This is a touchy subject, which is why you won’t likely find many dedicated hosting company managers and owners openly addressing this topic, instead instructing their sales reps to find ways to jump around the subject. Our take is that it’s common sense, and therefore no reason to avoid the topic!
If you follow the industry at all, have servers elsewhere, read Web Hosting Talk, otherwise stay”in the know,” then you’ve likely seen some of our competitors increasing prices retroactively for all their clients. I won’t bother to mention names, but some of the price increases have been as high as $30 a month on a $100 per month server 30% per month. Each and every price increase, from what I can tell, are direct results of rising energy costs. Just like almost every other business, hosting is very much affected by rising energy costs. That said, there are some things that clients should be aware of, and be protected from 30%~ increases:
First, some of the price increases that I’ve seen are excessive. I don’t doubt the legitimacy of the need to increase prices to cover costs and these businesses, I’m sure, are well aware of the negative PR that will arise (and has!). But, as a business owner, that is the absolute last thing that I would ever want to do. So, the price increases were likely legitimate, but poor planning and playing with fire, is what I say!
These companies are largely using commodity hardware — old and cheap hardware that isn’t at all power-efficient (but it’s cheap!) This leaves the companies severely exposed- rising electricity costs ($), infrastructure upgrades (more $) and, of course, depleting margins. Who picks up the tab? You guessed it.
Here’s what you will hopefully take away from this.
a) Avoid companies that offer a price-lock to every customer. While it sounds great on the surface, think about the economics at play here. Hosting companies, especially dedicated hosting firms, have to pay big electricity bills each month. I’m not an economist, but I know that energy prices are highly unpredictable (given today’s gas prices, who doesn’t?)
With that said, we have *never* raised our prices and we have absolutely no intention, or need to, raise them today, or the foreseeable future. If electricity prices quadruple next month, we would obviously have to address this, but we have some protection from that. A company offering a price-lock indefinitely is playing with fire, because you can’t always guarantee that electricity rates won’t continue to increase at the rate that they have. Have a look here- http://news.google.com/news?q=electricity%20rates%20increase%20this%20year&ie=UTF-8&oe=utf-8&rls=org.mozilla:en-US:official&client=firefox-a&um=1&sa=N&tab=wn
FPL seeks 16 percent rate increase
Are you up to speed electric rate increases
PUC approves electricity hike
OG&E to ask for rate hike
Pay more for power? I&M electric pursues a 14-percent rate increase
City feels utility rates will rise
You get the point…. Just today, a lot of hosting providers costs just went up! I don’t care where you are- Colorado, Kentucky, California (who are you kidding), it doesn’t matter. Electricity rates are going up!)
b) Along with this, it’s just generally wise to avoid hosting on inefficient hardware. Here are the numbers – our servers use HALF of the power that many of our competitors’ servers use. This means a smaller electricity bill, less strain on our infrastructure (read: less chance of outages/possibility of large issues) and, subsequently, we’ll (you’ll) get more from our infrastructure.
Not to mention that warm fuzzy feeling you’ll have by being more environmentally friendly
Really though- if you have one server and your provider has been using garbage hardware and they increase your price on your server, it probably won’t be the end of the world. You’ll end up paying more and you’ll, of course, have the opportunity to move to a company better prepared. The people that are really in a bind are those with hundreds of servers that just had their margins squeezed dry. Don’t get caught in that situation- June is a great time to move to SingleHop because we’re not only locking in your price (only those that sign up in June) and providing a $200 credit if you transfer from a competitor, but we’ll also guarantee that you’ll be on a much more power-efficient server, with a company better prepared for wherever energy rates might go!