Today marks yet another day of getting notice for immediate price increase. This time on average of 4% on already relatively (for what it is, the value it brings) extremely expensive service. The total cost is "peanuts" or "rounding error"; but this service has very strong vendor lock-in, and the price scale small enough so they can do this every and each year, it costs much more to move to different service provider than many years of the increased cost. At this point it has more than 10x'd the cost in the past decade. At this rate, it will be 100x of the original cost by 2035. (No, this is not the piece of software everyone is thinking right now, despite known for this, but something local and only Finland specific)
This is constant, and ever lasting. This month it's been many more or less significant costs being increased.
Some wrap it as "Good News! We only raised price by 4.5% since that's the official inflation figure!". 4.5% annual price increase = 55.296% over 10 years. That is not small.
Electrical prices continue to be high as well, the 2023 annual average electrical price was somewhere around 300% of what it was previously.
YES, there were a lot of days with even negative spot pricing; But this does not come all the way to us, we do not own our DC building nor the transformers there in, we merely lease the space and we are at the mercy of the buying skill of the real estate corporation (bank) which owns the actual building. They seem to be abysmally bad at this, when the prices started skyrocketing turns out they had no upfront plans, they had no protections in place, and were solely on spot pricing 100% -- Then they made arrangements to protect 40% when the prices peaked at their highest, for not sure how long.
Not only that, this corporation is also bent on "Saving The Planet Earth", only rent increases come in paper for example "because of Co2!" (I would argue regular print paper might be net negative Co2. Is Co2 actually an issue? Another topic for another date!); They spend more effort on recycling programs for the building than actually maintaining the building, well it seems like that
So what they do when prices are the highest? Move to "100% Green Energy!" of course!
Net result is that our electrical price lowest month was still ~+100% of what it was previously, typical month is more like +200% with much higher peaks. No, This is NOT A JOKE.
This despite the total annual average pool spot (energy exchange) pricing was not that insane last year.
Despite this, we still have the situation better than many others. Some have made 100% lock-in price for years to come at prices 4 to 8x what they normally are. Imagine those people and businesses who locked in for 50-60cnt/kWh PLUS Grid Fees and Taxes! There are large office buildings right now at that situation, no one wants to rent or buy from those buildings, and companies are moving out of the building because management did something that silly as to lock in the highest price in decades.
At this point the only cost that has not increased is transit/bandwidth costs, and select hardware components.
Even weirder; We see that HDD pricing has stagnated to same level as 2020 roughly, new models get released, bigger ones, but per TB cost remains the same year after year. It's like the price was fixed, remains within few percentage Year Over Year!
What Does This Mean To You As Customer?
Not much at this time, we have no plans for immediate price increases. New service order prices has been increased, and much to our surprise that has not affected new service sales much.
However, we need to set much larger growth goals in revenue growth to retain the same profit margins, AKA healthy business. It does not help that Seedboxes has been a dying niche for a decade now, and to this, we are now expecting a pivotal moment this year with the MD Platform; Projections show that if successful; This year marks the point we have pivoted mainly as dedicated server provider instead of seedbox provider.
Our current revenue is approximately 23.50% dedicated servers, out of which MD beta testing and development units already accounts for 40%. Projection shows that we will increase quantity of MD nodes by 5x by end of the year at this pace. There's been a small hiatus on new nodes as we've worked on tooling, testing, and fixing issues. All of that background work enables us to work much more efficiently in the future, paying back dividends for decades to come. We are now at a point bringing up a new MD node takes significantly less than 1 human hour of labor, and we are now starting to analyze operational effort required (repairs, replacements, fixes) soon as the platform is starting to near feature completeness.
The pivotal moment is when from our revenue is 50.01% or more in dedicated servers. We expect to reach this point by end of this year. It might take until the very last day of the year, but we are expecting to reach. We shall see how that goes.
Tuesday, January 23, 2024
