Multiple Lines of Resellers

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Posted by JBIZ718, 05-12-2001, 07:14 PM
The latest frustration I think in the hosting industry, that is adding tons of clutter, is the reseller after reseller after reseller. Granted I own my servers and so do many others, but what frustrates me are the resellers who sell to resellers who sell to resellers and then well Ill let you all figure the rest out And while all this is going on the costs are going all over the place over saturating the entire market. I guess I have these resellers also, but I guess its just frustrating. Im not sure if you all agree, because you have many of these like I do, but its just frustrating, when you compete with costs that our less then yours, yet you are doing the work anyway. I think its just venting. Opinions welcome, and please dont think of this as insulting if you fall into this category. Joe
Posted by York1, 05-12-2001, 07:38 PM
Well what got me recently was signing up with a host then finding out they were a reseller for a terrible company.I know its not good business to advertise who you resell for but sure makes going thru a reseller hit and miss
Posted by Phoenix, 05-12-2001, 07:51 PM
It is a little confusing, the web hosting food chain, and the lower on the food chain your company is, the less control you have over the quality of service you provide, and the more vulnerable you are to losing your customers, your reputation, and your business. A reseller's reseller is dependent upon the company they resell for, that company is dependent on the server owner, the server owner is dependent on the company where the server is hosted and that NOC is dependent on their ISP's local backbone network (provided the ISP isn't a reseller's reseller (and then there is a whole new food chain involved). When things break down at one level or if there is a weak link in the chain, then everyone below it suffers. All of this is rather new information to me, as the only peers within the industry that I've interacted with were local companies similar to ours, and it's helped me see the ways in which hosts can differentiate themselves based on where they fall in that food chain, and how much control they have over the service they provide.
Posted by Wazeh, 05-12-2001, 07:51 PM
Joe, I don't think resellers of resellers pose any threat to you as a server-owner. Their ability to compete (price wise) is very limited. Say you have a plan for $10, and you give 50% off to yoru resellers, then yoru reseller wants to make $1 or $2? then the reseller of the reseller has paid $7 for the plan! I don't see how they can compete against you. On the other hand, I do agree that the market is way too saturated. Although demand is increasing, the hosts are increasing at a probably faster rate
Posted by TheComputerGuy, 05-12-2001, 07:56 PM
Either way people who own the servers win, am I wrong about this, because resellers have to sell their packages....
Posted by Phoenix, 05-12-2001, 08:40 PM
It really depends on what the pricing models are in relation to overhead. if you own a server and you pay 250/month to colocate it, you have the overhead of the cost of the equipment plus the monthly recurring cost of the colo.Or the cost of bandwidth to your location if you have the server hosted at home or in an office. Plus any prices for providing support (tech/customer) to your customers. Telephone support prices more than email support, etc. Resellers purchase space from you at a discount and some (not all) provide very little support. They also don't have to worry about paying for new equipment. They can undercut you by charging less than what you charge for what is perceived as the same service, because their overhead is lower. They can also mark up your services and make a much higher profit, and depending on how ethical or unethical they are, they can really make some big cash. We had a reseller some years ago who did just that and it came back to bite him. He was reselling individual shared hosting accounts, and although he had given us the names/addresses of his clients for billing purposes, he requested that we email invoices to his own email address instead of sending paper invoices, so the customers never saw an invoice for us. That should have raised a red flag, but it didn't. He didn't provide them with support, they knew we were the hosting provider, so they called us for tech support. Then he decided not to pay us for the services, and after several months of nonpayment, the late notices went out by both email and postal mail, the customers found out just how much of a markup they were being charged by him. Things got ugly after that. They were ready to lynch him. The real winners in the long term are the companies who provide good quality, appropriately priced service to customers who are loyal to them, and enjoy a good reputation that brings them in referrals. They may be resellers, server owners, NOC's or other types of hosts. The trick is to make sure that your chain has no weak links in it and you run your business in a professional and ethical manner. Not only will you be able to pride yourself on a job well done, but you'll be able to sleep at night (except when the #@!! pager goes off because one of the tests conducted by the monitoring system failed and an outage needs to be averted...grrr.)
Posted by JBIZ718, 05-12-2001, 09:28 PM
Im not worried about us, its just so saturated now that its getting crazy Joe
Posted by Phoenix, 05-12-2001, 11:40 PM
That's what makes it so exciting to be part of our industry right now. The past few years have been rather dull. We'll never be as glitzy and glamorous an industry as the dotcoms were last year, but at least our industry is trendy now.
