Hetzner price increase now...

AnthonySmith · February 23

https://docs.hetzner.com/general/infrastructure-and-availability/price-adjustment/

Looks like the the cost of hosting is going up.... Brace for impact.

bikegremlin · February 23

Here:

https://docs.hetzner.com/general/infrastructure-and-availability/hetzner-pricing-structure-explained

It says:

Customers don't have to wonder whether an offer is good enough, because every offer is the best we can make.

That is exactly how I negotiate prices.
I like that.

Ympker · February 23

@bikegremlin said:
Here:

https://docs.hetzner.com/general/infrastructure-and-availability/hetzner-pricing-structure-explained

It says:

Customers don't have to wonder whether an offer is good enough, because every offer is the best we can make.

That is exactly how I negotiate prices.
I like that.

I'm sure Hetzner is trying their best, but there's only so much they can do.

Joseph · February 23

How's their new pricing compare to the their (equal) competitors?

bikegremlin · February 23

Hetzner office, this afternoon:

AnthonySmith · February 23

@Joseph said:
How's their new pricing compare to the their (equal) competitors?

Much more conservative, I suspect ovh expects ROI in 5 years Hetzner probably 3 maybe less or they are hedging and planning year on year increases.

bikegremlin · February 23

@AnthonySmith said:

@Joseph said:
How's their new pricing compare to the their (equal) competitors?

Much more conservative, I suspect ovh expects ROI in 5 years Hetzner probably 3 maybe less or they are hedging and planning year on year increases.

I expect annual (if not quarterly - depending on the inflation rates) price hikes.

AnthonySmith · February 23

@bikegremlin said:

@AnthonySmith said:

@Joseph said:
How's their new pricing compare to the their (equal) competitors?

Much more conservative, I suspect ovh expects ROI in 5 years Hetzner probably 3 maybe less or they are hedging and planning year on year increases.

I expect annual (if not quarterly - depending on the inflation rates) price hikes.

For Hetzner, probably, but I think OVH will struggle to do a 85% increase each year, and exist in 3 years.

host_c · February 23

@bikegremlin said:

@AnthonySmith said:

@Joseph said:
How's their new pricing compare to the their (equal) competitors?

Much more conservative, I suspect ovh expects ROI in 5 years Hetzner probably 3 maybe less or they are hedging and planning year on year increases.

I expect annual (if not quarterly - depending on the inflation rates) price hikes.

I agree that it might be 12 to 24 moths, I would not cross 24 months.

I am confident nether does OVH or any other large size operator. At that scale, no one burns $$ on hardware that get's devalued to nothing in 5 years, it just does not fit the math.

At that scale we are talking of 50-100K / Month in HW or more? now why on earth would you wait 5 years? or 3?

vish · 12:19AM

well crap...

where is @deank ...

vyas · 5:39AM

Translation: Take it or leave it..

With a bottle of local arrack if they agree. 👍

@bikegremlin said:
Here:

https://docs.hetzner.com/general/infrastructure-and-availability/hetzner-pricing-structure-explained

It says:

Customers don't have to wonder whether an offer is good enough, because every offer is the best we can make.

That is exactly how I negotiate prices.
I like that.

bikegremlin · 6:07AM

@vyas said:
Translation: Take it or leave it..

With a bottle of local arrack if they agree. 👍

@bikegremlin said:
Here:

https://docs.hetzner.com/general/infrastructure-and-availability/hetzner-pricing-structure-explained

It says:

Customers don't have to wonder whether an offer is good enough, because every offer is the best we can make.

That is exactly how I negotiate prices.
I like that.

Yup.

As a seller, when you start with your lowest acceptable price, you don't lose business for setting the price too high, while you also don't do any business at prices below what you think is fair.

Negotiations are super quick - and to me it doesn't feel like a fraud. Starting with a higher price and toyig with discounts and promotions seems a bit like trying to cheat.

The main difference is that Hetzner is probably not broke. LOL.

AnthonySmith · 8:39AM

@vish said:
well crap...

where is @deank ...

Where is @deank ?

Falzo · 9:23AM

@host_c said:

@bikegremlin said:

@AnthonySmith said:

@Joseph said:
How's their new pricing compare to the their (equal) competitors?

Much more conservative, I suspect ovh expects ROI in 5 years Hetzner probably 3 maybe less or they are hedging and planning year on year increases.

I expect annual (if not quarterly - depending on the inflation rates) price hikes.

I agree that it might be 12 to 24 moths, I would not cross 24 months.

