Layered Tech Price Hike Irks Clients

• By The WHIR, June 03, 2008

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By Liam Eagle, theWHIR.com

June 3, 2008 -- (WEB HOST INDUSTRY REVIEW) -- After notifying some customers of its low-cost hosting services that those costs would be becoming somewhat less low last week, dedicated hosting provider Layered Technologies (layeredtechnologies.com) saw a flood of complaints from many of the customers that would be affected by the change.

The company sent an email last week to month-to-month customers of its unmanaged dedicated servers outlining a series of upgrades it intends to make to its services, adding that those upgrades would lead to increases in monthly rates.

"You will notice a price increase on your monthly service charges beginning July 1, 2008 for all month-to-month contracted service prices," said the email in a copy apparently pasted to Web forums.

The increased rates vary depending on the type of server, but in some cases as much as $30 for servers that had previously cost in the vicinity of $100.

On its own forums, and on a Webhosting Talk thread that by Tuesday had reached more than 600 posts, many of the customers that would be affected by the increase - mostly customers of Layered Tech's older, in some cases somewhat outdated, servers - said the increased prices, scheduled to take effect July 1, had them looking for other hosting options.

Most of the commenters, in many cases resellers, say they can't afford to pass on the price increases of as much as 35 percent to their own customers.

As is almost always the case with news that generates an outcry, comments on the Webhosting Talk thread were almost universally critical, with a few dissenters pointing out that it is not generally unreasonable for a service provider to increase the prices for its services.

The main criticisms being leveled at Layered Tech are the short notice involved between the notification and the increase itself, barely more than a month, and the fact that it would increase prices for existing customers at all, rather than price correct for newly-purchased services.

Many posters also pointed out that the company implemented an across-the-board price increase of $8 per month approximately a year ago.

Representatives from Layered Tech, including chief marketing officer John Pozadzides, responded to some of the comments on the WHT thread.

"The old machines take up the same (or more) space in the racks as newer, more powerful machines; they use as much (or more) power; and they require a LOT more servicing than new machines. So, it really costs LT more to support them the longer we keep them in service," said Pozadzides in a post, by way of explaining the increase. "In short, we know it's a big percentage increase for some of the low end hosting packages, and we didn't want to have to do it, but the cost associated with running these servers is what it is and there is not much we can do."

Layered Tech very notably bought dedicated hosting provider FastServers in April, and has since embarked on the task of integrating the two services. The company has said it is certain it will be able to do so without suffering the kinds of service interruptions associated with some of the larger migrations in recent memory. But it seems like a customer outcry at some level may be an inevitable byproduct of a business shakeup this significant.

It's an inexact science trying to determine the size of the customer churn or "reputation damage" a 41 page forum thread of complaining customers represents. But it's clear that at the very least Layered Tech has upset some of its customers.

Some of the posters in the Webhosting Talk thread suggested that the company may be trying to price out lower-margin customers to make room in its facilities for customers of higher-density services, or to encourage customers to switch to its Grid Layer service, a cloud computing offering developed by the company.

In several support ticket responses posted to the forum by customers, the company appeared to be encouraging customers to consider the Grid Layer as a possible means of avoiding swallowing the price increase.

Pozadzides, in another post, refuted the notion that the company was trying to drive away the lower end of its customer base.

"Layered Tech does not want to lose a single client," he says. "We did not take this price increase lightly. But our underlying cost to provide services has increased in a number of areas by as much as 50%."

Tags:  dedicated server  cloud computing  Appro  FastServers  Layered Technologies  Layered Tech  WebHosting Talk 

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