Posted by skysenshi, 05-13-2001, 02:33 AM
I guess this is why my colleagues and I have been discussing about a new business model. Hosting is not our primary focus, though. It's just one of the services we offer, which we usually do for web design/development clients. We did this because we knew how oversaturated the hosting market is becoming. I guess we all should also learn to find other means of doing business, or to evolve. We can always keep in mind that what kills a business is not another business of the same sort. Sometimes, it's something entirely different (what I'm saying is that someday something will come, something better than hosting and it will kill the hosting industry). There was this case in my country. Four years ago, pagers/beepers were the rage when it comes to communication. Now every Tom, Dick, and Mary has a cellphone. Even maids, and drivers, and garbage collectors. The paging/beeper industry in my country is dead, and the paging companies have since then evolved to become ISPs. In the hosting industry's case... what's next?
Posted by successful, 05-13-2001, 08:21 AM
If used correctly a Reseller network can be very profitable. As a matter of fact many hosting companies only cater to resellers and do not deal with the end users at all. Personally what we've found is that even though we make less on accounts that are sold through our resellers, we still end up with a decent profit since we don't have to provide the sales and support to the end users and we're also able to fill up our servers at a quicker pace. It's really a win win situation. We don't believe in giving away free reseller accounts. We charge our reseller about $24-$29 for their main Reseller account so this really subsidizes their resold accounts!
Posted by JBIZ718, 05-14-2001, 05:07 AM
A reseller network can be great. We have many resellers and they do quite well. We try not to have resellers who resell who resell, it causes problems because then there are three companies trying to get support before we even get the email. We also try to resell to designers, for instance, we will have a solution partnership with a design company, they will resell our services or package them in with there web design packages. I dont consider that reselling, more like adding value added services. So in regards to reselling the big problem I see is when you have multiple resellers until you get to the source. Example: Primary Company - Reseller A who resells to reseller B who resellers to reseller C and so on, In this case If reseller C has a problem and reseller B take an hour to fill out a trouble ticket or send an email. Then reseller B also takes and hour to send to A, and then another hour from A to the primary company. There is already a 3 hour latency from the first support ticket to Primary company, which makes them all look bad. Now if anyone can follow that, im glad its 4 am and I cant sleep, again... Thats the big problem I see, which is why we dont that. Joe
Posted by dustin[s31], 05-14-2001, 04:54 PM
Joe, can you give me the URL of your site? Or how about an ICQ number? Mine is 47984070. Please contact me, I'd like to chat with you. Thanks.
Posted by Seer, 05-14-2001, 05:02 PM
When you start to have resellers reselling, the whole system starts to look and sound like a screwy pyramid scheme. I'm not going to get started on that subject..
Posted by Phoenix, 05-14-2001, 05:39 PM
We are still on the upward side of the curve when it comes to demand for web site hosting. Although at the upper levels most large businesses are using web hosting in some way, the tier with the largest number of businesses, small business, has the lowest concentration of web sites and are doing little or nothing with ecommerce. I did a presentation for a group of small business owners a few months back, and based on industry analysis, 2004 is the year when there is finally enough small business and consumer reliance on the Internet as a tool for doing business, that this "internet thing" will finally take off. Unfortunately for the dotcoms that have been going down in flames lately, didn't take that fact into account. They believed that their was enough adoption of the Internet that their businesses would be wildly successful, and consumers don't change that fast. Small businesses change even slower. These intervening years give us some breathing space and get our houses in order, so that when the demand for higher-end hosting and connectivity for medium to small businesses (who still consider their Internet access and web hosting a luxury, and not a requirement of doing business in this day and age) begins to increase, there will be providers ready to meet that demand.
Posted by Globalink, 05-21-2001, 08:08 PM
From the downstream perspective, is there a way to find out that you would be reselling from a reseller who in turn is a reseller who... etc...? Antonio
Posted by JBIZ718, 05-21-2001, 09:00 PM
Well tracers always work. There are limitations to how much you can find out. Joe
Posted by Wazeh, 05-21-2001, 10:17 PM
You can trace the connection to the company that owns the server (the original host) but you won't be able to figure out how many layers of resellers are there in between. It could be none and it could be 5 or 10!

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