I am confident nether does OVH or any other large size operator. At that scale, no one burns $$ on hardware that get's devalued to nothing in 5 years, it just does not fit the math.

At that scale we are talking of 50-100K / Month in HW or more? now why on earth would you wait 5 years? or 3?

no. they don't plan on any price hikes. you want to keep prices always around certain levels for certain audiences and you adjust the amount of ressources that you get for it every now and then. netcup calls it generations, hetzner changes the descriptor of their dedis or cloud products. also OVH always (re-)introduces new lineups for their servers and changed the VPS lineup only last year.
still you will have a product at 5€ 10€ 15€ and the likes.
this way you don't have to vary too much with the pricing at all and ROI calculation can even be done much better. for sure the ROI horizon is 3-5 years or even longer.

their ROI calculations on all current and existing services are totally safe. what is in danger right now is the future grow and planning.
so, a real price hike like right now is indeed only an adjustment in a crisis where demand sky rockets and you need to deviate from the long term planning because external factors throw your calculations out of the window.

you use your existing stuff without sacrificing the initial ROI calculation on those, but instead milk it more, simply because the demans allows for that. and with that you enable yourself to continue with the growth.

you always need to remind yourself, this would not happen, if there weren't enough people out there right now, that are actually willing to pay these prices and take over your spot or service if you angrily leave.

and they will not lower prices later, especially for existing clients and services. no one from these large companies ever really did.
instead they'll introduce a new line-up, where you either get more/better ressources or eventually even pay a bit less. but only for new sales.

tl;dr; not really anything to do with their ROI planning. it's just adjusting to demand.

AnthonySmith · 9:35AM

I guess the market will pay what it will pay, people go to OVH for price for the most part.

Probably worth remembering the online outrage is usually just a very visible minority.

If they double my price I would move because I can get better for less, at a smaller host that won't do that because their financial model works differently.

But that might be a daunting idea for others

bikegremlin · 9:50AM

@Falzo said:

@host_c said:

@bikegremlin said:

@AnthonySmith said:

@Joseph said:
How's their new pricing compare to the their (equal) competitors?

Much more conservative, I suspect ovh expects ROI in 5 years Hetzner probably 3 maybe less or they are hedging and planning year on year increases.

I expect annual (if not quarterly - depending on the inflation rates) price hikes.

I agree that it might be 12 to 24 moths, I would not cross 24 months.

I am confident nether does OVH or any other large size operator. At that scale, no one burns $$ on hardware that get's devalued to nothing in 5 years, it just does not fit the math.

At that scale we are talking of 50-100K / Month in HW or more? now why on earth would you wait 5 years? or 3?

no. they don't plan on any price hikes. you want to keep prices always around certain levels for certain audiences and you adjust the amount of ressources that you get for it every now and then. netcup calls it generations, hetzner changes the descriptor of their dedis or cloud products. also OVH always (re-)introduces new lineups for their servers and changed the VPS lineup only last year.
still you will have a product at 5€ 10€ 15€ and the likes.
this way you don't have to vary too much with the pricing at all and ROI calculation can even be done much better. for sure the ROI horizon is 3-5 years or even longer.

their ROI calculations on all current and existing services are totally safe. what is in danger right now is the future grow and planning.
so, a real price hike like right now is indeed only an adjustment in a crisis where demand sky rockets and you need to deviate from the long term planning because external factors throw your calculations out of the window.

you use your existing stuff without sacrificing the initial ROI calculation on those, but instead milk it more, simply because the demans allows for that. and with that you enable yourself to continue with the growth.

you always need to remind yourself, this would not happen, if there weren't enough people out there right now, that are actually willing to pay these prices and take over your spot or service if you angrily leave.

and they will not lower prices later, especially for existing clients and services. no one from these large companies ever really did.
instead they'll introduce a new line-up, where you either get more/better ressources or eventually even pay a bit less. but only for new sales.

tl;dr; not really anything to do with their ROI planning. it's just adjusting to demand.

This is an excellent analysis.

I would add that we are now facing a pretty big global inflation (if I'm wrong about that, then it's great), and that makes it worse, on top of the reasons you've explained.

Chievo · 9:53AM

@AnthonySmith said:
I guess the market will pay what it will pay, people go to OVH for price for the most part.

Probably worth remembering the online outrage is usually just a very visible minority.

If they double my price I would move because I can get better for less, at a smaller host that won't do that because their financial model works differently.

