Re: [cobalt-users] Memory pricing

["Steve Werby" <steve-lists@xxxxxxxxxxxx>]

"Carrie Bartkowiak" <ravencarrie@xxxxxxxx> wrote:
> Well in this case, it's being charged every month for a piece of RAM.
> Charge me a little more for the RAM and make a profit - no problem.
> Charge me labor to put it in and make a profit - again, no problem.
> That's realistic, hell that's good business.
> But to charge both of the above and then a recurring fee for a stick
> of RAM - that's screwing. The extra RAM doesn't take any added
> support each month; it's a one-time thing, there is no reason
> whatsoever to charge monthly for adding RAM.

I don't know for sure, but I can speculate on a few reasons why many hosting
companies charge a monthly fee for servers with more RAM.  As you know, many
of the hosting companies offer dedicated servers with a small amount of RAM
and *hefty* amounts of allowed data transfer.  Like many hosting companies
offering virtual hosting accounts with unlimited data transfer these hosting
companies are counting on the average dedicated server customer to use a
relatively small amount of bandwidth in order to make a reasonable profit.
There's no direct correlation between traffic usage and RAM needs, but it's
reasonable to assume that the average client who needs more RAM for a server
is probably going to be transferring more data than the average client using
less RAM.  I'm not saying that will always be the case, but I'm fairly
confident it's true when talking about averages.  Since the hosting company
is probably already counting on most clients using a fraction of their
allowed data transfer and those with more RAM will likely use more than
those with less RAM the cost associated with those servers is likely higher
and is probably being taken into account.  It's also possible that the
hosting companies believe anyone needing more RAM is likely hosting more
sites, higher-cost sites and pushing more revenue generating traffic than
the equivalent client who's content with less RAM and therefore has more
money to spend (which the hosting company wants a part of).  Another
possibility is that the competition is charging additional monthly fees for
machines with more RAM and if they're getting away with it they want a piece
too.  If you think back a few years companies charged $50+ a year to host a
parked domain.  Now you can park them for free at hundreds of different
sites who are glad to use the parked page to advertise their own services.
Obviously people were paying way more than it was worth for a parked domain
and now that business has completely changed.  Perhaps charging seemingly
high monthly costs for RAM will be a thing of the past in a year.
Personally I think when overhead and people time is considered the companies
offering dedicated servers with ample data transfer that charge $100 a month
aren't profitable (just speculation based on my own projections and
financial analysis) and these companies have to eventually make additional
revenue through additional monthly fees, tech support services, etc.  I
think the real problem may be that from the perspective of the client
there's no correlation b/w the additional monthly fee for RAM and the
perceived incremental cost of the hosting company.  I feel that way about
fast food restaurant pricing sometimes.  The drinks and french fries are
marked up several hundred percent (the packaging material and ice actually
cost the restaurant more than the drink itself) in order to subsidize the
price of the sandwiches and ensure that customers don't just come in and buy
fries and a coke.  No one really questions that.  As an alternative the
hosting companies could charge more for their low end server, come up with
tier-based traffic pricing, avoid marking up hardware like RAM and larger
hard drives and avoid fine print fees and one size fits all plans so the
price the client pays is more closely tied to the cost the company is
incurring, but I'm not sure that would be in their best interest.

> I've found a fantastic local store here with pretty good retail
> prices and incredible customer service; the owner has forgotten more
> about computers than I've ever learned. I've happily sworn off the
> trade shows. ;)

Carrie, I'm quite sure this local store must be in a city I either drive
through or visit a few times a year so if you don't mind can you give me the
details off-list?

--
Steve Werby
President, Befriend Internet Services LLC
http://www.befriend.com/