Mitigating eBusiness Growing Pains
As soon as your first web page goes up, you're
global. Simply because anyone in the world can access your site,
however, does not imply the infrastructure of a cross-continental
business, nor even that of a business that spans the regions of
a single country.
Whether your company is a portal that organizes and distributes
information, or an e-commerce company delivering products to consumers'
doors, or a business-to-business organization supplying the production
materials, moving your company into increasingly larger business
spaces involves planned, controlled expansion of the resources needed
to function efficiently and smoothly in disparate markets. The issue
for companies as they expand globally is projecting and maintaining
a singular corporate and brand identity, even as they adapt themselves
to new contexts for doing business.
People are the most important resource a company has, and they are
the most difficult resource to find and keep. The Internet economy
has left many companies unable to fill positions, particularly high-tech
positions, and employee retention rates suffer from the widespread
availability of jobs. Finding, attracting, and keeping talented
employees who are not only good at their jobs but also who fit well
into your company's culture is difficult in the current economic
environment. The task of opening an office abroad and trying to
hire dedicated, qualified people in another country adds an additional
level of complexity to the problem.
Despite the somewhat daunting prospect of expanding a company into
new regions and across borders, the need to do so is urgent in the
eBusiness arena. The rewards for successful eBusiness are enormous,
but the challenges are great as well. Your online shoe store has
the opportunity to sell to consumers in Italy, but you also compete
against the local brick and mortar shops in Italy as well as the
rest of the online shoe stores across the globe that are willing
to ship to Europe. In addition, your online business model is relatively
transparent, allowing anyone access to your idea. If another company
can implement your idea locally before you get there, you will likely
find yourself fighting an uphill battle. The best way to do business
in specific overseas markets is to establish a physical presence
there, and do it quickly.
The Internet land-grab is on, compelling eBusinesses to expand their
operations globally earlier in the life of the company than traditional
businesses. Just as with domestic expansion, the biggest challenge
is finding the right people. With a little planning and attention
to efficiencies of infrastructure, companies can take advantage
of the loyal employees they have and focus on their core business,
gaining an advantage over the competition, which, on the Internet,
WORLD WIDE WEB-WORLD WIDE ECONOMY
The Global Economy is becoming a reality for
many parts of the world, and it is a strong and healthy economy.
Markets beyond the borders of the United States are enormous, and
the Internet is poised to take advantage of them.
- International Data Corporation predicts that
online spending in Western Europe will balloon from $5.6 billion
in 1998 to $430 billion in 2003, and in Japan the number is expected
to rise from $3.2 billion in 1999 to $63.4 billion in 2004.
- IDC projections indicate that by the year
2003, 67 percent of Internet users and 56 percent of all e-commerce
will be outside the United States.
- Forrester Research indicates that online
banking is more popular in Europe than in the U.S. and that Scandinavia
has nearly 50 percent per capita Internet usage, whereas the U.S.
has 38.5 percent.
- The European economy is at least 15 percent
larger than the U.S. economy, but the European Internet economy
is only one third the size of the U.S. Internet economy, according
to the IDC.
By all projections, the next five to ten years
will see extraordinary growth in world markets for goods and services
At the same time, most American eBusinesses have paid relatively
little attention to global markets. Most of the largest U.S. eBusinesses
have comparatively modest operations overseas, and some are paying
the price. Deft companies can take huge advantage of learning from
the hard lessons garnered by the pioneers of a given space and can
start local operations at a point in the life cycle that it took
the eBusiness veteran several years to reach. And they can do it
for much lower cost. A popular American web site had its idea replicated
by a British upstart, which now owns a significant portion of the
market in the U.K. and in mainland Europe. The American company
now finds itself struggling to establish itself in Europe and generate
loyalty and its brand identity, because it faces an uphill assault
on the local company that got there first.
Traditional business plans falter when your concept can be applied
almost overnight by competitors you never knew about or who did
not even exist when you launched. The Internet rewards companies
that are the first to arrive in a given market, and having a secure
brand in the U.S. does not guarantee an easy migration of it to
other countries and other continents if someone else has gotten
Expanding operations overseas is not simple, and it is not a problem
that will be overcome merely by throwing money at it. Cultural differences,
even among countries that superficially seem not dissimilar, can
derail growth plans if those differences are not understood. In
one country, a very relaxed work ethic may be standard, including
long lunches, extended summer vacations, and short work weeks, while
in another strict dress codes, long work hours and minimal vacations
may be more the norm. Even within countries you may find that work
cultures vary by region.
