Common Misconceptions About Selling Hosting Services in Foreign Currency

About a year ago, we shared with you, our valued customers, the announcement that some of our services would be sold in foreign currency instead of Turkish Lira, and seven months ago we completed the transition. No matter how much we tried to explain the reasons for this in the finest detail in written and verbal form, we could not prevent people from evaluating this issue based on the movements of the majority by looking at alternatives rather than wanting to see and understand the truth. This is similar to many of our citizens joining the famous chain called “Çiftlik Bank” by thinking “this many people cannot be wrong” by looking at the number of members of this chain.

First of all, we would like to tell you about the lifecycle of physical servers, the pace of developments in technology, the software world affected by this pace, the path that broadband internet services have traveled from the past to the present, and show how current physical servers and today’s technology are quickly consumed and renewed.

Physical servers are machines that, like organic living beings, have a certain lifespan and become broken, outdated, and unusable within a certain period of time in line with technological developments. Unfortunately, within Turkey’s borders, we can at most produce screws of these industrial machines, and at great cost if we push it, the outer casing and a few electronic circuits. For this reason, all of these physical servers, which have a lifespan, are imported from abroad in foreign currency. We can say that the server is the sole raw material and supply of the services we provide to you. After a certain period, it needs to be renewed as it breaks down or becomes unusable.

Technology develops rapidly and is used and consumed by people at the same rate. Today, speed is one of the most important building blocks for technology to develop rapidly. Each new software version released daily uses more resources compared to the previous version. New features, users’ speed concerns, and today’s technology becoming tomorrow’s old technology make this inevitable.

While a thousand entry-level hosting packages can be run on a server with an Intel Xeon E5-2640 v4 processor, the same number of websites could be hosted in 2003 on a server with an Intel Celeron 857 processor. Meanwhile, even if you compare the purchase prices of the two processors based on inflation, there is a very large cost difference between them. In 2003, the internet was not widespread, and services like ADSL were very rare and difficult to access.

According to PassMark reports, the Celeron 857 score is 1,172, while the Xeon E5-2640 v4 processor score is at 15,331 level. Could the approximately 15-fold difference between the two processors and the 15-year gap between them be a coincidence? If you are asking “so does the need for CPU power increase exponentially every year?”, no. CPU power, Disk IO power, and internet bandwidth requirements continue to increase much more and faster!

Every year and in periods within the year, you can see on the BTK official website, in the publicly available market data report, to what extent internet usage has increased periodically over the years. Looking only from 2016 to 2017 in terms of speed, we see a 2-fold difference, and a similar 2-fold increase was achieved in 4 years from 2011 to 2015. Why do you think a 2-fold increase occurred within one year in 2016 compared to a 2-fold increase in 4 years? The main reason for this was the introduction of 4G technology, called 4.5G in our country, into our lives. With even this simple example, you can see how resource usage increases with developing technology.

Technological developments do not always increase resource usage needs. Another example on this topic is the security vulnerabilities Meltdown and Spectre that emerged in modern processors on January 2, 2018. Although software comes to mind immediately when security vulnerabilities are mentioned, this time the vulnerability was at the hardware level, not the software level. The software patches that eliminated these security vulnerabilities caused a performance loss of between 5% and 30% in processors.

We hope that with everything we have explained, we have enabled you to see how quickly the costs increase, especially for servers that form the raw material and supply of all produced services, internet bandwidth, and related costs. We particularly hope that we have succeeded in informing everyone who thinks that service is provided by purchasing a server once, who cannot understand how foreign currency input exists in the production and sustainability of services, and who thinks that all hardware, network equipment and similar tools are purchased only once.

Our company has taken great care to price all the services it has offered since 2006 in Turkish Lira. One of the primary and biggest reasons for this is that selling in Turkish Lira is a marketing argument. However, there are harms to both our users and our company. Unfortunately, the exchange rate has never been stable in our country in any period. In the face of this instability, selling services in Turkish Lira whose raw materials and supplies are indexed to foreign currency (Data center components, servers and similar) always reflects the exchange rate risk as an additional risk ratio in prices.
The annual fixed increase of the US Dollar exchange rate, which generally shows between 10% and 15% without extraordinary circumstances, is calculated from the very first day and added to accounts defined in Turkish Lira. In this case, since the exchange rate risk is foreseen to occur by default, due to increased prices, users are forced to bear today the cost they will bear in the future.

We do not believe that selling in Turkish Lira in our sector has the benefit of strengthening our country’s currency. This is not very correct information for our sector, and we believe that individuals or organizations criticizing our company and companies like ours that sell in foreign currency are victims of misinformation.

Continuing; even if we assume that using Turkish Lira is advantageous for the user in the short term, the price increases that generally come in subsequent periods are sufficient to subsidize the losses arising from the past exchange rate differences. While this cycle continues this way, we can easily say that users paying in Turkish Lira only psychologically feel comfortable, and the situation is not actually like this.

The decision to transition to the foreign currency rate, announced to our customers on April 10, 2017, was planned long before its implementation. The breaking point we defined for this problem that has been on our agenda for years is October 27, 2016, when the US Dollar rate above 3 TL was accepted as standard in our country. After approximately five months of feasibility and software infrastructure compatibility, information was provided to our customers on April 10, 2017, and the gradual transition was completed by the end of December 2, 2017.

You can also see how long the changes made were planned and completed. Similarly, there are specific methodologies particular to our company applied with experience from the past in the pricing of services provided. In pricing services, the aim is not to index to small or large companies operating in the same sector, but to be able to provide the service healthily for many years, taking into account possible adversities, within specific plans down to the finest detail, without victimizing users, and without damaging the Netinternet brand value today and tomorrow. As the proverb “every brave person has their own way of eating yogurt” goes, providing the services offered specifically by our company within a certain standard and at a certain quality is one of our primary and non-negotiable priorities.

Abdullah Altunbaş

Content Writer

Netinternet Bilişim Teknolojileri A.Ş.'de teknik konularda liderlik yapıyorum. 15 yıldır bu alanda çalışıyorum ve özellikle sistem yönetimi, ağ teknolojileri ve yazılım geliştirme konularına odaklanıyorum.