za-profilnuWrites: Predrag Damnjanović, the founder of MyCity company

 

When we started, 10 years ago, as a young IT company, our two web-portals (Vesti.rs and MyCity.rs), we came into a need to find a reliable hosting for our websites. That year of 2006, we did not manage to find a single reliable hosting provider in Serbia, while foreign hosting providers offered either unreliable or slow shared servers, or they asked for too much money for completely professional solutions (which were designed for big foreign companies who had lots of money).
Since I’ve already had experience with Linux, being a programmer, the only rational decision left was to purchase a piece of my own dedicated server and to try and configure hosting services. The decision proved to be a good one, the websites had a fast response time, because only two of our websites were hosted and I learned there and then a lot of new things about servers and hosting. In the next years, that experience and knowledge has only improved.

With time, we started creating websites for other companies, as well.
In the beginning, we still tried not to host their websites with us, as we had no desire to venture into hosting at the time, as we were, in essence, a programming company – programming being the only thing that we wanted to do. Still, trying to entrust hosting of the websites we’ve created to others did not go well – as a company, we would always be the ones to blame for it and we would seem unprofessional to clients who we’ve made the website for. As a company, we were in charge of their whole online appearance, and when their website would “go down” (or load too slow) due to the bad hosting services, we were the ones who were called and asked “why isn’t the website working?” We’ve actually encountered the same problem that we’ve had with hosting our websites – we just couldn’t find a hosting company that we could rely on.

We’ve decided to take that onto ourselves, as well, we’ve bought another server, put up the websites there and worked – the clients were happy – we were without worries.
That’s when we’ve said that that hosting was only for the clients that we’ve made websites for, so we still had no desire to “sell” hosting on a larger scale.

However, life is not always what we plan – our friends started asking whether we could host them, as well – and later these friends started bringing in their friends – and, without noticing, in a few years we’ve reached the number of 300 websites that we host, even though we primarily do other business – even though we had no website, no formed pricelist/offer – not even an ad. Simply, people were satisfied and kept recommending us to their friends. Ten years of experience with hosting our own websites has done its job.

In one moment, we decided to approach the whole story more seriously and see firstly why such a large number of other hosting companies’ clients are choosing us – and whether we can actually continue doing this hosting, that we allegedly weren’t doing at all (and in fact were quite in the story at the time), so that we could provide our hosting services to all who might be interested, and not just to friends and friends of our friends.

Before anything else, we analyzed what were the mistakes that other companies have made – and what we’ve realized is that they make only one – they have the problem to keep the quality of their service at a high level while aiming at competitive prices.

Namely, here is a short overview of hosting companies, i.e. the explanation as to why they provide poor quality hosting services. It’s not that hosting companies are irresponsible and/or bad – their only mistake is trying to offer the cheapest possible prices, which, as you will see, makes it impossible to keep the quality of the services provided.

Let’s say a hosting company pays $100 USD per month for a hosting server. That is the price of the server itself (hardware + Internet + cPanel) – that’s without the other payments that an average hosting company has to provide for, like: system administrator’s salary, tech support salaries, company’s taxes, electricity, etc. With all those added monthly charges, we reach the conclusion that each hosting server costs a hosting company up to $200 USD per month, which is $2,400 USD annually. If a hosting company is to make money (for each server), it, then, has to sell hosting services worth at least $3,000 USD on a yearly basis (and knowing Serbian entrepreneurship, they are all trying to make at least double that, so, they will try to get even $5,000 USD for a year).
Now, for them to have competitive pricing (i.e. to be able to offer a price that is competitive with the prices of the kids who rent their own server, work from their bedrooms and represent the system administrator, tech support, marketing and a director, all in one), hosting companies are forced to offer hosting for as low as 1,000 RSD per month ($8 USD ). Doing basic math brings us to the following fact to reach (at least) $3,000 USD on the yearly basis (to cover the server expenses) by selling hosting for $8 USD per month, hosting companies have to sell at least 375 hosting packages, meaning they have to host at least 375 websites on one server. I say “at least”, because in case that some packages offer hosting five websites then that is no longer 375 websites…what we’re talking about is more than 1,000 websites on one server!

Can a server with 1,000 websites function properly and be stable?

Of course it cannot.
If we take, for example, that every website, on average, has at least 100 visitors per day (and some of them have way, way more), and if a server hosts 1,000 websites, then we arrive at a number of 100,000 visits per day. Servers are simply not as powerful as to be able to, with 1,000 MySQL bases, cover and serve such large amounts of visitors on a daily basis. This is why servers crash or are just too slow.
Can hosting companies save money somewhere along the way?
They can if they wish to not have tech support, or to just hire one person, and pull that person apart to work both as a tech support and to maintain 50 servers…and then, when there’s an outage on five servers at the same time, he’ll maybe manage to fix them by the end of the day – while that phone that’s been ringing won’t even be answered by him. So, chaos, again…

All those hosting companies make only one mistake – trying to compete with low prices – stretching the quality of their services to ridiculous limits.

