No doubt about it, power costs are increasing. Everyone feels the pain at the gas pump now, and more are feeling it in utility bills. When your utility bills run many thousands of dollars, like it does for hosting companies, you feel percentage increases even more.

New servers are more powerful than ever in the past - generally drawing more electricity to power them. New servers are also smaller than ever in the past - meaning the power requirement per square foot ("per square foot" is something commonly reviewed and analyzed in data center scenarios) are increasing drastically. Another power consumer often not considered by people who don't deal with data centers is cooling. The more dense the server capacity, the more heat per square foot, which requires more cooling, which requires more power.

I've already heard and read in a few places some grumblings from the lower end "cheap" hosts who are being squeezed on costs but have put themselves into a market position where low cost is their only value. When low cost is your only value, raising your rates can literally kill your business. So, if they can't raise rates, and their "fixed" costs are rising, my guess is that these companies will look at their other costs - like payroll - for ways to stay profitable. The challenge there of course is that with layoffs and salary cuts, quality of service often drops, so that's a very tricky route to take also.

It will be interesting to see how this plays out over the next year or two. I've been approached recently (as I am every few months) by business brokers and in the most recent contact it was mentioned that this one broker alone was representing over 200 hosts looking to sell. Interesting. I suppose we'll see a much smaller number of competitors in the market a few years from now - either from mergers and acquisitions or from the super-low margin hosts going under.

NOTE: ORCS Web isn't in the "cheap hosting" business and while we've seen power cost increases, it has not had a negative impact on us (no worries there).

~Brad