Is a price war looming in local Web hosting? - TechCentral

Is a price war looming in local Web hosting?

Gian Visser

Is a price war looming in the local Web hosting market? It appears that big changes may be coming that could put a smile on the faces of executives at SA companies, especially those running small and medium enterprises.

SA consumers and businesses have long complained about the high cost of hosting their websites in the country versus the sometimes negligible costs of offshore hosting.

Now, whisperings in the industry suggest the situation may be about to change, with Internet service providers saying hosting costs are too high and must come down dramatically.

Talk of much lower costs will be music to the ears of businesses, especially small companies, many of which have been forced to host their servers in Europe or even the US to save costs. This is far from ideal, as international bandwidth tends to be slower and less reliable than local bandwidth.

But prices in some parts of the world have fallen to such an extent that service providers charge less than €10/month — and sometimes as little as €5/month — to provide basic but unlimited website hosting on shared servers.

In SA, by contrast, service providers tend to charge incrementally for each service offered. They also charge clients for data transferred, usually measured by the megabyte.

Though SA finally has much cheaper fixed-line broadband thanks to dramatically reduced per-gigabyte charges and the recent introduction of uncapped services, hosting costs have remained stubbornly high.

It’s a problem that hasn’t escaped the attention of MWeb business division, whose GM, Andre Joubert, says prices will have to come down.

MWeb shook up the local market earlier this year when it introduced the first relatively affordable uncapped broadband offerings delivered over Telkom’s fixed-line network.

“The big capacity we’ve bought on the ADSL side will flow directly into the hosting side,” says Joubert. “The benefits have to flow through to our customers.”

Joubert says the big corporate customers are already seeing the benefits of lower bandwidth costs. But lower prices haven’t yet been passed on to small businesses and individuals hosting their websites locally.

Though he expects prices to come down sharply — and to do so soon — Joubert warns that they may never reach the levels they have in Europe and the US.

He says service providers in those markets have the scale that allows them to offer prices that may never be possible in the SA context, simply because the country doesn’t have the same level of demand.

However, hosting costs “will follow connectivity and bandwidth costs downwards”, Joubert says.

Afrihost CEO Gian Visser agrees. He says the hosting community in SA has long had a mindset that it cannot compete on price with international service providers. He says this has to change.

“We fell into this trap as Afrihost,” Visser says. “Our mindset was to compare ourselves to our rivals in SA and it was kind of accepted we could never compete with the overseas guys.”

Though SA will never quite match the prices that are charged by European and US service providers, Visser says local hosting providers can match the sort of services, like storage space, offered by overseas companies, and at prices that aren’t dramatically out of kilter.

“We have the same hardware and software and there’s no reason why we shouldn’t be competitive,” he says.

Visser says the approach to the SA market will change. He compares local hosting providers to people who said no athlete would ever run a mile in under four minutes.

“They said it was biologically impossible, that we didn’t have enough capacity in our lungs, and that our bones weren’t strong enough,” he says. “Then Roger Bannister came along and soon hundreds of people were running sub-four-minute miles.

“We’ve been looking at this the wrong way. We need the same mentality we have in ADSL bandwidth, where volumes have driven down prices.”

However, not everyone is convinced there’ll be big price drops in local hosting costs. The corporate market, in particular, shouldn’t expect prices to fall dramatically, says Internet Solutions MD Derek Wilcocks. He says skyrocketing electricity prices are largely offsetting any benefits from reductions in local bandwidth costs.

Derek Wilcocks

Wilcocks says between 20% and 40% of what clients pay for a dedicated hosting service is related to bandwidth. So, if bandwidth prices come down 50%, they can expect a 10% to 20% reduction in hosting charges.

In shared server environments, such as those used by European hosting providers to offer cut-rate prices, falling bandwidth costs have a much bigger impact on overall costs, he says. So, retail consumers can expect to benefit more.

Local bandwidth prices are falling by about 10-12%/year, Wilcocks says. However, rising electricity tariffs could negate the benefits for companies with dedicated hosting infrastructure.

“Power can be 20% or 30% of your total cost,” he says. “If you are not hosted in a shared environment, if you have your own server, then power is a big cost factor.”

Even though electricity prices have risen substantially in the past two years, Wilcocks says Internet Solutions’ hosting charges have remained flat or fallen slightly, mainly driven by falling bandwidth prices.  — Duncan McLeod, TechCentral

7 Comments

  1. Sorry, I’m not buying the “expensive electricity” excuse… Germany’s probably the cheapest place for unmetered bandwidth, and they pay R2.29/kwH, whereas my latest bill shows I paid 64c/kwH. And that’s consumer rates, for a predictable power environment like IT, and the volumes of electricity IS must use, they could probably get 40% off that power tarriff. I’m siding more with Afrihost on this one, in that people are just assuming it can’t be done, so aren’t looking for ways to do it.

