Why all OVH dedicated servers are "sold out"
ovh.co.uk
ovh.co.uk
They could stop the customer churn by simply changing the price to match the new offerings.
At the time I switched to a new server type I even asked their customer team if the new pricing would be offered to existing customers and the answer was a flat no.
Alternatively, start a PAAS business to use the servers people dont want to buy, although I guess the VPS business does this to some extent.
The saner alternative would be to _increase_ the cost of the newer servers, but as they point out that could result in them being less competitive.
The real solution would be to devise some way where happy customers just retain their current servers, and new customers can get the latest hardware for the lowest price.
For some reason the old customers do enjoy upgrading their machines though, so this lands them in a tough spot. They can't have the best of both worlds, both the lowest prices and the freedom contracts. So they're going to take their time finding out what their strategy on this is going to be.
> So yes if it's a turnover issue, we could offer the old server at the same price as the new one as an incentive.
It might or might not be correct, but it's an extremely obvious idea.
A host that expects customers to keep paying the same monthly amount for a 2-year-old server is no different from a rotisserie that expects customers to pay the same price for last week's leftover chicken. If the rotisserie's business model depends on selling stale poultry at a higher price than what the market would bear, it is clearly unsustainable and deserves to have its revenue reduced.
This is largely their own fault; they make doing this relatively cheap and easy, and are thus punished for it.
I met people using OVH 4 years ago and they told me support wasn't great (I can't confirm this at all!) and that it was usually faster to order a new server and migrate than to wait until a faulty disk was replaced.
If people get good doing that kind of thing, it makes sense it's a problem for OVH (+150k servers): instead of waiting until a server is over 3 years old to be retired, just order a new one every year and benefit of the newest hardware. It's the same price, isn't it?
This is still pretty much true, especially under their best effort support. I have their higher SLA (<2hour) on several large servers and it still takes them a day or more to get back to me and then a day or more to get the hardware replaced. And now they've introduced a new iteration of servers (which, IMO, was designed to fuck the customers over...they've figured out how to oversell the rack at scale) that was ~20% the cost of the 2012 models of the same servers.
For example, one of the things they're trying now is to link the number of IP addresses you can have attached to the cheaper servers with how long you have been running it. Which is pretty clever if you think about it. Who are the savvy customers switching to the new offer the day it comes out? Hosters who need mutliple IPs for their users.
So, they buy a new Core i3 box with 8GB of RAM and they want to get $40 over the next two years to cover the investment. If they have to reduce its price to $30 after 6 months and further as time goes on, they don't cover the investment.
Now, they could price the box at $60 and lower it over time, but then you lose signups since it's a higher price (even if the average price over two years would be the same). You can say: well, have the older servers whose price has already been reduced available for sale as well. That complicates the lineup and is hard to manage. Unlike the new servers, the old servers only become available when someone gives one up which makes the supply unpredictable. With a new server, they can always buy one. Making matters worse, if the old ones have a reduced price, people are more likely to stay with them.
A decent part of this is that a lot of people are probably "needlessly" upgrading. By that, I mean that a lot of people probably aren't upgrading because the new server will make their usage better, but because they have a sense that they should be getting the top that their dollar will get. They were running perfectly fine on the old box, but why not try the new?
Ultimately, this is why VPSs are a lot easier. You can lower prices as time goes on in a reasonable manner. Someone wants the 1.7GB/1GHz 2007 box? That's a fraction of a new piece of hardware we can deploy. On the contrary, if someone wants a two year old model at OVH, they can't deploy a new two year old model: it's only available if someone gives it up. So, it becomes hard to capture the cheap-end of the market unless those signups keep paying for that box.
That feels like the crux.
A friend claims Warren Buffett said something along the lines of "it doesn't matter how many insurance policies you sell, if you sell them at the wrong price".
If your customers are losing you money by paying at your published prices, then acquiring more customers isn't a sensible thing to do. Lock the customers in, or price higher at the start. Why chase customers who aren't making you money?
I am currently testing the waters on offering 24 and 36 drive storage monsters https://news.ycombinator.com/item?id=6576796
any feedback is appreciated
We have 40 servers with them and we're getting out of there. Been getting downtime almost weekly for the last couple of months.
Their prices are impossible to beat in America however. Even heavily discounted, SoftLayer is more than twice the price.
Guys, you need to realize this isn't about getting the balance sheet in the black. There is no legitimate or interesting problem to solve here. They've been deep in the red. Their ultimate goal is to increase revenue figures at all cost and perhaps look "good" for an OK exit. Maybe there isn't more users or market share to grab in their niche. Hence the "thrashing." Their target server count is a million. They've been building DCs left and right with this figure in mind without there being solid sustained demand. I think they've spread themselves too thin.
OVH is working hard to acquire as many users as it can for the sole purpose of pleasing investors. And when that becomes any business' only focus...
If an existing customer reads that page, and this thread there's just one thing that they will immediately deduce. Existing customers are being used as a subsidizing agent to capture new audience. Which, again is quite strange. In a game theoretic way, this drives the point to existing customers that it is beneficial to not be loyal to the service (i.e. cancel/re-order).
If they reduced cost on older hardware while introducing newer one, they could also list those up for sale. Surely people on a budget or people who don't need a Xeon will simply settle for an older Atom at a cheaper price. This also allows OVH to retain and milk the box till its ROI is hopefully achieved.
You are right, if the situation remains, it does make them redundant. On the other hand, if the turnover is too high to allow them to recover the cost of the new servers, they'll go bankrupt, so it is a problem they need to deal with one way or the other. The approach they've chosen is unusual, that is all.
I'm eyeing up online.net now anyway, as I didn't know of them before. Now I do, and I have an insight into how the OVH mind works, I'm unlikely to ever use them again.
Do you think Hetzner is better than OVH, by the way?
At one point I had ~5K of servers with them and in any given week one of them would require some work. My org had paid for the best SLA (<2 hour) and we'd often have to wait a day to hear back what the problem is and another day, at least, to get things replaced.
OVH's general business plan is to expand customer base quickly, then take the time to actually build out the network to fit their pre-growth size.
Hetzner is a little better on supportbut they have some annoying policies (See the DDoS thread from yesterday), I do like their automation though. I'm now mostly in Leaseweb and a couple CN-datacenters with my own peering mix
>> My org had paid for the best SLA (<2 hour) and we'd often have to wait a day to hear back what the problem is and another day, at least, to get things replaced.
Ouch. That's really unacceptable, especially when you've paid for supposedly top notch support!
>> Hetzner is a little better on supportbut they have some annoying policies (See the DDoS thread from yesterday), I do like their automation though. I'm now mostly in Leaseweb and a couple CN-datacenters with my own peering mix
Hmm.. I haven't seen the DDoS thread.
But do you think Hetzner should be avoided, or did you just find Leaseweb that much better? Hetzner's dedicated servers look like good value for money, assuming there are no hidden problems like with OVH.
I've had 100% uptime over the last 3 months (externally monitored), used terabytes of bandwidth, and get 20ms ping over the Channel. You can't beat that on price.
Interesting problem, and surely not the worst one to have. What would have been a more graceful way to deal with it, though, if any?
The turnover on each new generation is higher than their models accounted for, and so reduces their lifetime expected revenue per server too much.
Doing what you suggest is certainly possible, but would likely mean they'd need to charge more early on.
Oh well. I recently found out that I can get business-class internet at my home, so I'll be moving all that stuff inside my own network soon enough.