When picking a vendor to host business critical services, there are many things that need to be looked at. Other than the obvious offerings such as redundancy, standards, best practices compliance, and service level agreements (SLAs), one needs to look at the vendor’s billing terms and policies. If there’s a problem at the bank and a credit card payment doesn’t go through, are business critical services going to be affected?
When I managed a web hosting company, I was leasing a few servers at The Planet, a large data center company that has since been absorbed by SoftLayer. The Planet was a good data center. Their network and power redundancy was good, and they even managed to survive a fire without having any network downtime.
They let me know by e-mail that my credit card couldn’t be processed, and that I had five days to update the credit card to prevent suspension. I knew that my credit card was expired and I even had the new credit card, but I was on vacation and expecting to return to work in only three days, giving me a two day safety margin.
However, the morning that I got back to work, I found that my servers had been null routed. The company had violated their own billing policies and suspended service after the payment being past due for only three days.
This was my first experience where a billing issue had caused downtime of Internet services. Fortunately, these servers weren’t business critical. However, I decided to write a blog article on the issue and try to put some pressure on hosted services vendors to make some positive changes.
My boss at the time was worried about pissing off vendors, so the article was deleted shortly after publication. I’ve recently done new research into many hosted services vendor’s billing policies, and wanted to share what I found here on my own blog.
The billing policies
Amazon Web Services (AWS)
Suspension: After 15 days past due
Late fee: 1.5% on past due balances
Amazon has one of the better policies as far as having time to resolve the issue. However, some members in their forum indicate that service wasn’t suspended for nine to 14 months after payment was due, resulting in customers finding outrageously huge bills for past due payments.
http://aws.amazon.com/agreement/
Rackspace
Suspension: after “Reasonable advance notice” or “3 days written notice”
Reconnection fee: $150.00
Rackspace’s terms of service also indicate that if you’re paying month to month, that they can increase the monthly price. This is uncommon in the industry. Additionally, Rackspace oddly took 11 days to respond to my first pre-sales e-mail, even after I followed up several times. When they did respond, they didn’t answer any of my questions, but rather replied with nine questions of their own about what types of services I needed.
I know that my colleagues at Duo Security were using Rackspace, but I can’t recommend them, as they’re clearly one of the worst offenders as far as suspensions after past due accounts go. However, Rackspace’s terms of service are written to provide more protection to customers overall.
http://www.rackspace.com/cloud/legal/
SoftLayer
Suspension: After 5 days past due
Late fee: $20.00
Reconnection fee: $50.00
SoftLayer is a great hosting provider with good network redundancy and a very advanced control panel. Many features that cost extra at other providers are included with SoftLayer. They have many data centers, and you can choose which data center to have a leased server hosted at. This geographic redundancy might make you too comfortable to rely on only the one vendor, especially since they have a business continuity certification. However, don’t be tricked into relying on one vendor.
SoftLayer’s terms of service include a clause indicating that you agree to be charged a fee of $500 if you do a chargeback on your credit card against them. This is rare in the industry, and is a violation of Visa and MasterCard’s rules and regulation.
If you have a billing dispute with a vendor where Visa and MasterCard allow you to do a chargeback, you have every right to do it, without being charged a fee.
SoftLayer was the fastest to respond to my pre-sales billing questions.
http://cdn.softlayer.com/SoftLayer_MSA.pdf
HostGator
Suspension: after 10 days past due
Late fee: $10.00 after 10 days past due
I don’t have any direct experience with HostGator, although I remember when they were first getting started. The owner had a very humble personality, and he oddly got an instantly good reputation and was highly recommended on Web Hosting Talk for a long time, which helped him get a foot hold in the industry.
Their 10 day suspension policy seems good, and their sales team was quick to respond, once I got past their CAPTCHA. It’s odd to have a CAPTCHA on a sales e-mail address, as it turns away business, but I sent them a second e-mail after they hadn’t responded to my first. The second time is when I noticed that their autoresponse wasn’t just confirming that they had received my e-mail, but it was also asking me to take an action to verify that I wasn’t spam.
I was told by Joshua N. in billing that they notify customers by e-mail when a bill is past due 5 days, and then again at 10 days. I received conflicting information from Eric B. in billing, who informed me that they notify customers by e-mail at 5 days, 9 days, and then again at 10 days past due.
This highlights one huge problem when billing policies aren’t part of the written terms. It’s part of the problem that I had with The Planet. They turned out to have billing policies that weren’t applied consistently and were also in violation of their written terms of service.
http://www.hostgator.com/tos/tos.php?/tos.shtml
iWeb
Suspension: after 7 days past due
Late fee: 2% of past due balance
Reconnection fee: $50.00
Ramiro Gomez on their team informed me that their policy is to notify customers three times before suspension occurs. Again, this wasn’t in their written terms. He gave me some conflicting information though, saying that their reconnection fee was $15.00, which wasn’t in their written terms.
iWeb’s written terms of service has conflicting information too, though. In one section the reconnection fee is given as $50.00, and in another section, it’s given as $25.00.