But that might be a daunting idea for others

Owner of the hardware+colocation costs. I know that this is not a miracle but if you depends from X provider all the time for obvious reasons you could suffer from lack of what you are going to pay tomorrow.

AnthonySmith · 10:45AM

It depends on a lot I guess, what I do know is that people's wages are not going up at the same rate if at all and generally the B2B customer profits are likely not going up at the same rate as hardware costs either.

Going to be an interesting few years.

host_c · 10:49AM

@Falzo

I do agree with you on some aspects, yet let me provide my insight on the matter ( this is pure speculation, as I do not have any insights on OVH or other's books )

At hyper-Scale ROI is not buy HW -> amortize 5 years -> trash it to ebay.
It is more about power contracts, rack density, cooling upgrades, component inflation (RAM, NVMe, other), capital rotation speed and I am sure I left out other aspects. ( labor, taxes and other ). Larger scale, more moving parts.

Year 0 2025 : HW 100K target ROI 4 yr
Year 1 2026 : Power cost +15%, RAM times 2,3,4, New CPUs 2x performance per watt - the later is a really important one, I can vouch for that as that it gives you density / same space, and the one thing you cannot expand cheaply is data-center space.

So now what? If you continue, you waste power efficiency, rack space and spare parts for what you have running, and prices hiked x2 - and you now start to hear the sound of all those coolers and realize you have zounds of servers running - now you have a true dilemma on your hand.

Also, Hyperscalers optimize for revenue / rack / kilowatt / mo, as at that scale, KW is a big expense / month. ( among labor and taxes, yes, but is a pretty large percentage )

You think that as of today, they sit calmly and discussing in a meeting "our 5-year amortization plan is rock solid". we still have 2000 DDR4 memory sticks for spare. Also, at some point in the meeting imagine John from acquisitions raising he's hand saying guys, we have to get 600 units of AMD Ryzen DDR4 and DDR5 in this quarter, but they were budgeted at 2.5K, and now memory alone is 2K.

I highly doubt that. What they did, they adjusted pricing. Yes, small values as +1 or 2 ..... XYZ USD / mo or higher one time fees, but that times 500 or 4000 is a serious gain.

Here small providers fail, as they do not have the numbers, so when the average "hoster joe" has to do that, he will be forced to do a lot more in price hike, or decommission legacy services; that will inevitably cut a proportion of it's customers, yet doing so, he will cut he's active servers, that gives him spare parts, fewer racks to pay rent, lower monthly expenses and a bit of a time, not much, to reorganize.

Milking more is kinda out the window as I really fail to see how, market is flooded with cheap 3 USD VPS / mo, so that is a NO-GO, larger services for cheap $$ that are attractive will not be sustainable as for that you need better parts that cost a lot more today and your ROI will be 6-7 years if you do so, bad idea. ( even if you might have the infrastructure, you will burn $$$ just to keep the alive, and when you will need replacements, you are kinda screwed if the market does not settle back - too big of a gamble )

There is also option B, go get a bank loan and push against your surroundings, that is also a gamble, it can go 2 ways, succeed and yes it will play out nicely most of the times, or if times will not change as fast as one assumed and he will go under very fast. ( bank loan is not 20K usd, I am talking about 100K at least so you can actually do something with it )

For smaller companies ROI planning is dynamic and not static, also 5 yr fixed ROI models only work in stable environments and mostly for Hyper-scalers as they have the $$ to buy in bulk, and bulk is not 20 PCS of fully loaded servers ( whatever the config is ).

Demand exists 24/7/365 - very true, the question is what is the right call?

One option is to keep pricing artificially low and attract customers migrating from providers that increased prices. That can drive short term growth, but it also increases infrastructure load and accelerates hardware wear. Density limits are real, CPU usage, storage endurance and memory failure rates don’t disappear simply because demand exists, they actually increase with demand as a result of load.

If pricing does not reflect replacement cost, you will eventually do hardware refresh cycles and parts changes with debt rather than revenue - very very bad idea.

The alternative is to follow market adjustments, increase pricing in a as controlled as possible way you can and accept the outcome... some customer will flee, but you will protect operational stability - that is kinda important for a company, regardless the size of it. That approach may reduce the user base in the short term, but historically it has proven to be the more sustainable model during heavy storms.

That is why you see that company giant XYZ disposed 800 workers. They did not do that because they do not like the 800 fellas that work in that factory, are trained and have families, they did that because if they keep them and that product line that does not bring in profit anymore, all 65000 will be out of a job in 6 months.

Growth without discipline is not growth, it is a very short path to what you guys call

Hetzner price increase now...

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