It’s an absurd race – one that my company will never enter, for numerous reasons.

First of all, I personally do not like chaos in my office and having dissatisfied clients calling us. I also do not like disappointing people. That’s just the kind of person I am, I cannot stand that kind of ruthless, capitalist relations with people. For me, it is a lot more sensible to charge more for a service, have less clients and offer quality, then having a lot of clients because we are cheap. I’d rather have 10 USD from 10 clients, and then commit all my effort to those people, than have 1 euro from 100 people. It is simply impossible to give the same kind of attention to ten clients and to a hundred clients. The money I make in both cases is the same (10 people x $10 USD = 100 people x $1 USD ), but, in the second case, I’ll have chaos and poor service quality.

The server itself won’t work with the same efficiency when it’s hosting 1000, as it would with 100 websites. I can simplify all this with a formula, to make for better understanding:

A stable server = 100 websites x $50 USD = covering the overhead costs of the server
A chaotic server = 1,000 websites x $5 USD = covering the overhead costs of the server

To people, it seems at the first glance that it’s great if they can host five websites for $10 USD , but, there is a steeper price to be paid at the other end – they host their website on a server which is forced to host 1,000 websites just to stay afloat for the hosting company – that price is, then, paid by the website itself – with slow loading times and frequent downtime.
After conducting a lot of analyses and marketing researches, we have made the decision to go with the expansion of our company’s services and to offer hosting services as a company – but under three conditions:

kanc2-500

  • Quality definitely has its price
    To be able to offer our clients with a stable hosting server, it absolutely cannot host as much websites as I have mentioned above. Thus, if we host a smaller number of websites per server, it is logical that our hosting prices must be a little higher in order to pay for the overhead costs of the server, because we pay for our servers as much as other hosting companies do. We do not wish to host 1,000 websites on one server, which would then be overloaded. Instead, we wish to host 1,000 websites on 10 servers. Ten servers equal ten times the costs for our company. This is why it is impossible to cover this expense by selling hosting services for $10 USD . Simply, quality hosting takes money. Just like for everything else in life, quality does not come at “a dime a dozen”. You either have a realistic price of your service and quality, or you have a cheaper price and black-market quality. Our clients, who need stable hosting, know this, they pay and they know exactly what it is they are paying for. They’ve had a 10-euro-hosting experience and they simply do not wish to go back to it.
  • Quality instead of quantity – proportionality in everything
    As I’ve already said, I personally do not like chaos in my office. I don’t like chasing quantity. I like to dedicate myself to providing quality. It is better to have 10 clients paying me $10 USD, than to have 100 clients paying me 1 euro. If you wonder what we’ll do when we have 10,000 clients, the answer is simple – proportionality. When we have 10,000 clients, we will, proportionally, have 100 servers, and, again proportionally, we will have 10 system administrators – each of our servers and system administrators will have as much clients as it can optimally serve, without being “overcrowded” at any point. Proportionality and sustainable pricing are the key to everything – this way, no matter how large our company grows in the future, everything will be within proportions and the system will function equally well as it is now.
  • Professionalism and honesty – to you and to ourselves
    We are primarily a programming company, we have stable income, and we don’t really have a need to compete with hosting companies and their low prices. If we are doing something, it has to make sense for us as well – we need to get some benefits out of it, as well as to retain our desire to further develop our hosting services. The least that you, the client, need is dissatisfied staff (tech support, system administrator, etc.), so why should we take up hosting at all, if we are not motivated and we have no benefits from taking it up? So, we want to be honest both with you and ourselves, it is essential that we, as a company, have some benefit from what we’re doing. When you put things like this at the very beginning, then the will and the enthusiasm (for providing high-quality services) will come by themselves.Aside from that, I find that the quality of what we offer is of utmost importance. Ever since I’ve started working (and I’ve been on the Web professionally since 1999, while I’ve been programming since 1993), I’ve strived to provide the complete product or give a thoroughly professional service – if I wasn’t able to do that, then I wouldn’t accept the job at all. What I dislike in others is unprofessionalism, not respecting deadlines, changing the quality that was agreed upon, not responding to e-mails and delivering products or services that are not functional. What I don’t like people doing to me, I don’t do to others. Not only because I’m used by now to treat my work responsibly, but also because I personally cannot feel well if someone is not satisfied with my service/product. Someone can sleep well at night while their clients are dissatisfied and angry, but I cannot. I will either accept to do a job, if I assess that I can do it professionally, or I just won’t accept it. If I accept to do something, I’ll do it professionally and responsibly, and I’ll put a price which is reasonable for both the client and for me. This kind of job responsibility has been carried over from me to my company and my employees, and we have an agreement that we will simply not go beneath our quality standards. When we do something, we do it professionally. We don’t provide 10-euro hosting, which is why we don’t have 10,000 clients. Instead, we host only those clients who need quality hosting. Thanks to this philosophy, we are not overburdened with work and we can devote ourselves to each of our clients adequately.

That, in short, is a story of MyCity-Hosting’s inception and, also, the story about why we don’t provide 10-euro-per-year hosting packages.