When I asked about a late fee and for a link to the terms in writing, I never received a response back, although I found the information on my own.
iWeb was the second fastest to respond to my pre-sales billing questions, but they left me hanging in the end.
http://iweb.com/about-iweb/legal/terms-service
LiquidWeb
Suspension: after 14 days
Reconnection fee: $50.00
Randy Cram from the Liquid Web’s sales team informed me that they charge the reconnection fee on a case by case basis, depending on whether late payments are a regular occurrence. Although this sounds good, you can’t rely on a company following their policies versus their written terms, and should assume the $50.00 reconnection fee should your service be suspended.
I have some experience with LiquidWeb, and their network was pretty good and was what I expected considering the smaller size of their operation compared to the bigger companies that could afford more connectivity and redundancy. One issue I did run into was that they null routed IP addresses that they gathered from some list of malware infected hosts, and did not remove these entries after a reasonable time, or make it public that they were providing this limited connectivity. I don’t know if they still do this.
https://www.liquidweb.com/about/dedicatedtos.html
HostWay
Cale Wilson from HostWay’s sales team said that he’d get the information from an account manager to answer my questions.
I never received anything, after following up more than once.
The real problem
The underlying issue with billing policies is the harm done to credit worthy customers by lazy billing departments and companies afraid that customers may take advantage of them.
It’s rare that a customer actually runs out of money and isn’t going to pay their bill within a reasonable amount of time. Lack of payment is usually caused by busy customers and busy billing people that don’t attempt to notify their customers of a billing problem, or billing people that get upset when a customer doesn’t respond.
A busy customer that doesn’t check their e-mail regularly is a happy customer. They don’t expect to hear from their vendor, because things are running smoothly. Suddenly suspending a customer’s service, maybe after many years of service, and tens of thousands of dollars in sales paid to the hosting services vendor, with no notification other than an automated e-mail message, is a horrible way to retain a happy customer.
In my experience in the service industry, more theft of service occurs with charges paid on time by stolen credit cards, than by customers that run into problems with their payment method. However, when a loyal, long time customer’s bill suddenly goes past due, the vendor sees that as money taken out of their pockets, and the service is suspended. Even if continuing to provide the service costs the vendor pennies on the dollar.
It’s true that suspending service gets the customer’s attention, and has the customer racing to contact the vendor, saving the vendor the trouble of having to track the customer down to notify them. However, this only works if the service is business critical. The exact reason why the service shouldn’t be suspended in the first place.
When a vendor violates their SLA, or doesn’t provide the service contracted for, the vendor needs to refund the customer. Don’t make the customer do a chargeback. Some vendors may be lucky enough to be able to extort money from their customers that are reliant on their service, but they shouldn’t rely on it.
Finally, the amount of money that a customer pays the vendor is not necessarily relevant to how business critical the customer’s service is. Don’t go out of your way to keep service running for your biggest account, and quickly shut down service for the smaller accounts. It doesn’t make sense anyway, since the bigger account is quickly racking up a larger past due bill.
The solution
The solution is easy. Vendors make money by providing service, and keeping customers, not by shutting services off. Have your billing team contact the customer by all means necessary. Have your billing teams remind the customer that their business is valuable. Have your billing teams work to resolve any issues that are getting in the way of the customer paying.
Finally, take into account past timely payments by the customer and how long the customer has been with the vendor. This is a big indicator of credit worthiness and is the direct measure of how much loyalty the vendor owes back to the customer.
Customer tips
Until hosted services vendors get into the right customer oriented mindset, there are some things that their customers should try:
- Don’t go on vacation.
- Have backup credit cards, in case something happens to one or more of them.
- Check your e-mail every day.
- Disable your spam filter for e-mail from your vendors.
- Be prepared to bend over backwards and be extorted by a vendor if you’re reliant on them.
- Don’t rely on one vendor.
What next?
If the hosted service vendor’s billing policies have you scared, wait until you read the rest of the service agreements. Every single service agreement will disclaim all warranties and have something that will scare the hell out of you, although Rackspace’s seems the most level.
“We may change, discontinue, or deprecate any of the Service Offerings (including the Service Offerings as a whole) or change or remove features or functionality of the Service Offerings from time to time.”
“We may modify this Agreement (including any Policies) at any time by posting a revised version on the AWS Site or by otherwise notifying you in accordance with Section 13.7.”
“The counsel which Customer selects for the defense or settlement of a Claim must be approved in writing in advance by SoftLayer prior to such counsel being engaged to represent the Indemnified Parties.”