Corporate cultures are as different as national cultures, and with
the current shortage of qualified high-tech workers, a skilled employee
can leave your company and find a new job before the end of the
week. Effective employee retention programs are becoming a necessity
for eBusinesses, and the potential difficulties in generating loyalty
among employees are heightened when the employees live in another
country, maybe speak a different language, and come from distinctly
Recent proliferation of managed service providers (MSPs) is evidence
of the need and the demand for companies that can provide some,
if not all, of the IT infrastructure and resources-especially qualified
people-to eBusinesses that want or need to outsource this part of
their business. Using an MSP allows an organization to focus on
its core competencies, which can be extremely valuable when the
company is expanding, whether that expansion is domestic or international.
It frees up time and resources that can be devoted to ensuring the
success of the business plan, leaving the recruitment and hiring
of skilled technical staff to the service provider.
RULES OF THE GLOBAL PLAYGROUND
A company wanting to expand its operations overseas
faces all of the challenges of starting a domestic operation as
well as a host of added concerns. Being successful in eBusiness
demands availability, reliability, consistency, and trust in the
web site, and expanding an eBusiness to have a presence in another
country demands all of these plus an understanding and accommodation
of the differences inherent in that country's social, political,
and economic structures.
E-consumers across the globe share the same high expectations. They
expect a web site to function smoothly and consistently, in a reliable
manner, and they know that if they are not satisfied, online alternatives
abound and are one click away. The price that an eBusiness pays
in disloyal customers and lost revenue from poor site performance
and service outages is staggering, forcing companies to be obsessive
in their efforts to monitor and track the performance of their sites.
Instituting an overseas branch of a company-and having to deal with
the attendant exigencies of doing business in another culture-raises
the bar for customer satisfaction.
The problem is borne out in a study by Forrester Research that showed
that 46 percent of online orders from consumers outside the U.S.
suffered process failures and were left unfilled. This, despite
data from Forrester that indicate an average eBusiness gets 30 percent
of its traffic and 10 percent of its orders from users outside the
The same issues that a company faces when entering markets of a
different culture and trying to earn the trust and loyalty of customers
also affect the company's ability to hire and keep employees in
those countries. When you want to have a presence in another country,
there is a long list of considerations that compete for your attention.
- Differences in language and currency
- Regulations regarding state trade and taxes
- Legal and political situations quite unlike
those of the U.S.
- Widely varying national infrastructures for
speed, availability, and cost of access to technology and bandwidth
as well as supply chains and delivery channels
- National cultural differences that impact
the fundamental ways in which business gets done
Companies that are able to leverage their domestic
employees as part of overseas expansion have a sizeable advantage
over those companies that must go to those countries and attract
the people they need.
A premium is placed on customer loyalty even in an organization
with a strictly domestic eBusiness operation, and a hallmark of
successful online businesses will be sophisticated monitoring services
that can identify and anticipate web site problems and can take
corrective measures to ensure and maintain the quality of the customer
The task for any company wanting to expand its operation into new
markets and new cultures is to present appropriate, local content
for products and services that are valuable to potential customers
while maintaining a consistent brand identity. Companies face interesting
challenges when trying to establish a singular brand across many
cultural and national borders, appealing to consumers with different
values and needs.
Speed and time-to-market are crucial for eBusinesses, but those
that grow without careful planning and that lose sight of their
core business are not often around long. The case for effective,
comprehensive monitoring is compelling for purely domestic operations,
and when a company is ready to jump across borders and oceans to
open new centers, having a centralized system of site management
services offers a head start in the mad rush to capture market share.
Because of the new pressures that eBusinesses face compared to traditional
business-to become truly global players in their industries-smaller
and smaller companies, and companies that have only been running
domestically for a short time, are opening offices in other countries.
These companies, stretched much nearer the limits of their resources
than a giant of traditional business, need every helping hand they
can find for their expansions to succeed.
LEVERAGE EXISTING EMPLOYEES
Perhaps the biggest obstacle to opening offices
around the globe is finding and hiring the necessary personnel.
No matter where you plan to set up shop, you'll find the Internet
economy has put an enormous strain on the supply of skilled, high-tech
workers. Research by the Saratoga Institute show it takes an average
of 65 days to fill every open position, an eternity in Internet
time. Sales and marketing, customer service and support, and other
types of employees are typically in greater abundance than the very
technical, and some of the deepest-pocketed eBusinesses have had
grand failures trying to open offices abroad because of a dearth
of qualified technical staff.
