It’s Alive!!! Shared Hosting Returns from the Grave

Starting on page 40 (article starts on page 34)...

While staying sharply focused on what you do best is vital for success in shared hosting, you might one day hear the call for higher level hosting.  When do you decide to add dedicated or managed services?

Consider these suggestions from someone who’s lived the drama. Dynamic Net’s Perchansky started his business in shared hosting, but recently launched We Manage Servers to meet the needs of more demanding customers.  Several factors motivated that decision.

Better margins.  No duh, right?  You might make as much as $30 a month on every shared account, but we’re betting more of you are in the one-dollar range. If you can’t hack it, think about going dedicated where margins can run anywhere from $100 to several thousand bucks monthly.  “The more managed services thrown in, the higher the gross margin,” Perchansky says.

Stickiness.  Every shared host loses the original account - or lots of ‘em -- because they cannot accommodate a customer who outgrows the basic services.  adding more upscale hosting can stanch some of that bleeding.

“One of our managed, dedicated-server clients who has been with us since August 1998 [originally as a shared hosting customer] recently commented that if he was with another Web hosting company, he may have had to change hosting companies several times in order to have his current needs met,” Perchansky says.

Overwhelming demand. If more and more of your shared accounts show the following signs, it’s time to move them up to dedicated servers: their traffic exceeds the CPU capacity on your shared servers; they’re running CPU-draining applications; they’re running applications that could mess up other accounts on your shared servers; they want more security, load balancing, clustering or other advanced services.

One of Dynamic Net’s customers, for instance, started a medical information site on a $25-a-month shared account.  Within weeks, site traffic was approaching 30 gigabytes a month.  The only cure for resulting server straining and frequent downtime was to move the customer to a low-end dedicated Sun server. Since then, the site -- now generating close to 1 megabyte of traffic every second -- has moved on to an even more powerful server.

You’re ready to deliver. Don’t add higher-end hosting unless you are gung-ho about serving a more demanding type of customer.

“Since they are paying a lot more than your shared customer, they want all of your attention when they need your attention,” Perchansky says.  “Expect to meet their needs with more qualified technical-support personnel and system administrators having both technical skills and a personality.”

Web Hosting Magazine, October 2001, page 40.