Statement on optimization of prices of WMS, VPS, VPS SSD, VPS ON, WEDOS Cloud and dedicated servers and tariff adjustment

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Dear Customers, due to a sharp increase in costs, especially electricity prices, we are forced to optimize the prices of our WMS, VPS, VPS SSD, VPS ON, WEDOS Cloud and dedicated server services. For these services, the price of electricity used to be a small cost item, but in recent months this has become the dominant price component. The current prices for these services are a loss for us (the cost of operation is higher than the price at which we sell them), even though we are trying to use energy-saving technologies as much as possible.

We do not increase all prices or items. We even reduce the price of some of them, which is unheard of these days.

Optimization – service price adjustment is based on a thorough analysis of hardware and infrastructure usage. Based on this analysis, we have also increased some parameters for services. Some of this has been made possible by technical progress (upgrading infrastructure, new technologies) and some by natural growth (more connectivity). The new services we offer at a discount can save many of our customers a lot of money.

Price optimization will be carried out for existing customers from 15. June 2022, but only after the subscription period has expired (e.g. if your service expires in six months, you will not pay anything extra during this period). For new services we will perform the optimization from 1. June 2022.

How the price of electricity has increased and the outlook for the future

Our electricity price has increased by 450% year-on-year. So we are paying 5.5 times more for electricity than in 2021. Compared to the beginning of 2020, it is even 7.5 times higher.

In 2019, we paid EUR 36 per MWh for electricity. Today, the average price is 250 – 300 EUR per MWh.

If it was a fluctuation of a few days or weeks, we would not deal with it and operate the service at a loss for that period of time. In fact, last year was already bad in this respect and the average price of electricity was 2-3 times higher than the year before. This year’s start of the year looked better, but the conflict in Ukraine came into the picture and electricity prices are still many times higher than before the conflict. Unfortunately, we are convinced that the situation on the electricity market will not improve during this year or next year 2023 and we are therefore forced to react.

We will try to compensate for the possibility that the price of electricity will increase even more in 2023 by switching to oil cooling, when we will gradually start to launch services in our second data centre WEDOS DC 2 after the holidays. But no one knows where the energy price ceiling will be in a few months, let alone a year. A year ago, the price of electricity reached all-time highs and we watched in amazement as we paid EUR 160 or more instead of EUR 36. This year’s peak values reached up to EUR 700. By then the smile had gone.

Our ultra-efficient cooling will save us a substantial part of our operating costs, but we still have to react now because our service prices were calculated on a cost level (our input costs) and it has completely changed.

We don’t want to run the service on debt, or reduce the quality of service. This is the road to hell. Gradually, we wouldn’t have the money to run the service, to support it, to develop and innovate, we wouldn’t have new servers, and we wouldn’t have the money to pay our staff. For example, in 2010, when we started, IT wages were barely a third of what they are now. We also need to get (and pay) staff to move things forward to ensure quality technical and customer support.

We might hear that they don’t make it more expensive elsewhere, or not as much. It’s not entirely true. Several companies on the market have already raised prices, they just don’t talk about it as much publicly because they don’t have as many customers or they just send out email alerts. But we have always been honest, and so we must respond, how else but openly and with sufficient information. We are not ashamed of the fact that we have to make things more expensive. We provide a quality service that we invest in developing, pushing it further and it costs more and more every year.

For us, there is also one major aspect in terms of price increase. Our prices have been extremely low so far. Our prices were practically the lowest on the market for a long time, so we had (and have) practically no room to cover such extreme fluctuations in costs. If we disregard web hosting, we have not increased the price of some services since we started in 2010 and inflation alone has exceeded this increase many times over in those 12 years.

If the price of electricity had a share of no more than 11% of the sales price in the cost of our services, which we are now increasing in price, then we had the opportunity (from the remaining 89% of the price) to cover all other costs (wages, HW acquisition, operation and building of the datacenter, connectivity, service, development, accounting, administration) and we had room for some fluctuations or increases (for example in wages)… But today the share of electricity (for some services) is almost 80-90% of the selling price, leaving us with no funds for anything else.

If we take this as an example. Currently the service costs 1000 crowns and until now the cost of electricity was about 110 crowns, so we had 890 crowns for operation and to cover other costs. So we could pay for everything else. But currently we are not left with 890 crowns, but about 100 crowns, and we can pay almost nothing from that. The cost of everything is rising. In addition to the extreme increase in electricity prices, wages have also risen extremely, which cannot compare to what they were in 2010 when we started…

If competitors are selling and have sold similar services for 2-10 times more in real terms, they obviously have quite different financial options (in the event of similar fluctuations) to cover the increase from their margin. If someone sells (rents) the exact same dedicated server for 3000 per month (and we for 1000), the cost of electricity was 110 crowns per month before and now it is 900 crowns per month. But we’re running out of room to cover. Jim did. However, if we increase the price by 50%, we will still be half the price of our competitors.

What components make up the price of our services

The price of the service consists of several parts. Some are budgeted among all customers, others are per specific service (customer). Where we can, we look for long-term ways to reduce costs.