Not only does hiring a separate technical staff for overseas operations
present significant challenges, but even if you are able to recruit
the necessary employees, providing an adequate level of consistency
and reliability to maintain your brand across very different markets
can be formidable with separate operations and monitoring centers.
Centralizing managed services-bringing the oversight and maintenance
of web site operations under a single umbrella-is a win-win situation.
- It allows you to forestall having to hire
those hard-to-find people, taking more time to do so and being
- It allows improved employee training to established
standards, and reduces the impact of employee turnover.
- It lets you accurately manage your global
business, avoiding the inconsistencies and slowed communications
of multiple centers.
Any organization that has multiple data centers,
even when they are all within the same national borders, can benefit
from centralized managed services that allow monitoring and management
of all of the data centers from a single source. Web-based solutions
give administrators full access to performance statistics as well
as the ability to make site-wide updates and changes to monitoring
applications from any computer with Internet access. Whether your
monitoring operations are entirely in-house, or they are outsourced
to a managed services provider, or a combination of the two, centralizing
them has several important advantages.
- Establish a single set of performance benchmarks
and apply them consistently across the organization
- Understand the strengths and weaknesses of
your site as a whole rather than individual parts, allowing faster
resolution of failures
- Add new offices and data centers without adding
a new operations center for each one, simplifying the process
of scaling the organization
When your company decides to move into markets
in other countries, opening local offices in those countries is
a necessity. Given the cultural, political, and legal differences,
even between the U.S. and a country such as Britain, a local presence
is vital. Cross-cultural sales and marketing efforts are extremely
difficult propositions; customer service and support across national
borders and time zones is complex and unwieldy; legal and accounting
practices vary enormously. These aspects of a business are effectively
impossible to administer from across a border or an ocean.
IT operations, however, and the applications that monitor and manage
them are excellent and willing candidates for centralization. The
technical functioning of an eBusiness can and must function in a
reliable, homogenous manner regardless of where on the globe the
data is being received and processed. In ways that the language
and content of a web site must be specific and appropriate for the
targeted market, the performance and reliability of the web site
must be uniform across markets to ensure the integrity of the brand.
As with purely domestic models, centralizing managed services for
eBusinesses with offices in multiple countries is a win-win proposition.
ACCESS COMPARATIVE DATA
When your organization has multiple data centers
in several countries, being able to generate reports that show apple-to-apple
data comparisons among the data centers is extremely valuable in
determining the overall health of your site. Separate monitoring
and reporting operations make useful comparisons of performance
data difficult to obtain, leaving IT staff scratching their heads,
not sure what exactly is happening in other offices. Having a single
source for managed services gives genuinely useful comparative data.
MITIGATE FALLOUT FROM EMPLOYEE TURNOVER
Employee turnover rates are quite high in eBusiness.
According to The Bureau of National Affairs, the nationwide employee
attrition rate for each of 1997 and 1998 reached an eight-year high
of 13.2 percent. Frequent disruptions or slowdowns can result from
losing veteran employees and having to train new ones and get them
thoroughly familiar with the application. When managed services
are centralized, and even more so when they are outsourced, employee
turnover can have a minimal or negligible impact on the site and
therefore on customer experience and satisfaction.
ADMINISTER ALL OFFICES AT ONE TIME
Trying to manage a set of multiple data centers
across single or multiple countries can be a nightmare if the data
centers have separate practices and applications for monitoring
and maintaining the site. If a new monitor needs to be added to
dozens of servers in five offices on two continents, how much time
and money could be saved by adding it to all the servers at one
time? How much do you trust the consistency of the servers if they
are maintained and monitored separately?
SAVE MONEY AND FOCUS ON BUSINESS
Adopting a centralized approach to monitoring
and managed services for your web site will save the costs of redundant
personnel in various locations doing effectively the same work,
but it will also save the costs of having to repair inconsistencies
and to overcome the inefficiencies of having multiple, disparate
systems. Organizations that have a single solution can focus on
their core business and spend their energy making it succeed.
