Starting a web hosting business (Chapter 6)
Chapter 6. Choose from Hosting Reseller Account, Dedicated Server or Colocation
How committed are you with the web hosting business? Are you capable of managing Linux or Windows servers yourself? Whether to resell hosting services provided by another company, or do it yourself largely depends upon your ability, risk tolerance level and commitment.
When I first started web hosting business in 2003, I have chose to setup Linux servers myself. I was pretty comfortable setting up servers, configuring them, and troubleshooting when problem occurs. I started out with only 3 servers, and within a few months I added a couple more servers for additional disk space. As the top end servers cost thousands of dollars, I bought a few year old high-end servers from Ebay. I didn't have much problem in the first year with the server hardware, but there has been a few outages in the 2nd year and onward. The most troublesome problems were disk failures. Even though hard disks are configured as a logical disk in RAID configuration, when a disk fails it would take hours scrubbing for marking bad sectors and verifying health of the disk. Especially when you have 5 servers that are 5-6 year old, you'll definitely expect to see a few failures months ahead. I didn't anticipate this.
Working with old hardware was one thing, and working with a home-grown control panel is another area where I would spend great deal of my time. I was constantly changing my configurations make best use of my resources, and optimizing the configuration for easy of use and maintenance. It took me a good year worth of my time invested in the business to make the server farm. Looking back, I spent nearly 50% of my time fiddling with server configuration and making the farm secure. As I have added a few thousand "Free" web hosting accounts, I have start seeing DDoS attacks, phishing from vulnerable applications, spam abuse from internal and hacked applications. I spent great amount of time researching problems, finding and implementing resolutions, and manually banning users who are abusing the server resources. With free hosting accounts, there were a few users abusing our policy by making multiple accounts to gain additional disk space. Also, many user accounts are compromised due to vulnerable applications and weak password. The servers were constantly attacked and password cracking attempts were seen in the server logs. I was spending more and more time administering Linux servers than developing business. Regardless of size of your business and customer base, you'll need a dedicated engineer supporting your server environment.
Whether you're a tech savvy or technology enthusiast, you may want to revisit your decision when you're just starting out. Cost of managing your server farm is not cheap whether you do it yourself, or hire someone to do it for you. Besides the time effort, you'll also have to invest in server hardware. Buying a top of the line server hardware with RAID controller, SAS disks, and redundant power will not be cheap.
On the other hand, buying a reseller account from a reputable web hosting company is a lot cheaper than having your own server. Yes, you do not have an ownership of entire server, but do you really need the whole server all yourself? Assess your business need and hardware resouce requirements, and acquire needed resources when you need them. Adding additional resources to your existing reseller account will be snap like flipping a switch, and if you have enough paying customers it will not burden you at all.
Before fully commiting yourself to buy physical servers and colocate them in a data center, I would strongly recommend reselling hosting services provided by a reputable company. Expanding due to business growth is easily justified, and it will never be too late to begin setting up your own servers when you have the paying customers. Leasing a dedicated server from a big name host will fall in the same category as the colacation with less freedom. With dedicated servers, you're risking yourself of possible server shutdown if your server(s) attack other servers due to compromised security or a vulnerable application.
Conclusion
With recent popularity of cloud virtual server, such as Amazon EC2, you may also opt to host yourself. Cloud virtal servers offer higher availability, easy upgrade path, and easy backup and restore. You have one less thing to worry about, which is hardware failure. Although it's very tempting to host yourself, I suggest you to save your energy until you really need them.
