One of the wonderful things about technology is that it rapidly reduces in price.
Take website hosting for example. It wasn’t that long ago that you would pay about $50 a month for 100 megabytes of premium website hosting.
But thanks to the rapid advancement of technology, what is initially out of our reach very quickly becomes viable.
Today, you can get one gigabyte of hosting and indeed much more for a few dollars a month as providers introduce new business models and hosting and communications technology becomes commoditised.
But unfortunately, this standard industry approach isn’t always adopted by everyone.
Nice solution, shame about the hosting allowance
There are some in the industry who persist in charging customers on an outdated and deceptive hosting allowance model.
These providers take advantage of their customer’s lack of technical knowledge by deliberately offering a very low allowance on both monthly data storage and traffic allowances, then charging like a wounded bull for exceeding them.
One prominent firm up until recently provided the woeful data allowance of less than 10mb (that’s megabytes) of storage (space on the server) and 30mb of traffic (visitor downloads) per month while their competitors offered between 500mb to 10 gigabytes for the same price.
For those of you not familiar with file sizes, pictures you take with your mobile phone are around 2-3mb each (not that you would put images that size on your website).
Many of your image intensive word documents or Powerpoint presentations would easily exceed 30mb.
If you exceeded this allowance you would be slugged up to 40 cents a megabyte for the excess.
Bizarre billing practices emerge
What’s more, instead of simply providing a monthly bill for the excess, the same firm came up with the bizarre model of charging the excess not only for the quarter, but in advance for the forthcoming quarter.
As a reseller of this solution (among a range of others), I questioned this allowance and billing practice from very early in the piece, but was repeatedly assured that only around 12% of customers exceeded their allowance and few of these complained.
Over subsequent months this claim proved completely without foundation as many of their customers easily exceeded the allowance and were often confronted with massive excess charges not only for the quarter but for the forthcoming quarter in advance.
More smoke and mirrors
In another bizarre twist, instead of simply working to offer a better hosting deal, the firm invested extraordinarily heavily in a range of measures designed to justify their hosting charges, including complex Return on Investment matrices which of course had more to do with the offerings and marketing efforts of the client than the (admittedly strong) attributes of the solution.
All when customers just had to glance at the data allowances of their competitors to understand that they were being taken for a ride.
Clearly the firm took us all for idiots.
Because the actual website solution itself was so superior, we continued to invest a small fortune on lobbying the provider to lift its game in this area. While we finally succeeded, the increase was soon completely outbid by competitive providers who were offering 10 to 15 times the amount of data allowance for the same price or less.
Apart from continuing to lobby them for a significant change in these practices, we then took care to steer more price sensitive clients away from the solution and hoped that their competitors could come up with a platform as comprehensive as theirs.
The competition emerges… slowly
While that has taken some time, I’m pleased to say that that hope is now being fulfilled.
Now a number of firms provide comparable and even superior solutions with generous hosting allowances and are rightfully winning business away from the maverick firms.
In the meantime, the mavericks continue to believe the world is flat and persist with their unsustainable and largely deceptive charging models.
Which to me is like digging their own grave.
Thankfully not all providers are like these. ‘Rented’ or SaaS solutions will still be far more affordable than their custom developed alternative.
In the meantime, it’s a great shame that such innovative and high quality Australian solutions can be undermined by their own fundamentally flawed billing practices.
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Craig Reardon is a leading eBusiness educator and founder and director of independent web services firm The E Team which provide the gamut of ‘pre-built’ website solutions, technologies and services to SMEs in Melbourne and beyond.
Smart Company is the leading online publication in Australia for free news, information and resources catering to Australia’s entrepreneurs, small and medium business owners and business managers.