We have different services and each of them is differently input-intensive. Some places cost more hardware, some places cost more electricity, some places need more human labour and some places need a lot of innovation or perhaps licensing or connectivity costs.

We set the prices of our services at 2010 and 2017 prices, respectively, when we gradually started to launch some brand new services. In the meantime, input prices have changed quite dramatically. Let’s take a look.

Services such as WMS, VPS (all kinds), WEDOS Cloud and dedicated servers are basically leased hardware that we have to buy, install, make software to service and take care of. Put connectivity to it, keep the whole datacenter running, and from time to time replace a part that breaks and replace all the servers once every few years.

For most of these services, you can’t increase the revenue from this service by putting twice as many customers on one server. For example, you don’t put 2 customers on dedicated servers because it’s technically (and commercially) nonsense. When we write that the hardware is reserved for you, it is.

Currently the largest cost item is electricity (up to about 90%). This affects mainly processors and if you want to maintain performance, there is no room to save. This amount is paid per service/customer. The second part of the electricity price is for the datacenter infrastructure, which we budget among all services. We have been able to continuously reduce this part through modernisation and the number of customers. However, with the current increase, it is also already noticeable.

People costs come in second place (at 31%). Someone has to maintain the service (electricians, networkers, technicians), move it forward (developers) and provide technical (technicians) and customer support (support). Our services are under constant control 24×7. There is always at least one technician and at least one colleague from customer support. When we calculated the services when they were launched, IT salaries were about one-third of the total cost, so this cost component was significantly less significant (in the total cost).

Infrastructure is the third item (out of 27%). This includes the cost of connectivity, DDoS protection, network elements, UPS, backup generators, datacenter security, etc. We see this as an investment in development, an investment in security and stability, and therefore it is a necessity. Fortunately, we were able to complete the second datacentre under favourable price conditions.

The fourth component is hardware costs (19%). It costs something to replace servers, something to replace a broken/worn disk, etc. Our services are no longer on one server where everything is. The server is now used only for computing power and memory. The data is on multiple disks across multiple storage locations. After the holidays and across datacenter buildings.

At the very end are administrative costs. It’s not a big item, but it’s not insignificant either. We need to have trained people to communicate and handle requests from the state, authorities, police, etc. They deal with various issues related to our customers’ services. Furthermore, to maintain a high standard of service, processes need to be adapted to international ISO standards. Every year these standards are reviewed by us and recertification occurs every 3 years. However, this means that we do not have to discuss with our customers whether our services meet certain requirements, because 99% of all requirements are “copied” from ISO/IEC. Someone also has to account for it all and we have to do an accounting audit… and we could go on and on.

All of this is getting more and more expensive.

We want to maintain the quality, high standard of our services and at the same time have the capacity for further development

Since 2010, when WEDOS was founded, our team has gradually grown with more and more experienced colleagues. Some bring their years of experience from elsewhere, younger colleagues usually pick it up gradually from older colleagues and from real-life operations. We also handle the most hosting services in the country, so we face more challenges. All of this moves us forward.

Our services are moving forward with us. If you had service with us four or five years ago, nothing is the same except for the same look and feel of the customer administration 🙂

We have modernised the WEDOS DC1 datacentre, including the infrastructure, built another one, we have a new internal network, we have increased the capacity and computing power – hardware, many services are running on a completely new hardware and software solution. Everything is more resistant to accidents and deliberate attacks. We are not staying still and we are moving forward.

We strive to maintain a high standard of service and we know this is the right way to go. After all, we’ve been writing since 2013 that we are the largest hosting provider and we’ve been growing ever since. If it doesn’t work for us, some competition will at least start catching up 🙂

When you buy a service from us, you also buy its development for the future, you buy hardware upgrades (for the service and infrastructure), you pay for infrastructure improvements and the development of new services that you will be able to use.

We are always doing something and improving, which is evident from the planned and sometimes unplanned downtime.

It is true that some services are no longer offered (VPS, VPS SSD). We’ve already finished their development, and you’ll hardly encounter any unplanned downtime there, and most of these services have been running for several years without outages. There is not as much time as we would like to spend on some of them (WEDOS Cloud, WMS), but if we find new colleagues who want to devote themselves to it, this can change quickly. Even if the service as such has not visibly shifted, it still benefits from improved network infrastructure or stronger DDoS protections.

Dedicated servers

Dedicated servers are more of an addition to our offer.

HPE ProLiant DL320e

This server (together with remote management) can consume up to 101 KWh of electricity per month at peak times. On average per one this is about 81 KWh. When the price of electricity was EUR 36 per MWh, the net cost of electricity was up to EUR 3.63 per month. But today, the price of raw electricity averages EUR 250 per MWh. The cost of electricity for raw electricity is thus about 25.25 EUR per month.

Of course, you have to factor in the fact that the above electricity price is just raw electricity and we pay for distribution, for circuit breakers or high voltage to the substation, and various renewable energy charges… You have to remember that the value is just the value of what the server consumes, but you have to cool the server to do that. You have to have a UPS and cool those. You have to have network elements and backup servers and again you have to cool… So then the cost of “electricity consumed” (converted) per server is actually tens of percent higher. Realistically, the cost of electricity to run one server per month will be over 33 EUR.

