Page 1 of 2 12 LastLast
Results 1 to 25 of 31
  1. #1

    Is the VPS business really that profitable?

    Hello,

    I am wondering if the profit margins are exceptionally larger in the VPS business.

    A provider I was looking to purchase a VPS from has told me each of their machines have the following spec:


    CPU: 2 x quad-core 2.5Ghz, total of 8 cores
    RAM: 16GB
    Disk: 2 x 320GB (RAID1)

    Very roughly, the cost of such (decent) hardware is approx $5K (say 5K Euro for those in Europe).

    They say:

    Divided by 64, each share gives you:

    CPU: 1/8 core
    RAM: 256MB
    Disk: 5GB

    Now, without taking all other costs into account (bandwidth, rack space, power, work, remote hands, support, billing, MARKETING, etc), it comes down to approximately $78 per VPS.

    Lets say we ask for a pretty reasonable price of $13 per VPS per month, we paid for the hardware alone in six months. Double this for all the overhead, we paid for it in 12 months.

    So can one really expect a return on investment for a VPS business within a year? does this scale or am I missing something here?

    It sounds like it's much easier to turn a profit on a VPS business, than on a dedicated hosting business. Is this assumption correct?

    Thanks!

  2. #2
    Join Date
    Mar 2007
    Location
    Washington State
    Posts
    1,088
    Your logic is mostly correct, but a lot more can go wrong with VPS than with dedicated. You have to know what you are doing, and how to troubleshoot.
    FazeWire Web Services.
    || We have provided great prices and better support since 2006. Located in Seattle, WA!
    || -----------------
    || Shared Hosting - VPS - Dedicated Servers - Colocation - Software Licenses

  3. #3
    Join Date
    Apr 2009
    Location
    inside wht
    Posts
    746
    yes that is true. You must need good technical support over the VPS technology that you using . Otherwise it will make troubles to you
    24x7 PROACTIVE SERVER MANAGEMENT | OUTSOURCED WEB HOSTING SUPPORT
    Sales : sales @ syslint.com | Call us : (+91)9447607799 | Are you looking for DevOps Admins ?

  4. #4
    Join Date
    Feb 2002
    Posts
    1,138
    You could always ask more for the VPS and do larger accounts so you put less on the server, 64 VPS on one server seems a lot to me.

  5. #5
    As each VPS user uses resources in a different way, a smart operator would automatically determine each VPS' characteristics (heavy on memory, IO, network, storage) and move the VPS transparently to a different server where these resources are abundant, thus making optimal use of hardware.

    There should be no reason not to put 64 VPS, or more, on a single server, assuming you manage to balance our their resource usage according to what is still available on the physical server.

  6. #6
    Join Date
    Sep 2004
    Location
    Cluj-Napoca, Romania
    Posts
    504
    When the VPS business scales up and you have the proper connections costs can go down a lot. Like having massive discounts on hardware once you buy X servers per month.

    On the other hand I think hosting is one of the few industries where people expect to get profit in just a few months.

    You can also build a small hotel or a factory and expect to become profitable in 10-20 years. How's that for an alternative?

  7. #7
    To be perfectly honest, I was just asking out of curiosity. I don't think hosting in general is such a great business. Each and their own, of course.

    Thanks for the comments so far.

  8. #8
    Join Date
    Oct 2008
    Location
    Singapore
    Posts
    4,685
    Quote Originally Posted by mrmonkey View Post
    A provider I was looking to purchase a VPS from has told me each of their machines have the following spec:


    CPU: 2 x quad-core 2.5Ghz, total of 8 cores
    RAM: 16GB
    Disk: 2 x 320GB (RAID1)

    Very roughly, the cost of such (decent) hardware is approx $5K (say 5K Euro for those in Europe).
    The disk space is really low.

    A decent hardware like this will cost around USD$2500-3000. However, a cheaper one (without ECC RAM, RAID edition drives, hardware RAID etc.) should cost about USD$2000-$2500.
    Quote Originally Posted by mrmonkey View Post
    They say:

    Divided by 64, each share gives you:

    CPU: 1/8 core
    RAM: 256MB
    Disk: 5GB
    I will advise you to stay away from that host, as the machine is oversold. Yes, I know 256x64=16384, but other softwares like the hypervisor needs resources for them to work, including disk space.

    Quote Originally Posted by mrmonkey View Post
    Now, without taking all other costs into account (bandwidth, rack space, power, work, remote hands, support, billing, MARKETING, etc), it comes down to approximately $78 per VPS.
    As I had mentioned, the hardware isn't that expensive...
    Quote Originally Posted by mrmonkey View Post
    Lets say we ask for a pretty reasonable price of $13 per VPS per month, we paid for the hardware alone in six months. Double this for all the overhead, we paid for it in 12 months.

