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Hosting Game: Major Providers Raise Prices for Their Services
Forbes noted that several major hosting providers that provide server capacity for hosting websites have either increased or are preparing to increase prices for their services. Thus, Masterhost has increased prices by 20% since October 4, according to a letter from the company (provided to Forbes), Ru-Center has increased prices for household services since November 12, while corporate prices have not changed significantly. According to the company's website, TimeWeb increased prices by an average of 30% in June.
The hosting market in Russia is highly fragmented and divided into hundreds of players. The largest share belongs to Reg.ru with 33.4% of clients, Masterhost.ru with 8.93% of clients, Ru-Center with 8.04% (in the same group of companies as Reg.ru), Timeweb with 5.16%, and so on. follows the data of the resource Hostings.info, which counts hosting providers by the number of clients.
Head of the Hosting and Professional Services Department at Reg.ru Sergey Ryzhkov reported that this year Reg.ru limited the target price increase for one of the tariff items to approximately 20%. “We will still be able to restrain further growth, since investments in information security and infrastructure protection were an important process for Reg.ru every year, and new expenses were covered by the usual budget plan limits. In fact, because of this, sometimes we had to postpone new launches,” he explains.
According to Ryzhkov, the implementation of the hosting registry and the refinement of services to meet the requirements will definitely cost the company money. "For a business of our scale, this will cost about 100 million rubles, and for a small hosting company - from 10 to 20 million rubles," he calculated. Another factor contributing to the growth of prices was "equipment prices are growing almost every month." This is 20-30% more than last year.
Software prices are also rising, Ryzhkov noted. “Suppliers have increased prices by 1.5-2 times due to the departure of competitors, especially in the information security sector, and now we are seeing an average increase in requests for budgeting and pricing for the next year by 20-30 percent. “He explains, “The infrastructure needed to combat cybersecurity risks is also being updated, key rates are rising, and personnel costs are becoming more expensive. All this affects the cost of the product itself, forever sacrificing profits.” At the same time, it would be impossible to cover these increased costs.”
“The reasons for the price increase are related to changing economic conditions, rising costs of components, and the need to update software and hardware to meet modern safety and operational efficiency requirements,” Masterhost said.
Timeweb, Springhost, Beget, Gino, Majordomo and ICH did not respond to Forbes' requests for comment.
In December 2023, a new law regulating the work of hosting providers came into force. It concerns the creation of a registration of hosting companies so that they can deploy their infrastructure in Russia, identify all clients and connect to the National System for Detection, Prevention and Elimination of Consequences of Computer Attacks (GosSOPKA). For the rapid transfer of information. In addition, Roskomnadzor must install Technical Means of Countering Threats (TSPU) on the provider's infrastructure. Hosting companies must also independently install SORM (Operational and Investigative Measures). Anyone who is not included in the register must stop providing hosting services. The current register of hosters includes 462 companies and individual entrepreneurs. Market participants have previously stated that the high costs they will have to bear to comply with the law prevent many players from fulfilling some of these requirements.
According to estimates by the Russian Association of Electronic Communications (RAEC), the hosting market in 2023 will grow by 20% compared to 2022, increasing to 12.7 billion rubles. "New requirements will affect the market in 2024. We can expect consolidation and the exit of smaller players from the market that are unable to meet existing requirements," the RAEC study says. Experts predicted a redistribution of the market back at the stage of adopting the bill in the State Duma.
As predicted earlier, the market in 2024 is seeing a consolidation process in this segment of the IT industry. One of the most active companies in this regard is the hosting provider and domain name registrar Reg.ru, part of the Runity group, which includes Ru-Center, SpaceWeb and many other companies. In February, Reg.ru signed an agreement to accept Reddock clients to its services, and in April it also agreed to transfer Eternalhost clients to its infrastructure. At the same time, in October 2023, Reg.ru opened a collection of proposals for the sale of the business and client base of hosting providers.
The price changes will only affect the leaders, experts believe. The rest of the market players will do the same, said TelecomDaily CEO Denis Kuskov. "Nobody wants to work at a loss." Hosting companies also need to expand the capacity of their servers, which requires money and makes this business unprofitable, he added. "In the IT sector, salaries are growing very quickly, as are the costs of paying employees. The demand for rental services is increasing due to the difficulties in acquiring equipment," explains senior consultant of iKS-Consulting Stanislav Mirin.
For Ru-Center, hosting services are a secondary activity. Independent IT expert Philipp Kulin notes that there are most likely no plans to develop this service. According to him, individual clients of the hosting provider receive virtually no benefit, and significant support resources are spent on them.
The growth in prices for hosting services was influenced by the growth of the dollar exchange rate and the complexity of the supply chain caused by secondary sanctions, which increased the cost of server equipment, said Nikita Tsaplin, CEO of the hosting provider RUVDS. "The numbers are significant. Depending on the type of disk, generation and processor, the average price in dollar terms increased by almost 20%, while average prices increased by up to 30%," he added.
According to Tsaplin, the increase in taxes also has an impact. This means the introduction of VAT from 5% to 7% for companies operating on a simplified tax system. The hosting provider itself, and then the host of the other party. Interest rates on loans also contribute to the increase in expenses for hosting companies. Financing a business is now much more expensive, and hosting providers need to take this factor into account. This year alone, base interest rates have increased from 16% to 19%, he noted.
"Don't forget about the regulations," says Nikita Tsaplin, reminding that in order to be included in the register of hosting providers, it is necessary to meet the requirements for the presence of SORM equipment. The implementation of SORM itself can cost hosting companies 1-5% of their annual revenue, and costs have now increased by 15-30%. "These are additional costs that will also be passed on to the client," he says.