    IS still haven’t got uncapped internet right, a few months after Mweb blew them out the water. I’m a large IS customer on the enterprise side and continue to enjoy the service at an enterprise level, but clearly something’s not right there at the moment, they used to be a massive innovator and trendsetter in ZA internet, and now they’re battling to keep up with the pack.

  2. Power is a big factor in hosting price, but low power servers based on Intel’s Atom architecture are available. Something like a N330 has 4 threads running at 1.6Ghz, which is ample computing power for lots of applications. If the CPU is the constraint of your webapp then you can always cache your data on disk or in memory. And if your webapp scales well sideways, just add another miniserver if you need more resource.

    In the UK you can get your own dedicated N330 server with 4GB of RAM and 500GB of bandwidth for £30 a month, or even cheaper in Russia. I also read an article recently about several server manufacturers (incl. Dell) experimenting with putting several of these miniservers in a single rack.

    Obviously, these aren’t the solution to every problem, but if you’re looking for good performance per watt then they should definitely enter the equation.

  3. Ian Carpenter on

    Disclosure: I work at IS, however these opinions are my own.

    re innovation: IS has, and continues to innovate in the enterprise space, whereas MWeb and Afrihost have typically innovated in the consumer space.

    re power: you may see pricing options come through that would encourage the use of power-efficient servers, or conversely charge more to put (or keep) older, more power-hungry servers in our IDC’s.

  4. @Ian As I said I’m a very happy IS customer, I’m down in Durban and even with the massive amounts of issues that have been occuring lately down here with your hosting facility upgrades, I’m still around. Your centralisation of support up to jhb has not worked out well, it was far better when the local guys who had relationships with you, helped out. Massive step backwards from the “personal attention” I’ve been used to as an IS customer over what must be close on 15 years… but that’s a personal rant, nothing to do with bandwidth costs.

    re power: Are you talking about the changes in prices to favour blade/consolidated servers? With the port fees. We’re moving 5 servers into your UMH2 POP and are getting the new pricing there – and buying a blade server to house all 5 servers instead of 5 separate servers pays off the blade server (R180k) under a year just by having one “port management charge” – your guys aren’t selling it as “green”, by the way, they’re selling it as an “ease for IS to manage” when all it’s doing is moving away from 5 ports on your infrastructure to an internal switch in the blade server. Sure, it saves power, but nothing like 80% of the power.

  5. Ian Carpenter on

    @Greg I’ve made our Hosting Exec aware of your support concerns. If you’d like to mail me directly ( firstname at is co za ) I’d be happy to make sure that our Customer Services people get in touch with you to understand in greater detail.
    wrt power no, I was really just speaking in general. We still have a significant number of clients with (old) traditional servers who wont be looking to consolidate onto blade servers.

  6. @Ian it’s fine – the head tech guy from KZN came to do some TLC with us, we’re speaking to him; it’s unfrotunate that yesterday your guys were doing maintenance and unplugged our racks (we have 2 with you) and forgot to plug our network cable back in. Kind of undermined all his words of confidence. Working in the IT industry for so long, I know this kind of stuff happens, it just didn’t used to happen so much up to 6 months ago. Something has fundamentally changed.

    wrt blade servers – In a typical 6-slot blade server, it becomes cheaper after 3 blade devices than to go standalone servers, something I never knew until IS prompted us to look into the blade route. What about IS supplying the blade chassis, so customers could just buy the blades and slot them in? I’m not an expert on blades, from the Intel ones I’ve investigated, they seem quite mix-and-match, and I’m sure you could get big discounts on the chassis if you recommended the brand to your customers. It would probably cost about the same to the users, give the users remote admin capability for reinstalling OS, and at the same time be “greener” and easier for IS to manage.

    @Paul – a few of the big providers have tried those little atom servers, but are already moving away from them, they are SO bad at multitasking and I/O that it’s more energy efficient to pop in a motherboard with 4 quad-core CPUs, a ton of RAM, and do a lot of virtual machines. The biggest problem for power consumption, as Ian correctly pointed out, is legacy hardware. Companies should get into the habit of depreciating their hardware off over 2 or 3 years, and then REPLACING it, not seeing how long they can run it, because now it’s “free” and it increases their bottom line. The newer servers are also getting a lot more energy efficient, underclocking unused cores, etc.

  7. Ian Carpenter on

    @Greg – I’ll ask our hosting product guys to look into the option of us providing the blade chasis, see what they have to say.

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