If you manage technology for a company that has a large Web presence, it is likely that a large percentage of your total technology costs is spent on the Web hosting environment, including the Content Delivery Network (CDN, e.g. Akamai, LimeLight, CDNetworks, Cotendo). In this article, we discuss some ways to manage these costs.
Before we discuss how to optimize your architecture and applications to have economical and the optimally low hosting expenses, let us develop a model for comprehensively understanding a site’s Web hosting costs.
Step 1. Develop a model for allocating technology operations & infrastructure costs to each Web site/brand
Let us assume for this example that your company operates some medium to large Web sites and spends $100K/month on fully managed1 origin2 Web hosting and another $50K/month on CDN. That means your company spends $1.8MM/year on Web sites hosting.
It is important to add origin Web hosting and CDN costs to know your true Web hosting costs, especially if you operate multiple Web brands and need to allocate Web hosting costs back to each. For example, let us assume you have two Web sites: brandA.com, a dynamic ecommerce site costing $10K/month on origin hosting plus $2K/month on CDN; and brandB.com, serving a lot of videos and photos costing $5K/month on origin hosting plus $19K/month on CDN. In this example, brandA.com actually costs $12K/month, which is half the hosting cost of brandB.com, $24K/month. Without adding the CDN costs, you may mistakenly assume the opposite that brandA.com costs twice as much to host as brandB.com. Origin hosting and CDN are two sides of the same coin. We recommend that you manage them both together from both technology/architecture and budget perspectives.
Then you add the costs of third-party vendor provided parts of the site rented in the software-as-service model. Next, add licensed software costs used at your hosting location. Let us assume that brandA.com also has:
- some blogs hosted at wordpress.com for $400/month
- Google Analytics for $0/month
- Other licensed platform/application software running on your servers billed separately from the managed hosting. Let us assume brandA.com’s share of that is $1,000/month.
So your Web hosting and infrastructure costs for brandA.com would be $13,400/month. That’s $160,800/year.
Assuming that many of your Web sites share infrastructure and systems management & support staff at your Web hosting provider, you may not have a precise allocation of costs to each brand. That’s ok: It doesn’t need to be perfect nor a staff-time consuming calculation every month. Work with your hosting provider and implement a formula/algorithm that provides a reasonably good breakup and needs to be changed only when there is a major infrastructure change.
Side Note: In order to stay competitive, adapt to changes in the market and meet changing customer sites, brandA.com also needs to do product and software development on a regular basis. However, that’s beyond the scope of this discussion. Managing ongoing product and software development costs for brandA.com could be the subject of another article.
Step 2. Regularly review the tech operations costs for each brand and make changes to control costs
Every month, review your tech operations costs for your business as a whole and for each brand. Make changes in technology and process as needed to manage your expenses. If you don’t review the expenses on a monthly basis, you run the risk of small increases happening in various places every month that add up to a lot.
Without active management done on a monthly basis, brandA.com could creep up from $13,400 to $16,000 the next month and $20,000 the month after. That $1.8MM you were expecting to spend on hosting for the year could turn out to be $2.4MM.
So what does such active management include?
Monitor and manage your bandwidth charges. This is one to keen an eye on. If you bandwidth charges go over your fixed commit, your expenses can quickly blow over budget. If you find bandwidth use increasing, investigate the cause and make course corrections. In some cases, this may simply be due to expected increase in traffic, but in other cases it could be avoided. A related article about taking advantage of browser caching to lower costs provides some tips.
Request your engineers to monitor and manage your servers resource usage (CPU, memory) so that the need for adding hardware can be avoided as much as possible. Enable and ensure regular communications between your technology operations team and your software development team so that software developers are alerted of any application behavior that is consuming more than expected server resources. Give the software developers time to resolve such issues when found.
Review the invoice details to make sure you understand and are in agreement with the invoice. A Web hosting bill can be very detailed and complex to understand. Do not hesitate to ask the hosting provider to explain and justify anything that you don’t understand. Don’t just assume the bills are always correct. They could (and occasionally will) be mistakes in the bills. Be sure to dispute these with the vendor in a respectful and friendly way.
These are just some examples. Please feel welcome to make more suggestions via comments on this post.
The time (and thus money invested) in controlling tech operations cost will be well worth the savings / avoidance of huge cost increases.
Keep abreast of evolving technologies and cost saving methods. Periodically review these with your vendor(s).
Cloud computing is exciting as a technology, and it is equally exciting as a pricing model.
If you find market conditions have changed drastically, request your vendor to consider lowering rates/prices even if you are locked into a contract. You don’t lose anything by asking and the vendor’s response will be an indicator of their customer service and long term business interest with you.
- Fully managed Web hosting includes network & hardware infrastructure, 24×7 staff and real estate
- The origin part of your Web hosting environments includes the network and server infrastructure at your hosting facility location(s) where your Web applications and installed and running. It could be in-house data centers or at providers such as RackSpace, IPSoft or Savvis