Results 1 to 5 of 5
  1. #1
    Join Date
    Jun 2002
    Posts
    1,376

    Dedicated servers: margins?

    I've been toying with the idea of a dedicated server company... Right now it's just a dream, but I want to reality-check it before I think about moving any further.

    I have a good idea of what servers cost, and what labor costs, and what bandwidth costs... But what I'm having a hard time with is average costs in the industry. For example, as a percentage of revenues, how much money is spent on labor? power? bandwidth?

    I'd imagine that no one is eager to open their books, but I'm wondering more about general, ballpark figures. (e.g., do hardware costs account for 5 or 50% of your expenses?)

  2. #2
    Join Date
    Nov 2007
    Location
    Oregon
    Posts
    156
    Without opening our books, it's a safe bet to say in general terms that the first few months of dedicated hosting directly go to pay for the hardware (on the assumption you're using new hardware and not used junk from craigslist, etc.). The next few months go to pay for bandwidth. The months following that pay for internal support overhead. And before you know it, you've been hosting the customer for a year.

    That is why many dedicated hosting providers look for a minimal lease term (we require 12 months on all dedicated contracts). That way, overhead is met. If the client needs additional services (extra bandwidth, custom/additional support, consulting, etc. etc.) then that is where the margin comes in.

    Cheers,

    David
    Canvas Host, LLC - http://www.canvas.host - 800.574.4299
    cPanel shared and reseller plans. Softaculous, RVSiteBuilder.
    200% renewable wind power offset, sustainable practices, certified B Corporation.
    30-Day Money-Back, 99.9% Uptime, No-Oversell.

  3. #3
    Join Date
    Jun 2002
    Posts
    1,376
    Thanks for the reply!

    What spurred the question was that I noticed that eBay is flooded with "off-lease" type servers that, although several years old, are still amazing machines... I had in mind that I could pick up some of those, put in new hard drives (I imagine there'd be outrage as high-end servers started having disk failures in their first weeks...), and keep down costs that way. Of course hardware is just one of the expenses.

  4. #4
    Join Date
    Nov 2007
    Location
    Oregon
    Posts
    156
    Hmm, that's not a half-bad idea really. Most server components will last for years. Of course, every component is critical. Even the fans must be working else you could risk an overheat.

    We've sometimes toyed with the idea of used boxes simply to offer them for dev environments or even gameservers.

    In the end, we've always opted not to host used hardware, simply because there is no guarantee, no warranty, no way of tracking support for the equipment, and should that equipment fail, it will be our brand and company on the line for using faulty equipment.
    Canvas Host, LLC - http://www.canvas.host - 800.574.4299
    cPanel shared and reseller plans. Softaculous, RVSiteBuilder.
    200% renewable wind power offset, sustainable practices, certified B Corporation.
    30-Day Money-Back, 99.9% Uptime, No-Oversell.

  5. #5
    Join Date
    Mar 2004
    Posts
    550
    All our servers were bought off eBay. We don't do hosting but rather SaaS for our software product, so we know exactly what specs we need. Currently, we use Dell PowerEdge servers, and buy them in minimum lots of 5 on eBay, so that the servers will usually be the same type/quality. They are all configured with hardware hot-swap RAID that allows us to have up to 2 drives fail and stay up, and since all the servers are the same, we keep a set of hard drives on hand to swap in, in the case it's needed.

    In our case, it's our application and we know it's not CPU-bound, so eBay works well, as you get servers from the "previous generation" which are fine for what we do. I think all our servers are PIII's with 1GB of RAM -- perfect for our application.

Posting Permissions

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