I agree with everything you say, but if history has taught us anything it is that people want "cheap" and just expect great support regardless of price.
I mean the best example is airlines. For the longest time the big national airlines claimed that they would laugh last since their support/customer care was /so/ much better than cheap no-thrills airlines.
But look at what happened! The no-thrills airlines have been stealing market share year upon year, people are booking whatever is cheapest in the price comparison all other things be damned.
The same is true of retail Vs. the internet. Retails shops claimed that they wouldn't lose market share because people loved the one on one customer service and face to face interaction, but clearly they were mistaken.
In fact the ONLY company I can think of who has high quality customer care/support AND is actually growing is Amazon. But they also often happen to be the cheapest.
Well, the main difference that comes to mind is that in the airline business, the denominator in your "cost function" is probably going to be keeping $30-100 million dollar planes in the air all the time.
Whereas in low-end VPS services, the labour cost for Great, Responsive Service will quickly begin to approach your capital outlay.
Amazon makes a ton of money. They don't make profit because Amazon's horizon is 100 years from now. They are trying to slowly drive all other retails into starvation by forcing them to operate at unreasonable margins (margins amazon is only able to break even at because of scale).
Talking about amazon as if they're a charity is not apt. Amazon makes a great deal of money and judiciously reinvests it.
>They are trying to slowly drive all other retails into starvation by forcing them to operate at unreasonable margins (margins amazon is only able to break even at because of scale).
This is not true in the hosting arena, at least.
Amazon is like everyone else in this industry; when they came out, they came out with very compelling prices.
Well, costs fall with moores law. Amazon prices (especially bandwidth prices) have not.
There are... a lot of new entrants to the market, and they /all/ have prices that are dramatically cheaper than amazon.com. hell, most of them make me look overpriced, and it wasn't so long ago that I was the unreasonably cheap option.
They're a publicly traded company. However you want to characterize their strategy – and I think everyone agrees with your summary of their strategy – as a shareholder I'm not interested in 100 year time horizons because I will be dead by then.
The argument goes, no other company gets such a free pass from their shareholders. Amazon could be amazingly profitable right now; in real terms, shareholders are subsidizing their current strategy in ways that Apple or Microsoft or Walmart could never get away with.
So why are you a shareholder? Or why haven't you attempted to change the policies from long term thinking to quarterly thinking like most companies these days?
>Whereas in low-end VPS services, the labour cost for Great, Responsive Service will quickly begin to approach your capital outlay.
begin to approach? You need... dramatic scale to spend more money on hardware than on support, even when you have pretty minimal support. I spend rather more on labour than on hardware.
I'm so far removed from hardware pricing these days that I didn't want to pretend that I knew how that business functions while pontificating about it on the internet.
Also, to be fair to airlines, they have immense labour costs.
>Also, to be fair to airlines, they have immense labour costs.
yeah. I also think that it's a good example of how some things? you can skimp on, while other things? not so much. I mean, if the airlines show that you can eliminate (or charge extra for) in-flight meals without disturbing anyone too much. You can even pack 'em in tighter (though, some people will pay extra for a little room.) - but yeah, you've still gotta keep the planes in the air.
Another interesting bit is that I'm not sure that it'd be cheaper to maintain airplanes to a lower standard, even without the customer backlash.
That's the thing; sometimes, the cheaper part is just as good- (for example, I think going supermicro is just as good as going dell, assuming the person assembling uses ESD protection.) - but other things? non-ecc ram, for instance, in my unscientific opinion, usually ends up being more expensive in terms of downtime and technician hours than ecc ram.
Of course, airlines are also almost all unionized; The hosting market is almost the opposite. Generally more is expected for less pay in the hosting market than of the same technical roles in other sectors. Traditionally, this means that many people start in the hosting market, then move up (certainly in terms of pay) into a corporate networking or corporate sysadmin role.
> In fact the ONLY company I can think of who has high quality customer care/support AND is actually growing is Amazon. But they also often happen to be the cheapest.
Not sure about the US, but when buying electronics Amazon is usually somewhere in the middle, price-wise. They are almost never really the cheapest and if so, this is usually due to a Amazon Marketplace seller, not Amazon themselves.
Lack of sales tax is US-specific, too which is, for me, quite strange. Amazon here pays 19% sales tax just like every other online and offline business and they end up somewhere in the middle of the spectrum (using price-comparison websites).
I mean the best example is airlines. For the longest time the big national airlines claimed that they would laugh last since their support/customer care was /so/ much better than cheap no-thrills airlines.
But look at what happened! The no-thrills airlines have been stealing market share year upon year, people are booking whatever is cheapest in the price comparison all other things be damned.
The same is true of retail Vs. the internet. Retails shops claimed that they wouldn't lose market share because people loved the one on one customer service and face to face interaction, but clearly they were mistaken.
In fact the ONLY company I can think of who has high quality customer care/support AND is actually growing is Amazon. But they also often happen to be the cheapest.