Profit: A “Win-Win” ArrangementPosted by Gary Kinman in Business, SoftLayer
Remember the “low-carb” diet craze a few years back? Some members of my family jumped on the bandwagon and I can remember seeing a lot of low-carb items in stores; low-carb milk, pasta, bread, chocolate, etc. Today you just don’t see as many of these products anymore. Look at the dates of the articles above and try finding some of the products in the links above – they’re long gone.
Why? Assuming these products really worked as advertised, when the low-carb craze was over, the cost of producing these products became higher than the revenue that the market was willing to pay for them. Maybe the market rejected them because they didn’t work. Whatever the case, mathematically, when costs are higher than revenue, there is no profit. Consequently, companies stopped offering these money-losing products. No profit is a “lose-lose” situation. Neither the companies nor the consumers who want the discontinued products benefit when there’s no profit.
The same goes for the hosting industry. If the cost of providing hardware, software, power, cooling, and bandwidth ever rises higher than what the market demand will pay, this offering will exit the marketplace. Personally I don’t think that will ever happen. Because there is an opportunity for profit in the hosting business, we and other providers will continue to inject our offerings into the marketplace. And due to the cost of these offerings, we won’t be offering dozens of processing cores, unlimited RAM, unlimited bandwidth and multiple terabytes of storage capacity for ten bucks a month.
Thankfully, SoftLayer doesn’t have to deliver all of that to achieve a top notch customer experience (as of yet anyway). But simply providing the list above is only part of the equation. As I mentioned in my last post, treating your customers “right” and building long-term relationships is critical to maximizing profit. Therefore, we do our best to price our offerings at value points that make both our customers and our investors happy. The resulting profit ensures that we continue in business and that we keep our server fleet refreshed. Profit keeps us around and motivates us to provide our customers with an excellent customer experience.
Thus, for SoftLayer and our customers, profit is a “win-win” situation.