You would think that pricing your online backup service would be simple: determine your costs, add a reasonable margin, and voila! Increasing price competition from cheap commodity online backup vendors complicates the exercise, though. Naturally, these services want to advertise the strength of their offerings and provide a service to many consumers, but the scale of their advertising has created great confusion in the marketplace against which a dose of reason must be injected.
I was reading a great post by the Harry McCracken at Technologizer: Mozy’s New Pricing is a Small Price Hike, or a Big Price Hike, or a Price Cut, Depending on How You Look at It, which linked to some scary reference pages that talk about some of the un-marketed facts about the cheap online backup solutions. Customers will hear that they can get “Unlimited Backup” for a few dollars per month, and compare your price points to that offer, but this is really comparing apples to apple seeds! Many people ask us about the differences between what a good online backup service will offer vs these cheap commodity online backup services,[Note: Mozy website no longer exists] so here is the summary list, followed by some discussion on each point below:
- Business-class upload speeds
- Unlimited upload speeds vs throttling
- Fast restores
- Live and responsive customer service
- Setup assistance
- Proactive backup monitoring and alerting by a tech support person
Business-class upload speeds:
According to the Carbonite website reviewed 2011 August 29th, Carbonite limits upload speeds. If I understand their webpage correctly, they say that all uploads are limited to 2mbps. My home connection has upload speeds of 5mbps, and our test backup server regularly sees individual customers at 50mbps. The difference in backup times can be staggering: the same upload that takes 1 hour at 50mbps will take over a day if you backed up to Carbonite! Think about this: limited to 2mbps, your backup wouldn’t get done fast enough to do daily backups. But that’s not the worst news: In the bright red text, the page says that those speeds are the maximum speeds that can be achieved, which I am guessing means you won’t see those speeds unless conditions are perfect for fast uploads.
Unlimited upload speeds vs throttling:
The same webpage says that Carbonite limits upload speeds for customers that have larger datasets. While you start at up to 2mbps only, that drops to 512kbps if you hit 35GB, and again drops to 100kbps if you hit 200GB. Just for the sake of clarifying this, the same dataset that takes 1 hour at 50mbps will take roughly 21 days at 100kbps! To make this more real, consider that the dataset we’re now talking about would include changes of roughly 21GB per day. Many of our partners have customers who have individual databases that are larger than that and must be backed up daily. Plainly, commodity online backup can’t back up that kind of data.
Not only does WholesaleBackup provide technology to its partners that can start downloads of restored files immediately without having to rebuild files during the restore operation, but our partners usually have faster potential download speeds than the low Carbonite restore bandwidth of 10mbps for restores. I will let you do the math on this one, but its pretty simple: you should charge your customers a fair amount for your service because they will get their data back faster from you than a commodity online backup service. Average households in the US have doubled their bandwidth in the last year to 7.5 Mbps according to a recent CISCO report, and are expected to grow to 28mbps by 2015. Now imagine that we start talking about business backups rather than just household backups. It’s clear that businesses have better internet connections than the average household, and also clear that for a large restore, you don’t want your downloads limited by the backup provider!
Customer Support (Lumping the last 3 bullet points):
An informal poll of several of our partners’ call center data shows that an average backup customer gets about 3-5 hours of customer support per year as part of their subscription. This may be for help during installation, dealing with issues with their internet connection or computer not backing up because the hard drive is full or has viruses and also assistance with restores. At a typical IT consulting rate of $150/hour, that is a value of $450-750 a year which your customer would have to pay if they went with a commodity online backup vendor. If you add the $750 on top of say $50 a year, the backup service now costs $800 a year or $70 a month, which isn’t all that competitive anymore.
Add to this the datapoint that by far the biggest issue with online backup is the kind of errors that actually compromise the machine so it stops backing up, and the ugly issue of who watches your backup raises its head. If nobody is making sure you’re backing up, your backup is worth nothing. And backups, like anything else, can fail. So paying for a service that monitors your backups and calls you when they’re not working, or just fixes them, is worth a great deal of your customers’ time, because if they spend 5 minutes a day checking it, that adds up to 31 hours a year, which even at the average wage of $21/hour adds up to another $651 a year. So now our cheap backup service costs: $50 + $750 + $651 = $1451, plus offers slow restores and limited uploads.
If that still sounds like a good deal to your customers, send them my way as I have a few bridges to sell!
So How should you price your service?
Oddly enough, after all the above math, I would still advise you do the following: figure out how much your costs are, and then determine a fair markup, and charge that for your service. If you hear complaints on the price, use the above to help your customers realize that when they see a cheap price, it often means they get a cheap result. When you compute your online backup pricing, think about the following:
- your time to administer the solution
- tech support time to help customers
- bandwidth fees for the service
- computers required to run the service, using whatever amortization schedule you use internally
- Annual replacement goods like hard drives that you might replace annually
- Hosting fees (or electricity, rack space opportunity costs, and network)
- Your time required to do billing and service billing questions
Check out our Cloud Backup For MSPs & Reseller Program page for more information about features and benefits and opportunities with the WholesaleBackup white label backup platform.