The best idea and business plan can only succeed
with the right people, and finding talented, dedicated people with
the technical skills you need is a constant challenge in the booming
Internet economy. Finding the right people in another country-across
cultural and language differences-and finding them quickly can be
impossible. The demands placed on eBusinesses, however, place many
companies in this situation. To have an effective presence in foreign
markets requires that many companies open local offices abroad,
incurring the expense and the difficulty of going overseas and getting
a facility up and running, and having to do it all in a short time
frame. Ultimately the rewards justify the work. But when the clock
is ticking and customers are waiting, anything that can streamline
the process is invaluable. Having centralized managed services that
offer 24 x 7 coverage of critical systems and processes can give
those companies the needed head start.
Successful domestic eBusinesses have sophisticated monitoring applications
that ensure the quality of service they provide and guarantee a
high quality customer experience. When these companies expand to
multiple locations, they turn to managed service providers to provide
consistency and accuracy among their offices. Effective managed
services protect brand identity and foster customer loyalty, and
they can also be a significant benefit in expanding the organization
and opening new offices. By offering a centralized, scalable means
to monitor and make updates to web operations, managed services
preempt the need to duplicate technical staff overseas, eliminating
perhaps the tallest hurdle to entering new markets quickly and decisively.
The rules are the same. To succeed, in e-business just as in brick-and-mortar,
you need customers. And keeping customers is vastly cheaper than
getting new ones. High rates of customer retention-and the referrals
that accompany happy consumers-can mean the difference between success
and going back to the drawing board.
The challenges that e-businesses face, however, in earning and retaining
customers are different from those confronted by traditional business.
A shopper who drives to the bookstore is not likely to put down
the book she wants and drive to another location because of a line
at the checkout stand. Someone looking for the biggest selection
of CDs cannot go to twenty stores in six states in half an hour
to check their selection. And once you have received personal attention
from someone at a store, helping you find exactly what you need,
it isn't hard to decide where to go next time.
The options and flexibility of doing business online put much more
control in the hands of the consumer, placing a premium on the performance,
effectiveness, and reliability of an organization's web site. There
is no one to apologize to Internet customers when the service goes
down, or when an image is missing, or to explain what an error message
means. And alternatives are just a click away.
For online consumers, the user experience is the most significant
factor in customer retention. Customer experience comprises a range
of issues, including ease of use, dependability, speed, as well
as less quantifiable aspects of a web site. As the Internet matures
and evolves into a ubiquitous, if not preeminent, medium for business,
those companies best able to monitor their web sites and ensure
a positive, rewarding customer experience will have an unparalleled
advantage in the race to create and retain loyal customers.
The Shift to e-Business
The attraction of moving an established, traditional business to
the Internet-or of starting a new, pure-play Internet business-involves
a variety of factors.
- Global Reach A small organization no longer
has to be a local organization. Anyone with web access-in a living
room in Chicago or a log cabin in Alaska or a caf¨¦ in Bordeaux-can
spend their time, and their money, at any online business.
- Higher Profile A company can have a significant
web presence and profile, even with relatively modest depth and
breadth to its inventory. On the Internet, a small but very efficient
company can have the profile of a much larger, deep-pocketed competitor.
- 24 x 7 Availability E-businesses do not have to
close at the end of the day. Information and services can be available
any time, any day, allowing revenue to be earned without interruption.
- Targeted Focus Companies do not have to be all things
to all consumers. Through the Internet, individual customers can
get goods and services tailored to their needs.
- Cost Savings Significant savings from, among other
things, streamlining inventory and distribution channels are possible
in effective e-businesses.
There is no free lunch, though, and along with the
benefits of doing business in the new economy comes a new kind of
customer, one with different expectations and standards by which
companies are judged. Web sites must offer a consistently positive
customer experience to win over consumers. Inspiring loyalty is
the biggest challenge to e-businesses, and e-consumers are a tough
group to win.
New medium, new expectations
Internet consumers expect e-business to be faster and more extensive,
with more options and services, than brick-and-mortar alternatives.
They expect their experience online to be easy, as uncomplicated
as buying a newspaper or filling the car with gas. And if they encounter
any problems with the site, or have difficulty understanding how
it works, or are otherwise frustrated, they know they can go somewhere
else, to another web site, and be there in no time.
Speed is crucial for successful e-businesses. Consumers expect web
sites to be fast. A useful starting point is the eight-second rule
of thumb, which says that a significant number of users are unwilling
to wait longer than eight seconds for a page to load or an action
to be executed, and as technology improves and speeds increase,
the time users will wait before leaving the site is likely to decrease.
Many factors, from fundamental site architecture to network traffic
at certain times of the day, affect how fast a site will function.
