Rising costs
One area which isn't getting any cheaper is the actual data centre, and the rising costs of cooling and electricity are expected to increase demand for collocation services over the next few years as more and more companies opt to have their servers looked after.
There is also a growing trend amongst technology suppliers, especially those catering to the smaller end of town, to bundle products with some sort of hosting.
This is increasingly common in the software industry, where clients who would otherwise forego a major upgrade due to the accompanying hardware expense will simply agree for their provider to take care of that end of the equation.
Sean Finn, director of Australian hosting reseller Oz Servers, reckons that any company that's gone to the simple effort of creating its own business website along with a few email addresses hasn't got all that far to go before becoming a reseller of host services themselves.
"The main benefit from hosting is that it's recurring income," he says. "The customer is giving you money every month. It's also fairly recession-proof; the margins can be spectacular."
Once a company has a few customers it might think about joining an affiliate program which delivers a kickback for signups, but with end users dealing directly with the host provider.
Finn says that affiliate programs, such as the one offered by WebAccess.com.au, will usually pay around 20 percent of all invoices generated for business referred, and will process payments quarterly regardless of volume.
"With an affiliate program most of the work is done for you, including support," he says.
After this it's worth considering signing up to a partner program to become a white-label reseller. In this scenario, companies will generally receive 20 percent for the first five, 30 percent for the first 10, or 40 percent for more than 10 hosting packages that are sent through, while the host provider takes care of all the technical operations.
The trade-off is that this requires the provider to create its own brand and deal with clients directly, while also taking care of their billing for them. Hosting packages generally range in price from $9 to $33 a month, meaning that five entry-level hosting packages will be about $45 retail, returning $9 every month.
Starting costs to have a dedicated hosting environment are about $55 per month for up to 30 domains, $110 for 100 domains and $200 a month for unlimited domains.
By the time you get up to a couple of hundred domains, the figures start to look rather attractive. For instance, you could be selling 200 domains at $10 each per month, all for the initial outlay of $200 a month for the server.
The next phase is to pay for your own dedicated server.
"You pick two Quad core servers capable of handling the job, and decide to start your own reseller and affiliate programs to new hosting providers."
But this is not a decision that should be taken lightly.
"Going it alone means running both the technical and customer side of hosting. It isn't for the faint hearted but provides much more financial incentive," Finn says.
He adds that virtual servers start at around $50 a month and are a great way for resellers to help clients gain fast and affordable access to additional resources as required.
Many hosting companies including Oz Servers sell virtual servers, often to smaller companies, while cloud services are often a more appropriate solution for larger scale enterprise tasks.
A number of hosting companies in Australia have deployed technology such as VMware or Microsoft's Hyper V to enable quick and easy provisioning of virtual hosting capacity for customers.
Cloud-based services have generated a great deal of excitement over the past few years, yet it's not clear to all how they differ from hosted services.
"The market generally doesn't know the difference," says Shane Muller, managing director of host provider OBT. But in a way this isn't all that important.
"People are not looking for how to get more infrastructure per se; the motivation is to do business better and easier with greater internal efficiencies."
"It's really about making the customer's business easier."
If there's one thing that sets cloud and hosting apart, the latter tends to imply a closer relationship with the customer. And for most customers, Muller says, this is more important than any of the other factors.
"The biggest hindrance and the biggest motivation for companies moving to a cloud or host platform is the relationship," Muller says. And the larger the company gets, the more it expects to rely on the channel to nurture and maintain these relationships.
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| Shane Muller, managing director, OBT |
Muller explains that until just a few years ago OBT only sold direct. Now resellers have come to represent the fastest growing segment of the business.
He notes that for any company that's thinking about becoming a reseller of hosting services, one of the first things they need to address is billing systems.
"As we work with more channel players we have also realised that many simply don't have the internal systems to bill for services.
"There are massive opportunities for the channel, but not unless they re-organise their billing," says Muller. The typical billing systems used to process the sales of goods and services are grossly inadequate in the hosting world.
OBT and other hosters have begun to offer white-label billing, so a reseller with 10 customers would simply receive 11 invoices.
Next: Does the channel drive the hosting market?
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