Is it a good or bad idea to oversell your hosting services?

[HostDiscussion]

It's safe to say, a majority of web hosts are overselling services in order to compete in today’s shared web hosting market.

What are your thoughts on this concept and what advice can you provide us?

[Lawer]

Nearly all web hosting companies oversell. If it's controll, it's O'k. Otherwise it's a calamity.

[Ashish]

almost everyone does a bit of overselling, its alright as long is properly managed though..

[virdave]

Where would we be without it?
You wouldn't see any of the crazy 2TB monthly transfer for $1 plans.
The VPS industry as a whole wouldn't be even a fraction of what it is. Could you imagine all VPS plans priced out to the average Xen provider's pricing? Even Xen can be oversold, just not on Ram (to my best knowledge - haven't worked with it in quite some time)

Dreamhost has a great blog post about overselling, http://blog.dreamhost.com/2006/05/18...t-overselling/

It's definitely worth the read.

[ch3nn!ng]

Overselling

I thought VPS overselling was a moot point? You hit the limits of your VE and it turns off or crashes.

Unless you mean the host is not properly managing the entire server?

[virdave]

Overselling is when a host sells more resources than a host server has, physically. Generally it refers to Ram, but can also be done with diskspace and CPU. It does not automatically imply 'poor management.' It is simply a tool that, much like everything else, needs to be used with responsibility.

How does it work?
It works like this; You have a host server with 8GB (8192MB) ram. and you sell 256MB Guaranteed ram to 32 clients in a 1:1 ratio. Each client on that host can use that 256MB ram whenever they want, with absolutely no swapping. However, 98% of them won't be using all of their Ram at any given time. So you end up with a lot of idle resources.
Now, those 32 customers have to pay a premium price for their resources. The host still has to make money off of them, otherwise there is no reason to continue providing the service. Now, the host says... heck, we've got 8GB Ram sold to these 32 people and only 2GB is being used on average... let's sell 256MB guaranteed Ram to 8 more people on that host server (who, with the above numbers probably won't even notice). So we have 40 customers and 10GB of guaranteed Ram SOLD to 8GB of physical Ram. Each of those 40 customers have to pay a bit less for their resources.

It can be abused, and when it is, you will notice it.
Overselling is playing the Law of Averages. Sometimes you have outliers, these are the people who use what they are given. When this happens the disks will start swapping, IO waits go up, etc, because there is no longer a 1:1 ratio of Guaranteed resources to Physical resources and when too many people try to use what they're given, well.. there's a finite amount for them to access. The more you oversell, the greater the amount of customers that fall into the 2% of those who use what they pay for. Host servers become sluggish and non-responsive, everyone complains, nobody is happy.

The key here is; it is the hosts responsibility to use this tool in a very controlled and monitored fashion. Treat the host node like a living being that needs constant supervision to ensure a certain level of service quality.

Overselling is NOT bad. Hosts who oversell irresponsibly are the culprit. But I guarantee you that without it, you wouldn't be paying what you do now for your shared/vps hosting. VPS wouldn't be able to price-cut dedicateds and come damn near in price to Shared. Shared wouldn't be able to offer insane packages for $5/month. The hosting world, in short, would be completely different.

[dada]

Can you give any examples of hosts who oversells VPS plans?

[virdave]

Anyone running Virtuozzo or OpenVZ (the opensource betagrounds for Virtuozzo) is most likely overselling. Xen doesn't allow for the overselling of Ram, but disk and cpu can still be oversold.

Edit:
Here are some examples;

A few reputable Virtuozzo hosts that oversell:
Knownhost
SolarVPS
PowerVPS
TekTonic

Some Xen hosts that can't oversell Ram (compare resource prices
Slicehost
VPSland
RimuHosting

In my opinion, any VZ/OpenVZ hosts that don't oversell are kidding themselves.
There is no reason not to oversell at least to make up for some virtualization overhead. When done properly an oversold host node should run without problem.

[Ryan-Limestone]

It is my understanding that the VPS industry is so over saturated with companies offering it that is becoming nearly impossible to make any type of profit without overselling.


Of course this is not my industry, so I accept the fact that I may be completely wrong.

[virdave]

The VPS market has definitely grown in the past few years, going from maybe a dozen or two to well over 100 providers with english supported sites. Overselling alone doesn't make or break profit, though. It has to be combined with a correct business plan and pricing structure. If a host decides not to oversell, they simply have to sell their resources for a higher price. Some customers actually seek such providers out (mostly resorting in finding a Xen host, imho) - because they want to know what is physically available to them at all times. Most VPS hosts do oversell though, as long as their virtualization platform can support it. There really isn't a reason not to in my opinion, unless you're targeting a niche group of "Anti-Overselling" clients.
The fact is, the vast majority who are purchasing a VPS don't really care what's going on in the background if their service doesn't suffer. Much like the Shared Hosting industry, the majority of people don't care that they're sharing Ram/CPU, etc as long as their site loads to their expectations.

[medal]

I guees I have even seen the formula of the acceptable overselling.

[whbro]

Overselling is when a host sells more resources than a host server has, physically. Generally it refers to Ram, but can also be done with diskspace and CPU. It does not automatically imply 'poor management.' It is simply a tool that, much like everything else, needs to be used with responsibility.

How does it work?
It works like this; You have a host server with 8GB (8192MB) ram. and you sell 256MB Guaranteed ram to 32 clients in a 1:1 ratio. Each client on that host can use that 256MB ram whenever they want, with absolutely no swapping. However, 98% of them won't be using all of their Ram at any given time. So you end up with a lot of idle resources.
Now, those 32 customers have to pay a premium price for their resources. The host still has to make money off of them, otherwise there is no reason to continue providing the service. Now, the host says... heck, we've got 8GB Ram sold to these 32 people and only 2GB is being used on average... let's sell 256MB guaranteed Ram to 8 more people on that host server (who, with the above numbers probably won't even notice). So we have 40 customers and 10GB of guaranteed Ram SOLD to 8GB of physical Ram. Each of those 40 customers have to pay a bit less for their resources.

It can be abused, and when it is, you will notice it.
Overselling is playing the Law of Averages. Sometimes you have outliers, these are the people who use what they are given. When this happens the disks will start swapping, IO waits go up, etc, because there is no longer a 1:1 ratio of Guaranteed resources to Physical resources and when too many people try to use what they're given, well.. there's a finite amount for them to access. The more you oversell, the greater the amount of customers that fall into the 2% of those who use what they pay for. Host servers become sluggish and non-responsive, everyone complains, nobody is happy.

The key here is; it is the hosts responsibility to use this tool in a very controlled and monitored fashion. Treat the host node like a living being that needs constant supervision to ensure a certain level of service quality.

Overselling is NOT bad. Hosts who oversell irresponsibly are the culprit. But I guarantee you that without it, you wouldn't be paying what you do now for your shared/vps hosting. VPS wouldn't be able to price-cut dedicateds and come damn near in price to Shared. Shared wouldn't be able to offer insane packages for $5/month. The hosting world, in short, would be completely different.

An overselling host is like carpooling operator. Every seat is reserved but when those seats remained empty, the operator will be tempted to invite more passengers with main purpose to gain extra profit.