Vital for success in any e-business is ongoing monitoring of the
performance of its site, identifying cycles of usage and ranges
of performance, making necessary modifications and upgrades to ensure
A white paper by Zona Research, Inc. attempts to quantify the economic
loss due to unacceptably slow web page download speeds, which is
one aspect of e-business customer churn. As of the April 1999 paper,
they estimate as much as $362 million is lost per month from customer
bailout, and this study only addresses bailout from impatience.
if it isn't broken¡
Key to the user's experience and level of comfort in e-business
is consistency. Whereas a brick-and-mortar business could not redesign
the store every month, e-businesses can, and some do. The relative
cost for changing the look and feel of an e-business is low, and
the appeal of adding new features is a strong temptation. There
is a fine line, however, between a "sticky" site, one
that attracts new customers and urges old ones to return, and a
site that changes so often and in such ways that customers must
re-learn the site. Instead of spending the extra time to deal with
the hassle, they will go to the competition, the one that is fundamentally
consistent in its presentation and functionality, and they will
no experience required
Many new e-business consumers are novices not only with online transactions
but with the Internet in general, and this complicates the issue
of glitches and raises the ante for web sites to function smoothly.
A computer neophyte is less likely to understand, or have patience
with, technical difficulties. A survey conducted by ICL, an e-business
services company, indicates relatively high levels of stress and
anxiety caused by computer problems for "typical" users.
- Thirty-eight percent found computer problems
more stressful than being stuck or delayed on public transportation.
- Sixty-eight percent found computer problems more
stressful than having to spend a weekend with a spouse's parents.
- Twelve percent found computer problems more stressful
than being left by a partner or spouse.
No web site runs perfectly 100 percent of the time,
but those that are close to 100 percent-web sites that minimize
outages and are able very quickly to detect and correct problems
when they do occur-have a significant advantage. Web sites that
frustrate users scare them away; web sites that offer pleasant,
easy experiences-consistently-keep their customers.
the (often) missing piece
A less tangible but equally vital aspect to customer loyalty in
e-business is trust. For consumers, participation in a typical Internet
business model requires divulging personal information for registration
purposes, often including sending credit card numbers to the site.
Increasingly, customers are cautious when sending such information
and wary about sites that they suspect may not adequately guard
the privacy of their demographic and financial information. Web
sites that have prolonged outages or frequent transaction failures
break the chain of trust with their consumers, pushing them to other
providers that instill stronger confidence, and therefore loyalty,
in their customers.
To be successful an e-business has to be (1) sophisticated and fast,
(2) easy and consistent, and (3) extremely reliable. Without these,
customers will click away, going to the sites that give consumers
the interaction with e-business that they expect and require.
Acquisition, Retention, and Referrals
Customer acquisition costs range wildly from one company to the
next, but everyone understands that once a company has acquired
customers, the key to maximizing revenue is keeping them.
- Research from the Harvard Business Review indicates
that it is six to ten times cheaper to keep a current customer
than to add a new one.
- A Xerox study showed that their totally satisfied
customers were six times more likely to make additional Xerox
purchases in the subsequent 18 months than the merely satisfied.
- According to the Harvard Business Review, companies
can increase profits by almost 100 percent if five percent more
of their customers were retained.
- Estimates show up to 90-95 percent of a brand's
profits come from loyal customers.
- A study by McKinsey & Co. calculates that a
10 percent increase in repeat customers translates to a 9.5 percent
increase in company value.
- Bain & Co./Mainspring research shows that online
grocers must keep customers for 18 months just to break even.
These are potentially frightening data to e-business,
which lives, or dies, in a medium where jumping from one web site
to another, changing brands and loyalties, is easier and faster
than ever. In the realm of e-business high rates of retention are
imperative for success and even survival.
Loyal customers are the best customers. People who are committed
to Buick and who will not buy a car from any other manufacturer
are the ideal consumers for Buick. They do not require further acquisition
expenses; they will buy Buick cars for their children and recommend
Buick to their friends; and they are statistically much more likely
to buy up, getting newer models loaded with optional equipment.
The recent boom in online loyalty reward programs demonstrates that
e-business understands the lifetime value of loyal customers and
is starting to shift resources to retention efforts. Many of these
incentives are financial, offering repeat buyers the opportunity
to earn points that can be redeemed for goods or services. Although
low prices and points programs are a strong draw initially for consumers,
e-consumers will, as in traditional business, grant their loyalties
ultimately to those businesses that offer them the best experience,
of which price is just one of several considerations. Low prices
are the carrot on the stick for acquisition, but user experience
and customer service are the tools of retention.
