Reseller vs. Dedicated: How to Choose
Armed with a dream, a business plan, and as much technological savvy you can muster, you’re at the point of your startup where it’s time to face the decision of where you will house the web sites of your first few customers. You’ve reached a fork in the road, and going either direction has advantages and disadvantages depending on your aspirations and how you want to achieve them.
When you’re ready to turn on the power and start hosting web sites, do you choose between a reseller plan or a dedicated server?
This decision will be based on many factors, including your financial objectives and marketing strategy. Let us take a look at the reseller plan and the dedicated server individually and explore the advantages and disadvantages of each.
Reseller Plan
When you purchase a reseller plan, you are essentially purchasing space on another web host’s server. This is not necessarily a bad thing, because you still have the ability to provide a transparent web hosting service. This means your clients won’t be able to tell that you are on a reseller plan, and they won’t know about the other company you are purchasing the reseller plan from.
With a reseller plan, look for a reliable web host that will provide you with the space you need, and a good limit on the number of accounts you can create. This is a big factor in determining your pricing structure and in calculating your return on investment. For example, if one reseller plan offers you a limit of up to 100 accounts, whereas another offers you a limit of only 50 accounts, the effective cost per account to your company will vary and will affect your pricing strategy and profits.
Reseller plans usually provide you with a reseller control panel where you can manually set up your customer’s accounts. This is essential because it gives you full control and allows you to give your customers control over their account features as well. With regards to accessing the control panel, ensure full transparency by providing a link to your customers such as
http://server.yourhostingcompany.com redirecting to the server’s address. Some reseller accounts will provide anonymous domain names associated with the server so that the web host you are purchasing the reseller account from will not be associated with your company.
Another detail to look at is your name servers. Most web hosts providing reseller plans will also provide you with your customized name servers, such as ns1.yourhostingcompany.com and ns2.yourhostingcompany.com. This further provides you with the transparency giving your company the image of being a hosting company separate from the web host that is providing you with the reseller account.
Advantages
Going the reseller route is usually the easiest way to begin your web hosting business. If you already have a number of clients ready to host their web sites with your company, acquiring a reseller account and getting started is very easy. From a financial perspective, prices of reseller accounts are much lower than dedicated servers so your initial investment into a reseller account will provide you with better cash flow. More money in your pocket from the start means you can invest in advertising and eventually make the move to a dedicated server.
Reseller plans are managed by the web host who provides the service to you. Therefore, you do not have to worry about performing any server upgrades, server administration or security. Any custom applications you want installed is usually done at a nominal fee depending on the services provided by your reseller plan provider.
Disadvantages
Although servers are managed by the web hosting company providing you with the reseller plan, things can go wrong. Because of the fact that you are not in full control of the server, a web host who does not keep security up-to-date, or oversells space on the server (amongst other things) means that your reseller accounts are affected.
There are instances, for example, where hardware failure or security breaches can take out a server, affecting your customers’ accounts resulting in downtime for a certain period of time. Because of the fact that you do not have control over the server, the remediation of this problem is usually left in the hands of your service provider.
Another disadvantage is the limit you have on your account. While there may be some web hosts providing unlimited accounts, certain reseller plans cap the number of accounts or domains you can have with your reseller accounts. This means you need to purchase more space if you meet your quota.
Overall
The cost per account is higher in a reseller plan, although the trade-off is evident. You don’t have to worry about managing the server. All you have to do is get customers, setup accounts, and provide support. However, leaving the management of the server in someone else’s hands means that your accounts are down when the server is down, and you can’t do anything about it. Not necessarily a bad thing, but make sure your hosting provider is reliable.
Dedicated Servers
Choosing a dedicated server plan is a big step up from a reseller plan, but if you are a startup with an aggressive marketing strategy and you have enough customers lined up waiting for web hosting, this might be the choice for you. With a dedicated server comes more responsibility on your part, and with responsibility comes cost – both time and money. In addition to the monthly cost of the dedicated server, you should factor in the cost of managing the server and whether to hire or outsource a server administrator to take care of the details for you.
Many service providers offer a plethora of options when it comes to dedicated server plans. With so many control panel choices, configurations and features, it becomes a matter of identifying what you need and what service provider suits you. Do your research! There’s nothing worse than making a decision on a dedicated server and ending up having to transfer all of your customers to a new one down the road. It is a good idea to choose a service provider that you see yourself doing business with in the long run.
(Tip: to find a good dedicated server provider, visit a web hosting forum and ask around. See what people are saying about the many service providers. Visit their web sites, learn about their company and compare their solutions. Choose which one suits your needs and go for it.)
Advantages
Without getting too personally and emotionally involved with my comments, signing up for your first dedicated server makes you feel as if you’ve reached a milestone with your web hosting startup. There’s no better feeling than firing up your web browser, hopping over to your server control panel and seeing all the things you can do with it. But that’s from the perspective of a web host who’s more business savvy than tech savvy, and easily overwhelmed by the many icons, buttons and configurations available!
But let’s get serious. The biggest advantage of a dedicated server is that you are in control. You have the ability to do whatever you want, within reason of course, to your server. Setting up and managing your customer’s accounts, installing your own software and so much more. And because you are in full control over your server, the health of your server and any anticipated downtime is also in your hands, giving you the advantage of being able to monitor potential server problems before they arise and remedying the situation before any downtime occurs.
Disadvantages
The responsibility of having your own dedicated server means you have to spend time and money to manage it. If you’re tech savvy, you may choose to manage all aspects of your dedicated server yourself, including keeping control panel and other applications up-to-date, performing security audits and installing necessary protection to prevent malicious occurrences, installing necessary software requested by your customers. If you have absolutely no clue about what’s going on with your server, this means you have to either hire someone to manage it full time, or outsource the work to a server administrator who will take care of server details when need be.
The one thing you will notice right off the bat when choosing to go the route of a dedicated server is the cost. You will be making a significantly higher investment and until you break even on your first server, you will have to apportion your expenses and manage your cash flow to ensure you have enough money to continue operating. This is especially true if you started your web hosting business with a very tight budget, and perhaps using debt financing to run your business.
(From a customer’s perspective, many web hosts have opted to go with a dedicated server, only to find along the line that they can not afford the cost of operating it. Customers end up with no web hosting due to web hosts that drop out of the market due to poor financial management. If you don’t have enough financial resources to survive with a single dedicated server for at least one year, go for the reseller plan.)
It’s Your Choice
Making that decision to take the plunge into choosing a reseller plan or a dedicated server is an important one, but is by no means a measure of how serious you are about the web hosting business. Your decision will be based on your own objectives, considering the financial and strategic plan you have in mind.
If you’re still in a state of confusion and looking for a coin to toss to make that decision, grab a piece of paper and do the math. Figure out how many customers you expect to have in one year, and then work on the finances. Whether you choose a reseller plan or dedicated server, do you have the financial resources for both?
Okay, if you really need someone to make the decision for you, the safest bet is to go with the reseller plan first. This is especially true if you have absolutely no server experience or very little tech savvy. Learn the ropes with a reseller plan, build up your client base, make a few contacts, learn a thing or two about servers then acquire your own dedicated server once you’re ready!
Copyright © 2004 Johnder Perez
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