    So can one really expect a return on investment for a VPS business within a year? does this scale or am I missing something here?
    Of course.

    Quote Originally Posted by mrmonkey View Post
    It sounds like it's much easier to turn a profit on a VPS business, than on a dedicated hosting business. Is this assumption correct?
    The other way round.
    You invest less in the VPS business, hence lesser revenue. You invest more in the dedicated business, hence higher revenue. All the revenue comes after the hardware had paid for itself. However, there are host who choose to rent dedicated servers to sell VPS, which they can turn a profit margin easier.

  9. #9
    Join Date
    Oct 2008
    Location
    Singapore
    Posts
    4,685
    However, in the end, the most important factor is still knowledge in the area. VPS business can be as troublesome as the dedicated business.

  10. #10
    Join Date
    May 2004
    Location
    Toronto, Canada
    Posts
    643
    I Second LaptopFreak,

    Servers do not cost $5k, a decent configuration can cost you about $2k. Mostly the RAM and CPU makes the biggest price difference.

    Sometimes if you balance your VPS correctly, you can even make a single Quad Core server profitable with VPS.

    Hussain
    Hussain Baig - 1-866-954-6747
    Toronto based VPS - Dedicated Servers - Colocation
    VPS Fusion - Providing scalable and reliable hosting solutions.

  11. #11
    Join Date
    Aug 2008
    Location
    UK, Major Cities
    Posts
    501
    Quote Originally Posted by mrmonkey View Post
    CPU: 2 x quad-core 2.5Ghz, total of 8 cores
    RAM: 16GB
    Disk: 2 x 320GB (RAID1)

    Very roughly, the cost of such (decent) hardware is approx $5K (say 5K Euro for those in Europe).
    That server wouldn't cost $5k, I could build it for $1-2k pretty easily, which makes a big difference to what your saying.

    A lot of VPS companies oversell which is where most of their profit comes from. No one would put 64 VPS's on a server like that, more like 20-30 oversold about double. In the end, it works out.
    - Colin Dunn | Systems Administrator
    I think CentOS is a pretty cool guy. eh runs mah server and doesnt afraid of anything...
    ^ That sig/meme is so old, I just don't have the heart to change it. I hope the cool kids around still get it... 2008 was a good year!

  12. #12
    You guys are right, my $5K figure was an over the top, and it makes a huge difference.

    From my experience it is not worth skimping on quality when building a server; a good motherboard, good brand ECC RAM, good quality chassis and PSU, good disks are a must.

    Comparing prices between different vendors can save at least a few hundred dollars per server too, so that's important.

  13. #13
    Join Date
    Jun 2003
    Location
    London, UK
    Posts
    1,765
    Quote Originally Posted by dbgohan View Post
    I Second LaptopFreak,

    Servers do not cost $5k, a decent configuration can cost you about $2k. Mostly the RAM and CPU makes the biggest price difference.

    Hussain
    A decent server like a Dell R710, suitable for hosting VPS will cost in the region of $5k. We're talking RAID10, SAS drives and lots of RAM and CPU.

    People can do things differently, but then there is only one type of provider that people complain about regularly in the VPS forum on WHT... the cheap ones.
    Darren Lingham - Stablepoint Hosting
    Stablepoint - Cloud Web Hosting without compromise
    We provide industry-leading cPanel™ web hosting in 80+ global cities.

  14. #14
    Join Date
    Oct 2008
    Location
    Singapore
    Posts
    4,685
    Quote Originally Posted by dazmanultra View Post
    A decent server like a Dell R710, suitable for hosting VPS will cost in the region of $5k. We're talking RAID10, SAS drives and lots of RAM and CPU.

    People can do things differently, but then there is only one type of provider that people complain about regularly in the VPS forum on WHT... the cheap ones.
    If you are talking about SAS drives, it's a different story. The price I had estimated is based on the specs given by OP, assuming it is of a quality hardware.

  15. #15
    Join Date
    Jun 2003
    Location
    London, UK
    Posts
    1,765
    Quote Originally Posted by LaptopFreak View Post
    If you are talking about SAS drives, it's a different story. The price I had estimated is based on the specs given by OP, assuming it is of a quality hardware.
    One of the biggest limitations of server performance is disk i/o and quality hardware presumes SAS drives. Standard 7200 RPM SATA is not suitable for the majority of servers, and I'm honestly surprised at the number of companies/people that persist using them when in a lot of application related to hosting, the performance difference is staggering.
    Darren Lingham - Stablepoint Hosting
    Stablepoint - Cloud Web Hosting without compromise
    We provide industry-leading cPanel™ web hosting in 80+ global cities.