Of special interest to e-business are customers gained through referrals
from existing customers, as well as customers lost due to negative
reactions about a particular web site. According to a Bain &
Co./Mainspring survey, online apparel customers referred three people
after the initial purchase and seven people after ten purchases.
The global reach of the Internet becomes a handicap when a consumer
brings up a list of dozens of online retailers in a given industry.
E-business consumers are generally anxious for referrals from people
they trust to help guide them through the ever-growing sea of web
Standard barriers to following through on a referral are absent
in e-business. If a friend recommends a music store that is 45 minutes
away, you might decide not to go because of the distance. Even a
local store may not tempt you if you know that the parking there
is a nightmare or if the skies just dropped two feet of snow outside
your window. When a friend recommends a web site, you get cozy at
your desk and go there.
Consumer trust, discussed earlier, is a unique challenge facing
e-business. Going to a brick-and-mortar store lends a sense of confidence
and implicit trust that has to be earned in other ways in the context
of the Internet and of doing business through a computer screen.
A referral from a trusted friend or colleague is invaluable to establishing
a relationship between consumers and e-businesses.
Referrals also provide an exception to the high cost of acquiring
new customers. Every customer who is referred to a company is "free,"
or is at least a significant offset to the marketing and sales budgets
for customer acquisition. Though somewhat more difficult to measure,
word-of-mouth advertising is extremely important and can have remarkable
impact on a company's bottom line.
Poor Performance and Failure
E-businesses tread a thinner line than traditional businesses in
efforts to attract and keep consumers. Someone who drives to a store
will extend greater latitude to that shop-in terms of what the consumer
likes or dislikes about the store, its selection, its layout, its
service-than to a web site. Online consumers expect speed and reliability
and broad selection. When they do not get it, they leave. All it
takes to leave is typing a new web address or following a link.
For e-business, there is no dress rehearsal and often no second
Internet users are increasingly barraged by new sites, new services,
all competing for their eyes and their dollars. When consumers find
a site they like, they add a bookmark and stop hunting. And when
a site does not satisfy consumers, they don't return and they tell
their friends not to go.
At issue for consumers is the tension between knowing they have
more control with e-business and feeling overwhelmed by the choices,
and this tension can spell disaster for an e-business that does
not adequately mind its store. Often a single negative experience
for a consumer means he or she will not return to that site to give
that company another chance. If someone tries to buy a puzzle online
and the transaction fails, there are enough other online toy retailers
that this consumer need never return to the one that failed.
A study of online shopping by the Boston Consulting Group for a
twelve-month period reveals unsettling statistics for e-commerce
companies battling to attract and keep consumers.
- Consumers who are satisfied with their first-time
online purchase spent, on average, $500 in a dozen transactions;
dissatisfied first-time purchasers spent $140 in four transactions.
- Four out of five e-consumers experienced a failed
purchase; 28 percent of all online purchases failed.
- Twenty-three percent of online shoppers who experienced
a failure stopped shopping at that site; six percent also stopped
shopping at that company's brick-and-mortar store.
In e-business, there are no humans to counter a negative
experience. A failed transaction or a site crash is extremely difficult
to qualify or explain online, leaving the consumer alone at the
computer to decide if it makes more sense to try again or go elsewhere.
The message is clear for any company that wants to succeed in the
Internet economy: make sure the site works extremely well, and when
something goes wrong, which it inevitably will, find out about it
and fix it FAST. When a popular web service had a nearly-24-hour
outage, the company's CEO recognized that such an event could be
disastrous, even fatal, for the company, and she effectively lived
in the IT operations center during the crisis and the following
The new and rapidly expanding business of online securities trading
offers a vivid example of the best and the worst for e-businesses.
Online trading has offered unprecedented access for thousands of
users to securities markets. The reach of brokerage houses has extended
into demographic sectors that previously had neither the time for
nor the access to securities trading, while securities markets have
extended their hours, with talk of 24-hour trading on the horizon.
Thousands of consumers place millions of trades at relatively low
commission, filling the coffers of online trading firms.
