Nobody could have predicted the fall of several VPS providers during the months of July and August 2007. Many of our fallen comrades had been in the VPS business for years and their demise was quite a shock to the Hosting world.

We’ve tried to analyze the problems which caused this sudden turn of events for VPS powerhouses in an industry that is traditionally quite lucrative. The main cause seems to have been the recent occurrence of sub $10 VPS’ that are diluting the market. Some of these fallen companies started the trend and some jumped into the price-slashing fray a little later.

It is hard to sell VPS’ when you are selling one for $45 and your competitive upstart is selling the same VPS for $10. Such market pressure creates the demand for a quality product at a price lower than a provider can afford. But in order to sell, you must either slash prices or face slow sales.

Of course, although a company may slash the prices of its VPS’ offerings, the cost of hardware, bandwith and support remain constant. This is where real world business economics clash with the rabid competitiveness of the hosting industry.

It’s not un-common in this industry for companies to come and go more often than many people change their underwear. The start-up cost of a hosting company could be less than a dinner at a fine restaurant! The lure of instant profits keeps bringing people into an already saturated market.

So to all of those VPS companies who survived the burning months of August and September, we tip our hats off to you.