Dedicated Server Upgrades / Client Retention

[andychev]

I have just been reading a post on another forum and thought i would ask the question / put it forward as a possible competitive advantage for glowhost.

Note all the figures are ficticious!

The question posed was, put simply, if you pay $200 for a dedicated server on day one you get a good spec but after X number of years this spec is out of date and the price being paid is then over the top. It was noted on the forum that this often causes dedicated server clients to go elsewhere where they can then get a higher spec at the same or lower price.

The solution i belive is quite simple and from doing some searching i cant find anyone else that does this.

Obviously when someone signs up for a ded server there is a cost to the host for setup lets call it $500. There is then a fixed cost from the datacentre each month let call it $100.

So on day one the customer pays $100, it cost the host $600. leaving the host out of pocket. However after 6 months the host has broken even and from that point onwards the host makes a profit of $100 each month.

This goes on for ever and ever until the customer says cancel my account or they cant afford it anymore or something else.

However a better scenario?-

The price for the ded server is fixed for 12/24 months then the client is given the option to either have monthly payments reduced or have a new faster server and pay the same each month. This reduction could take place every year for say 5 years until it reaches a minimum set amount each month. After 5 years the option will be to stay at that minimum or upgrade and go back to paying the original price.

If they choose to have a new server their old server which is in effect paid for at the data center then passes back to the host to use as they please. In effect a spare machine for shared users or vps or indeed a dedicated server at the knockdown price that would have been charged the original client for a new client.

From a hosts point of view you are getting the dedicated server clients to pay for the hardware and they are happy with paying the same each month and getting upgraded every couple of years.

Everyone wins?

[Matt]

Lets call the host's setup closer to $2000-$4000 per server and you will see why this business model doesn't work. Someone has to buy the actual machine and quality servers are not $500.

[Matt]

The business model you describe might work for a dedicated server reseller though. The could come buy dedicated servers from us that have no setup fee and then change them around as often as they want, each time we eat the original setup fee and all they see is free setup of $99 setup or $199 depending on whatever the price is that day.

Problem with the idea is that some of these servers have 2, 3, 4 extra drives, maybe anywhere from 2-16 gigs of ram above and beyond the base server.

Now in 5 years, ram and hard disk technology has changed, and all of the investment in ram and harddrives is lost. There were no SATA drives 5 years ago so someone that had a terabyte of IDE drives in their machine that they got 5 years ago, how would a host afford to throw those in the garbage and then give their customer 4x 250 GB brand new SATA drives? And all their ram from the old server probably will not work on the new motherboard required for the new faster processor and SATA drives.

Basically with your concept someone geta a garbage server or the host completely refurbishes the old one (new cables, drives, ram, possibly mobo) and then buys another brand new one for the existing customer. Essentially buying 2 servers for each dedicated customer. If a host makes $30-$100/mo there is no way that this is a profitable business model for anyone other than a reseller and I wonder if then it would be.