  16. #16
    Join Date
    Aug 2008
    Location
    UK, Major Cities
    Posts
    501
    Quote Originally Posted by dazmanultra View Post
    One of the biggest limitations of server performance is disk i/o and quality hardware presumes SAS drives. Standard 7200 RPM SATA is not suitable for the majority of servers, and I'm honestly surprised at the number of companies/people that persist using them when in a lot of application related to hosting, the performance difference is staggering.
    I beg to differ, we have a fair few of VM's running on 7.2k SATAs, and have never felt the need to upgrade to SAS's because performance is fine. No doubt if we did, we would notice an improvement, but the consumer only wants/needs so much for $10~.
    - Colin Dunn | Systems Administrator
    I think CentOS is a pretty cool guy. eh runs mah server and doesnt afraid of anything...
    ^ That sig/meme is so old, I just don't have the heart to change it. I hope the cool kids around still get it... 2008 was a good year!

  17. #17
    Its going a bit off topic, but what really is the difference in performance between say a Seagate Barracuda enterprise (ES) drive with a SATA interface, and one with a SAS interface?

    I doubt there's any performance difference at all, mostly because the disk can't even get anywhere close to the limits of SATA II.

    It's probably the exact same mechanical components, just with a different controller.

  18. #18
    Join Date
    Jun 2003
    Location
    London, UK
    Posts
    1,765
    Quote Originally Posted by mrmonkey View Post
    Its going a bit off topic, but what really is the difference in performance between say a Seagate Barracuda enterprise (ES) drive with a SATA interface, and one with a SAS interface?

    I doubt there's any performance difference at all, mostly because the disk can't even get anywhere close to the limits of SATA II.

    It's probably the exact same mechanical components, just with a different controller.
    Pretty sure they're exactly the same mechanically and in terms of performance - they're still only 7200RPM though which means random read and write performance (which is a typical profile of most web server functions like MySQL and email) isn't particularly impressive.
    Darren Lingham - Stablepoint Hosting
    Stablepoint - Cloud Web Hosting without compromise
    We provide industry-leading cPanel™ web hosting in 80+ global cities.

  19. #19
    Join Date
    May 2004
    Location
    Toronto, Canada
    Posts
    643
    Quote Originally Posted by dazmanultra View Post
    A decent server like a Dell R710, suitable for hosting VPS will cost in the region of $5k. We're talking RAID10, SAS drives and lots of RAM and CPU.
    Dell Servers like Dell R710 are over priced. I can build a server with even better specs for half the price.

    Dell R710 From Dell Website - Most Basic Config:
    - Intel® Xeon® E5520, 2.26Ghz, 8M Cache, Turbo, HT, 1066MHz Max Mem
    - Single Processor Only
    - 6GB Memory (3x2GB), 1333MHz Dual Ranked UDIMMs for 1 Processor, Optimized
    - No Operating System
    - SAS 6/iR Integrated, x8 Chassis
    - No RAID for SAS 6/iR Controllers
    - 73GB 10K RPM Serial-Attach SCSI 2.5" Hot Plug Hard Drive
    - Energy Smart Power Supply, Non-Redundant, 570W

    PRICE: $4,667 USD

    Server you put together yourself from example NewEgg.com:
    - DUAL Intel® Xeon® E5520 - 2x$384=$768
    - 2 x Dynatron G199 70mm 2 Ball CPU Cooler - 2x $26.99 = $53.98
    - 24 GB ECC RAM - $521.94
    - A Decent Supermicro Board (SUPERMICRO MBD-X8DAi-O ) - $379.99
    - A Decent Server Chassis: SUPERMICRO CSE-825TQ-R700LPV Silver 2U Rackmount Server Case 700W Redundant - $579.99
    - 2x HITACHI Ultrastar 15K300 HUS153073VL3800 (0B22136) 73GB 15000 RPM SCSI Ultra320 80pin 3.5" Internal Hard Drive - 2x$139.99=$279.98
    - A Good Raid Controller - 3ware 9690SA-4I-KIT PCI Express SATA - $339

    This configuration: $2922.88 USD

    These parts I put together is just an example. I am not saying that these are the best. But it gives you an idea.

    People can do things differently, but then there is only one type of provider that people complain about regularly in the VPS forum on WHT... the cheap ones.
    People only write something when they have something to complain about. Not alot of people go out of their way to say something good. I am sure there are no cheap providers, its just competetion that drives the price of VPS down. Then people like you assume they are cheap.
    Last edited by vpsfusion; 08-30-2009 at 06:32 PM.
    Hussain Baig - 1-866-954-6747
    Toronto based VPS - Dedicated Servers - Colocation
    VPS Fusion - Providing scalable and reliable hosting solutions.

  20. #20
    Join Date
    Jul 2002
    Location
    The Big Easy -New Orleans
    Posts
    341
    Quote Originally Posted by dbgohan View Post
    ...

