Why is it Beneficial to Have a Dedicated IP Address Vs. a Shared IP Address?

The conversation on Internet Protocol (IP) addresses, is a lengthy but enlightening discussion. This is especially true in the world of internet technology and the web hosting industry, in regard to Shared vs Dedicated IP address space.

In general, the available information on the subject today tends to lean toward in-depth concepts regarding technologies and technical best practices, which begs the question:

“What impacts will Shared and Dedicated IP have on my business(es)?”

This post will be the first in a series of three articles that will shed some light on general IP addressing, as well as the business implications of Shared versus Dedicated IP address space. In this discussion, we’ll be covering some of the high-level details of IP address, Global IP Allocation, and Shared versus Dedicated IP addresses.

All three of these topics will have a focus on the business impacts of dedicated IP addresses vs shared IP addresses and will arm a business person with the information necessary to engage in meaningful discussions while making informed decisions on IP addresses.

Let’s get started!

Importance of IP Addresses

IP addresses allow servers to identify each other and route traffic across local networks as well as the rest of the internet. Moreover, a single server can have many IP addresses but needs at least one to be publicly available on the internet.

This ultimately means IP addresses govern how traffic reaches your website.

Another thing to note is that IP addresses should not be confused with domain names. DNS, the system that ties domain names to IP addresses, was developed because it’s easier for people to remember and associate with names as opposed to numbers. This system is merely a supplemental layer to help people.

IP addresses are the all-important resource, the unique identifier for computers, which allows you to have a presence on the internet.

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So let’s get technical for a moment.

IPv4

An IP address is a set of numbers delineated by a marker. IPv4 addresses, the most widely used protocol today, are grouped in sets of four containing digits between 0 and 255 referred to as octets. They’re separated by a period.

An example IPv4 address: 216.58.194.78
Read denoting the period: 2-1-6 DOT 5-8… and so on

Why is that important? Because there is a shortage of IPv4 addresses.

Global Exhaustion of IPv4 and the Business Impacts

As of late 2015, The American Registry for Internet Numbers (ARIN), who manages all allocations for IP addresses in North America, including the United States, reports that IPv4 addresses are officially depleted.

If we look at the circumstances objectively, we see a simple supply and demand condition. As business is concerned, this type of situation generally means only one thing: the value of IP addresses is skyrocketing and, as in all supply and demand situations, as the value of a commodity goes up so too does the price for the consumer.

All across the internet IP addresses have been harder and harder to find and, where they can be found, the price is starting to reach upwards of USD 18 per address, as reported by the IPv4 Market Group. This price is quite different from the USD 11 per address which was published in 2011 between Nortel and Microsoft during the first market IP address transaction ever recorded.

Most hosting and internet service providing companies are beginning to pass this cost onto their clients, who often pay a monthly recurring cost to utilize these addresses. As IPv4 addresses are becoming less available, the price for the remaining addresses is going up.

So what should you do?

Looking Toward the Future

Fortunately, a solution has already been developed and adopted. IPv6 is the most recent Internet Protocol (IP) which was developed in the late ‘90’s and became an Internet Standard in the third quarter of 2017.

An example IPv6 address: 2607:f8b0:4000:803::200e
Read denoting the colons: “2-6-0-7, COLON, F-8… and so on”.

This development was primarily in response to the impending IPv4 exhaustion, but pains were also taken to add several other technological advancements including security and dynamic assignment.

The important business detail of this protocol is its inherent massive quantity of addresses. Whereas IPv4 addresses number about 4.29 billion possible addresses, IPv6 boasts about 7.9×1028 times this amount. This number is truly astronomical and will likely never be exhausted.

Shared and Dedicated IP Addresses

Now that you have a firm grasp on the IP address situation, we can start to see where dedicated vs shared IP addresses make sense for your business.

Definition of Shared and Dedicated IP Addresses

A Shared IP address is an IP address which hosts multiple customers and multiple sites. This can be one, two, or even ten clients all using the same resource.

A Dedicated IP address is an IP address which is reserved for use by a single client or a single website.

Both are great for different purposes and in different scenarios.

Let’s take a look.

Use Cases for Dedicated vs Shared IP Addresses

The practice of employing both Dedicated and Shared IP addresses is a function of client and traffic segregation. Single servers can own several IP addresses. Also, a single IP address can host several clients or sites.

If servers on the internet identify each other by IP address, we can conclude that traffic can be sent to a single IP address and potentially affect many sites. If we consider malicious traffic, a DDoS, for example, it’s possible a server on the internet can potentially send malicious traffic to a single IP address on your server and inadvertently impact several sites.

Knowing that IPs have the potential to be attacked allows you to determine how to allocate IPs to clients. You will need to answer the question, “Will traffic from this client potentially affect other clients?”

Once you can answer this question, you can go on to identify the potential traffic which is to be expected, compare it to stability, resource utilization, and reputation, and begin to use your resources appropriately.

General Best Practices for Client IP Addresses

Best practices are relatively easy and center around proper resource allocation, something we’ll go into in more detail in my next article. If considered with stability, resource utilization, and reputation in mind, we can start to see the difference in price point, which will keep our business relevant. Best practices balance the amount we’re spending on resources and ensuring those resources are used efficiently as well as effectively.

Answer the question: “Will traffic from this client potentially affect other clients?” Once you have the answer, best practices follow along segregating traffic accordingly.

If you believe one client, maybe one who has a history with DoS attacks needs to be separated from your other clients, do so. This will add a layer of security should malicious traffic become an issue.

You should also keep in mind your high priority clients. Sometimes you want to offer that layer of security just in case. And often they’ll want that level of forethought themselves. Whether they ask for it or you offer it as the cost of doing business, keeping these clients removed from any potential blast radius is helpful.

In Summary

Consider IP addresses just as you would any other business resource. When considering whether to use shared IP addresses or dedicated IP addresses for your clients, think through the ramifications to your stability, resource utilization, and reputation of your business carefully.

In my next article, we will hone in on the most effective use cases for dedicated vs shared IP addresses.

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