matter of statistics. Theoretically, all of the hosting numbers should fall very very very close to a normal distribution. Which should mean that about the same number of people will use all of their bandwidth as the number of people that don't use any (or very very little). Most, however, will fall somewhere in the middle, or a little lower than that.

- James

Well to me, overselling bandwidth (transfer actually) is when you sell accounts to your customers at say an average price of say $1 per gig when the direct cost to you of that bandwidth is say around $1-$2 per gig and that doesn't include indirect costs.

It seems to me that on that analysis, there are not too many hosts out there (other than those using sub $1 per gig providers such as dv2, rackshack, webreseller, etc - who provide way more bandwidth than the average shared hosting server is going to use anyway - so even then the true cost of the bandwidth actually consumed will come up a bit) who are selling bandwidth to their shared hosting customers at a net margin (even a gross margin) above the cost of providing 100% of the bandwidth allocated to the customer. Does that make sense :stickout ?

Comments?

Originally posted by mahinder
Overselling is not a problem until you get an account which uses all the stuff and maximum server resources. :rolleyes:

No, it is not a problem if you have ONE account that uses all the 'stuff and maximum server resources'. It is only a problem if ALL accounts use all of their 'stuff' and maximum server resources. And the law of averages tells you that that is not going to happen.

That is the basic idea of overselling... the fact that ONE client uses all of his resources does not mean diddly when averaged out over the 200+ accounts that are on each server.

And what happens when you've effectively "over sold" (not oversold) your server? Well, you simply move some accounts to a different server. (Notice the difference between "over sold" and "oversold"... over sold meaning that you have too many clients on the server to maintain a decent server response time, causing downtime and problems for you customers... oversold meaning that you have sold 100GB of disk space on a 50GB disk.)

It's all business, folks! If your server can efficiently handle one more account on the server without causing any problems, then for normal shared webhosting, it does not make business sense to NOT put another client on there.

Why buy 100% of your servers if you are only going to use 50% of them :eek: ???

Originally posted by zuby84
DefCon...If you don't mind me asking but if you don't oversell at all then how can you make a large enough profit to keep running. If it's $1 per 1GB transfer then the highest you can make is $400 correct on one server.

I just thought that you'd beable to make a larger profit than this on a full server or am I mistaken?

Thanks

No, actually been generous $40 or $80 if he have 2 X 40 GB HD :P

We don't oversell either. Just a principle we build on. It may make our per-server profit slightly smaller, but it seems to work out in the end.

So long as you can 100% provide what you commit to provide - then it would seem to be good business to plan based on actual average consumption. In reality there is a real difference between what is marketed & what is consumed.

At a minimum - the analysis of average + 3 standard deviations (which would cover 99.7% of all eventualities) - would be a good relatively risk free number(s)

The other question would be to compare the incremental revenue from over-selling to the cost of a contingency plan should there be a "run on the bank" where everybody uses all their allotment - even if that would be highly unlikely.