Therefore, we have to increase the price by 50% (we will still bear part of the increased costs). The new price will be 1500 CZK per month without VAT.
The service has 1 Gbps connectivity as shared. This will be newly guaranteed (reserved). This is a gift worth several thousand crowns that we will now add to the service.

QUANTA S910-X31E

This dedicated server has efficient processors. We will bear the increased electricity costs.

The price remains the same 2500 CZK per month without VAT.
The service has 1 Gbps connectivity as shared. This will be newly guaranteed (reserved).

FUJITSU RX100

This older dedicated server, which is still popular with some of our customers, we have decided to withdraw from the offer for operational reasons. Existing customers can still use it without restrictions.

This service can no longer be ordered. However, existing customers can still extend it at the old price of CZK 1,550 per month.

VPS

VPS are divided into old (VPS, VPS SSD) and new (VPS ON). In the old ones we use different servers and less powerful (less power-hungry processors). Therefore, the price for these services may not go up as much.

VPS (HDD)

We still have hundreds of customers on the old VPS with classic spinning disks. The price has never changed for this service. It has been the same since 27.10.2010 15:02:37 and we increased the RAM to double on 28.02.2014 for free.

The price of the service for all variants increases by +25%.
The price of additional services remains the same.
Connectivity increased to shared 1Gbps

VPS SSD

Even with VPS SSDs, we did not raise the price from the beginning. It was added to our price lists on 19.05.2014 11:27:56.

We are raising the price by 33% for all packages except the profi variant.
For the profi package we increase the price by 15%.
The price of other additional services remains the same.
Connectivity increased to shared 1Gbps

VPS ON

For VPS ON, we have to charge more because it uses more powerful processors and we have changed the way we work with data. See. article How we made progress with data storage and management on 3PAR StoreServ Storage 8450.

The price of the CPU will increase by 50%.
The price of RAM will drop by 5%. When you buy more RAM the VPS can swap less and save performance. Alternatively, you can try Redis or other technologies for working with data in memory.
The price for 1 GB per SSD increases by 33%. This is due to the change in backups, which requires more capacity (2x data redundancy).
For each VPS ON, the shared connectivity will be increased from 200 Mbps to 1000 Mbps. (dedicated connectivity packages are planned).
The maximum storage size (NVMe SSD) will be increased from the current 480 GB to 2048 GB. (this will come later, we need to test the effect on backups)

We have made significant improvements to the service to protect data and will soon be meeting even the most demanding criteria and will have data in 3 locations. Read more here . We bear these increased costs because we know that data security is extremely important.

WEDOS Cloud

With WEDOS Cloud it is the same as with VPS ON. With the transition to the new repositories, nothing prevents us from “switching” the service from test operation to live operation.

The price of the CPU will increase by 50%.
The price of RAM will drop by 5%. When you buy more RAM the VPS can swap less and save performance. Alternatively, you can try Redis or other technologies for working with data in memory.
The price for 1 GB per SSD increases by 33%. This is due to the change in backups, which requires more capacity (2x data redundancy).
For each WEDOS Cloud, the shared connectivity will be increased from 200 Mbps to 1000 Mbps. (dedicated connectivity packages are planned).
The maximum storage size (NVMe SSD) will be increased from the current 1 TB to 2 TB. (this will come later, we need to test the effect on backups)

WMS

WMS is a highly demanded service, unfortunately also very expensive and demanding to develop. Due to the priorities, its development is still delayed. Despite the fact that a large number of functionalities are missing, we have seen a long-term increase in interest in WMS. Dedicated hardware performance and simple management like NoLimit just pulls. Unfortunately, you have to pay for dedicated power and there is no room to save.

The price of the CPU will increase by 33%.
The price for 1 GB per SSD will increase by 33%. This is due to the change in backups, which requires more capacity (2x data redundancy).
For each WMS, the shared connectivity will be increased from 200 Mbps to 1000 Mbps. (but it won’t be right away)

Conclusion

We understand that price increases are not pleasant, but if we want to operate and move services forward, there is no other way to do it in the current environment. We don’t want to cheat or skimp on anything.

For customers with the above services, we also plan to offer a discount on services on WEDOS Global. Not only in our experience, for example, deploying WEDOS Global Protection will significantly reduce the load on servers. One of our customers had the maximum possible CPU at VPS ON due to repeated attacks. After deploying the protections it could pull it down to one. In addition, WEDOS Global Protection hides the IP address of your server for us as a reverse proxy. You can set it to block what doesn’t go through the reverse proxy.

Once we have completed and debugged WEDOS Global Protection we will move on to WEDOS Global CDN and other services.

Price optimization will be carried out for existing customers from 15. June 2022, and for new services it will be implemented from 1. June 2022. We want to be as fair as possible to all our customers and at the same time take the increased costs to date on “our shoulders”.