    - 2x HITACHI Ultrastar 15K300 HUS153073VL3800 (0B22136) 73GB 15000 RPM SCSI Ultra320 80pin 3.5" Internal Hard Drive - 2x$139.99=$279.98
    - A Good Raid Controller - 3ware 9690SA-4I-KIT PCI Express SATA - $339

    ...
    Just wondering whaty kind of adapater I need to make Ultra320 <-> SATA work? And 2x 73GB, not many VMs going on there...

    But I do agree that Dells are overpriced usually - sometimes the sales are pretty sweet though.
    Lagniappe Internet L.L.C. - Wholesale Reseller and VPS Hosting.
    Lagniappe (lan-yap) - An extra or unexpected gift or benefit.
    HostEntrepreneur - Hosting news, reviews, tips, tricks, help and the occassional rant

  21. #21
    Join Date
    May 2004
    Location
    Toronto, Canada
    Posts
    643
    Quote Originally Posted by Lagniappe-labgeek View Post
    Just wondering whaty kind of adapater I need to make Ultra320 <-> SATA work? And 2x 73GB, not many VMs going on there...
    I was just comparing the specs on the dell server. You can always get a bigger hdd.

    As for the raid card, you probably need it if you want to do raid 1 mirror or raid 10.
    Hussain Baig - 1-866-954-6747
    Toronto based VPS - Dedicated Servers - Colocation
    VPS Fusion - Providing scalable and reliable hosting solutions.

  22. #22
    Join Date
    Jun 2003
    Location
    London, UK
    Posts
    1,765
    As said we would normally go for dual quads, 32GB RAM+ and 6-8 SAS disks... but then you don't pay the list price, just like nobody pays the list price for a Cisco switch.
    Darren Lingham - Stablepoint Hosting
    Stablepoint - Cloud Web Hosting without compromise
    We provide industry-leading cPanel™ web hosting in 80+ global cities.

  23. #23
    Join Date
    Apr 2007
    Posts
    3,531
    Shared hosting is defiantly more profitable.
    But we enjoy doing VPS hosting more and we are more experienced with it.
    Works out well for us.
    BotWars.io - Code the AI of your Battle Bot!

  24. #24
    Join Date
    Mar 2006
    Location
    Reston, VA
    Posts
    3,131
    Quote Originally Posted by mrmonkey View Post
    Hello,

    I am wondering if the profit margins are exceptionally larger in the VPS business.

    A provider I was looking to purchase a VPS from has told me each of their machines have the following spec:


    CPU: 2 x quad-core 2.5Ghz, total of 8 cores
    RAM: 16GB
    Disk: 2 x 320GB (RAID1)
    Your disk IO wont be sufficient for more than a handful of VMs. More disks/faster spindles are needed.
    Yellow Fiber Networks
    http://www.yellowfiber.net : Managed Solutions - Colocation - Network Services IPv4/IPv6
    Ashburn/Denver/NYC/Dallas/Chicago Markets Served zak@yellowfiber.net

  25. #25
    Join Date
    Mar 2006
    Location
    Reston, VA
    Posts
    3,131
    Quote Originally Posted by Lagniappe-labgeek View Post
    Just wondering whaty kind of adapater I need to make Ultra320 <-> SATA work? And 2x 73GB, not many VMs going on there...

    But I do agree that Dells are overpriced usually - sometimes the sales are pretty sweet though.

    Your not going to make a scsi drive with a SATA connection nor SAS for that matter. Either replace the drives or replace the controller.
    Yellow Fiber Networks
    http://www.yellowfiber.net : Managed Solutions - Colocation - Network Services IPv4/IPv6
    Ashburn/Denver/NYC/Dallas/Chicago Markets Served zak@yellowfiber.net

Page 1 of 2 12 LastLast

Similar Threads

  1. Profitable Business Together
    By designer123 in forum Employment / Job Offers
    Replies: 1
    Last Post: 03-11-2008, 02:19 PM
  2. UK Established/Profitable Business For Sale
    By UKCompanySale in forum Other Web Hosting Related Offers
    Replies: 2
    Last Post: 12-29-2004, 10:42 AM
  3. Selling a profitable hosting business
    By munachi in forum Running a Web Hosting Business
    Replies: 18
    Last Post: 05-13-2004, 11:25 AM
  4. Profitable Hosting Business for Sale
    By Subhadip in forum Other Offers & Requests
    Replies: 13
    Last Post: 03-20-2004, 07:03 AM
  5. Is running a forum is a profitable business?
    By willowdale in forum Web Hosting
    Replies: 8
    Last Post: 01-19-2004, 01:36 PM

Posting Permissions

  • You may not post new threads
  • You may not post replies
  • You may not post attachments
  • You may not edit your posts
  •