Moving the apparatus for trading to the desktop, however, has resulted
in a wealth of information passing to the customer, with a corresponding
shift in power away from the brokerage company. With the Internet,
customers are more aware of stock prices, of transactions, and of
failures. When a glitch prevents online traders from selling stock
or canceling orders when the price falls, those traders lose money
and can very accurately identify how much they have lost.
Most of the leading Internet brokerages have suffered outages, ranging
from a few minutes to several hours, and the costs to these businesses
go far beyond the defection of angry customers. Online brokerages
are having to compensate customers for losses suffered when trades
could not be executed because of outages, and these payments are
stretching into the millions of dollars for each of several leading
online brokerages. Not only does an outage scare off otherwise potentially
loyal customers, it forces the brokerage to write checks to unhappy
customers on their way out the door.
A final significant problem facing e-businesses-at least those that
are publicly traded-is the response on Wall Street to reports of
prolonged service failures or customer dissatisfaction. In a market
where a company that reports earnings slightly below projections
can see the price of its stock tumble, word of a serious disruption
of service can be crushing as investors (many of them trading online)
flee and unload their stock in that company.
The price paid by e-business-in lost revenue from dissatisfied customers
as well as payments made for consumer losses-from inadequate performance
and significant site outages is potentially crippling, especially
for pure-play Internet companies that have no other customer base
or business medium to depend on. No web site is perfect, however,
and glitches are a reality in any online application. The key for
e-business is to establish performance benchmarks to attract and
keep customers and to minimize technical problems that make sites
unavailable or prevent them from meeting necessary standards. No
e-business will be successful without adequate and appropriate tools
to monitor performance of its web site and alert site operators
immediately about slowdowns and failures of service.
Ensuring the customer experience
Given the economic repercussions of a company's inability to build
and retain a base of satisfied, loyal customers, the need for effective
site-monitoring applications is paramount, and a site monitor must
be sophisticated enough to measure more than uptime. According to
Forrester Research, only 16 percent of site managers look beyond
uptime to specific network performance standards, and even fewer
monitor transaction success rates. It is these more complex data,
however-not simply whether a page is available-that give important
insight into the user experience and associated rates of retention
Service-level agreements (SLAs) that provide real value stipulate
more than simply what percent of time a site will be up, and monitoring
applications give internal operators and hosting facilities the
tools they need to measure other important parameters. Identifying
whether a slowdown is from an application failure or from a network
bottleneck is advantageous to IT personnel trying to fix the problem.
Additionally, effective use of monitoring software can identify
not only real-time glitches but design shortcomings as well. Thorough
reports from monitors might show, for example, a system weakness
that is responsible for transactional failures. The more quickly
and accurately a problem and its cause are identified, the faster
it can be fixed.
Monitoring software also gives companies the data they need to make
projections about future site usage and the improvements required
to accommodate increased activity. Successful e-businesses can see
their usage double in as little as three to six months. Understanding
growth and anticipating future needs can mean the difference between
recognizing the need and getting that extra server now, or waiting
until increased traffic crashes the system.
Features and services like these-what Forrester Research calls "Transaction
Management Services"-are provided through effective, sophisticated
monitoring software. It is this integrated web quality monitoring
that Forrester sees as the next step to managing the total quality
of web-based business. If, as they predict, e-commerce reaches global
hypergrowth by 2003, it will be those companies with effective monitoring
systems already in place that are able to survive and succeed.
In a remarkably short time, the Internet has grown from an quirky
playground into a vital, sophisticated medium for business, and
as the web evolves further, the threshold for conducting successful
business online will move increasingly higher. Online consumers
are flooding to the Internet, and they come with very high expectations
and a degree of control that they did not have with traditional
brick-and-mortar companies. Businesses, too, are rushing to join
the Internet revolution, and new, viable competitors are emerging
in all industries.
The enticement of doing business online must be tempered by the
understanding that when the dust settles, a significant percentage
of e-businesses will have failed. The ones that succeed will be
those that are able to deliver a satisfying and consistent customer
experience online, building brand loyalty and guaranteeing high
rates of customer retention.
Although customer experience includes intangible, non-quantifiable
aspects, it also includes a wide range of entirely measurable web
site elements. It is incumbent on any organization wanting to succeed
in e-business to define a broad spectrum of performance parameters,
establishing benchmarks for speed, reliability, availability, and
accuracy, and to monitor all of those parameters. Nothing works
perfectly all the time, and the spoils will go to those e-businesses
that constantly and efficiently monitor their web sites, immediately
identifying any glitches that do occur and fixing them promptly.