As a moderator and community member on WebHostingTalk.com, I come across discussions daily on the subject of overselling. For the purposes of this blog post, overselling is the practice of making more disk space and data transfer available to customers than a particular server, cluster, grid, etc. technologically has available to allocate.
My observations lead me to conclude there are three clear camps into which nearly everyone belongs (these are generalizations - there are flavors of thought within each one, but you'll get the picture):
1. Overselling is evil - this group believes you, as a host, are acting dishonestly if you sell resources to a customer that are not available at the moment you make the hosting account sale. In addition, many in this group believe the reliance on TOS-stated CPU load specifications to dictate limits misleads the consumer as well.
2. Overselling is fine - this group believes it doesn't matter what amounts you tell a customer they may receive, so long as in the end, their sites are up and servers are stable. CPU loads are an issue regardless of the amount of resources you sell a customer, and customers should be cognizant of this whether they use 1% of their resources or 100%.
3. A little overselling is fine - this group tries to straddle the two polarized groups. It believes a little calculated risk in overselling is acceptable, so long as hosts monitor use and the risks involved as they go. There's no set number for the amount of risk "allowed," but I've commonly seen numbers like 10% or 20% used. For example, if a server has 200 Gb. hard drive space available and 2,000 Gb. of available data transfer, this group would be fine with the server owner selling up to perhaps 240 Gb. of disk space and 2,400 Gb. of data transfer.
I think there's an issue greater than overselling at hand here that often does not get discussed. I've mentioned it within communal contributions I've made to the online world, but I'd like to call special attention to it here. I used to have a big problem with overselling. I firmly believed it was dishonest. I recently changed by mind.
Overselling is not a problem or even an issue. Overpromising is the culprit here! At the end of the day, all three camps are somewhat correct. It is dishonest to promise resources to which a customer will not be given full access. Yet, at the end of the day, the important thing is that customers are up and servers are healthy. As far as I'm concerned, resources do not need to be available at the time of purchase. They simply need to be available at the time of use. If they are not, a host has overpromised, and has served its customers poorly.
To the crazy overselling hosts pushing 1-5 Tb. of data transfer and 100-1,000 Gb. of disk space for a $5/mo. shared hosting account, if you have the ability to add the necessary resources into your hosting environment when your customers require them, and you can support your customers' needs at the time(s) they are needed, good for you! Oversell to your heart's content.
For those hosts who recognize they are wasting resources by allocating them to customers who don't use them, and who want to engage in calculated overselling to make the most out of their hosting system investment, you need to do a little math to ensure your customers are protected.
Get hard figures for data transfer overages, and costs associated with adding additional hard drive space to your system (remember, downtime - even scheduled downtime - is a cost!). Decide for yourself how much you're willing to wager should your customers blow through their limits, and oversell up to that amount. So, if you're willing to finance up to 1 Tb. of additional data transfer or perhaps a dedicated pipe, that's how much you oversell. If you're willing to finance a server hard drive upgrade from 120 Gb. to 500 Gb., there's your overselling threshhold. This is a very small-scale example, but the same principle applies whether you have one server or 1,000 in a cluster.
Set the funds aside; pretend they are already spent. Now, you've created an environment that supports your desire to oversell without putting your customers at any risk whatsoever. Sounds like a good plan, right? You tell me! Comments are welcome :)
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==========[ MORE ABOUT PAUL ]==========
PaulHirsch.com . International Web Developers Network . Web Hosting Talk . Equentity Host
Years ago....well 1997-98, when Dollar Hosting and the like were big at Hosting events, we wondered how were they doing it. We had owned two business prior to this one and well...it stumped us. How could they host people for $1-10/mo.? Or even free ( remember we just want eyeballs, we will figure out the rest later) Forget having to talk to them or return a call, or for that matter, support somethng broken with commerce, forms, etc...
So, in 1997, our beginning team of 4 locked ourselves in a Condo in Big Bear with 4 minds doing the math and trying to come up with some "what if's". We spent the whole weekend trying to answer the question.
In the interim, we came up with ideas like, well $7bucks is not realistic, let's advertise $10 bucks right???
At the end of the long weekend, one day in the snow and back to the calculations, and one of us came up with a brilliant comment to the question which was.."How are they doing it?"...The answer rang tru and loud.."I got it!!!".
The LOUD answer is "THESE GUYS ARE NOT MAKING MONEY" DUUUH. It was right in front of us. It still is.
Well, since then, the $2-10 Hosting is still around, but we hear about them when they really try to throttle and flex. It cannot be done day in and day out.
What is the solution?
Seek out a Hosting company that numbers make common sense. Think about it...Would you rent a security guard for $3 bucks an hour to guard your kids or family? Similar thing...only worse. e
The LOUD answer is "THESE GUYS ARE NOT MAKING MONEY" DUUUH. It was right in front of us. It still is.
What is the sound of one hand clapping?
That is a brilliant, almost zen-like conclusion, Eric. Thanks for the example!