Web Hosting Talk : Web Hosting Main Forums : Web Hosting : business model question

[camner]

Seems to me the usual business model (offering reseller packages with unlimited domains for a fixed amount of storage/bandwidth) practically HAS to end up resulting in "overselling" (i.e., more storage/bandwidth sold than is actually available), which will result eventually in degradation of service (particular when bandwidth is oversold).

Am I right? If so, as an enduser, how do I guard against this in the hoster I select....


Or am I all wet and am missing something important!

Just a curious sort...

Robert

[OJI]

i think a certain, responsible degree of overselling is a good idea. I mean - no reseller account will be able to compete with the prices of the bug hosts at the start - they will need to oversell to generate some buiness.

I think however reselling over 15% of what is available is not a good idea. I would oversell about 8%-12% over what is available to me.

Hopw that helps.

[ServerCentreLtd]

As a host... Yes you need to oversell your resources, however one of things that you shouldn't oversell is the disk space. Overselling bandwidth is fine within reason, However you can make yourself all sorts of problems if you start overselling disk space.

IMO

[MarcD]

Originally posted by isolsdotnet
As a host... Yes you need to oversell your resources, however one of things that you shouldn't oversell is the disk space. Overselling bandwidth is fine within reason, However you can make yourself all sorts of problems if you start overselling disk space.

IMO

I dont know about that I feel if you oversell at the right amounts by the time you start looking into filling up your hardrive you should be ready to get another server.

I mean selling like 2gigs of space for 2.99 a month is not a feasable oversell but keep it within limits.

[ServerCentreLtd]

So what happens if you sell 1Gb of space to a customer, they may only use 10Mb of that 1Gb, however they have the right to use 1Gb when ever they need it.

We mainly sell hosting to developers and large companies, who tend to use most of the resources they pay for. If your business model allows you to oversell disk space then thats great.

However this just wouldn't work for us

[TheGAME1264]

I'm not a host, but I am someone who would fall under the class that isolsdotnet mentioned. However, I would think that overselling is okay to a certain extent, depending on what percentage of resources were used and how many users could reasonably be allocated per server. My own personal formula would be this:

Q number of users that use 100% of the resource/average percentage of resources used per user = maximum number of users that can be allowed on the server.

For example, if 150 users using 100% of the resource would put the maximum amount of strain on your server you're comfortable with allowing, and each user uses an average of 70% of the resource, the number of users you could put on the server would be 150/0.7=214 users per server (it's actually 214.285714... but because there are no partial users, I rounded down.) Mind you, this is strictly theoretical and has no way been tested practically.

[mpope]

Hello,

If you oversell disk space, the worst thing that can happen is you run out of disk space. Then, you just need to either add a hard drive or move some accounts to a different server. Either one is not too hard (especially if you use cpanel).

Anyway... people always harp on overselling, but I think as long as you actively manage your servers and have the ability to move sites around, etc.. you should have no problems!

[mpalamar]

You could generally see the hosts that oversell by looking at the packages. It's hard to offer packages at less than $1-2 per gig of transfer without overselling. It seems like most of the problems are caused by overselling bandwidth and not dedicating enough CPU/memory resources for the users to actually use their alotted amount of bandwidth.

-Mike

[Studio-51]

If you oversell you run the risk of all your clients actually taking up what you have sold them, then you will be screwed.

It depends how you view it, if it is an inital 'discounted' land grab with more realistic prices to follow or investment in hardware to actually provide the service you offer then that could be ok (if not ethically dodgy).

However I cannot see longetivity for those who oversell in this way, not just because of the risks involved if users do take up their full allocation, but providing the service at such low profit margins (ie. $2pm packages)

Cheers,
Rob Taylor.

[mpope]

Many monthly recurring subscription based businesses oversell... it's just part of the business. Yes, there is a chance that everyone could use up all of their alloted bandwidth / disk space, but it has been shown (for us anyway) that this is very improbable.

Anyway, I do agree that you should not base your prices entirely on being able to oversell your bandwidth / disk space. However, I think it is simply a waste to not oversell once you have determined these prices. I would say on average, our clients use 20-30% of what we give them. So, if we filled up our servers without overselling at all, our servers would only be 20-30% full??? I'm sure you can agree that this does not make sense. (Maybe it would make sense for SLA'd top dollar hosting services, but not for your standard low cost shared hosting)...

[pmabraham]

Greetings:

"I think a certain, responsible degree of overselling is a good idea. I mean - no reseller account will be able to compete with the prices of the bug hosts at the start - they will need to oversell to generate some buiness. "

SIGH. If you are competing on price, yes, you probably have to cut corners, lower quality, etc.

Customers can protect themselves from hosting companies that cut corners, lower quality, etc. by creating an expectation list, and actually getting on the telephone with the companies that make it on their short list.

Actually calling on the phone references, etc.

Ask questions. Ask how many customers per server, ask how much disk space per plan, etc. Then do some math to see if they are overselling disk space (easy to do on disk space).

Look at how long they have been in business. How long have they been a x-person company, etc.

And if the price is really cheap, then that should be an indicator as well.

Thank you.

[atr]

One thing I do to protect myself from overselling of disk space is to upload a whole bunch of crap to make sure I am using almost all of my allotment.

[Chicken]

Well, that sure is an interesting way to keep the resources allocated to you.

Originally posted by Studio-51
If you oversell you run the risk of all your clients actually taking up what you have sold them, then you will be screwed.

<snip>

However I cannot see longetivity for those who oversell in this way, not just because of the risks involved if users do take up their full allocation, but providing the service at such low profit margins (ie. $2pm packages)

And the chances that all of your clients will take up all the space you've offered them has the same odds as one falling from a cliff, but being saved by a gigantic bird who happened to be flying by at the time.

You can use a formular or suggestion from others and see how it works for you, however if you oversell, the main thing is to under-oversell and track resources until you can determine what level is right for you.

You cannot answer the question, "How much space does a customer use?" -as that's like asking, "How long is a piece of string?" - though you can get some rough estimates from others and track usage. Different types of clients use greater and lesser percentages of their resources. For example, you don't want to heavily oversell a bulk reseller account with 'unlimited domains' , etc.

[Studio-51]

Originally posted by Chicken
And the chances that all of your clients will take up all the space you've offered them has the same odds as one falling from a cliff, but being saved by a gigantic bird who happened to be flying by at the time.

I agree it is unlikely, however as I said it is on ethically dodgy ground (IMHO) to sell something that in reality you do not have, in other words 'oversell'.

Such a reasoning overlaps the 'unlimited bandwidth' debate and suddenly it becomes where you draw the line (do you offer unlimited or play percentages?) in how far you are willing to 'oversell'. At what point does it become pure lies? At most it is misleading clients to your capabilities.

All I am saying is that it is a ethically unsound road to take, and I for would would advise people to take Dynamicnet's advice on how to avoid the resulting problems.

Cheers,
Rob Taylor.

[Chicken]

There's nothing 'ethically dodgy' about reasonable overselling. It would be unethical to not provide or not be able to provide the services when they are needed. It would be unethical to sell lifetime-unlimited-everything hosting for a one-time $30 fee, but that's not what we're talking about. Yes, there is reasonable and unreasonable overselling.

There's nothing wrong with those who choose not to oversell, however there's also nothing wrong with those who oversell responsibly. At some point there's a fine line, but those who oversell responsibly don't come close to that line.