The future growth of the online marketplace is being jeopardised by
elementary errors.
Nectar's botched loyalty card launch has sorely tried the patience
of Sainsbury's and Barclaycard's customers. It also raises the
spectre of the true costs to businesses of system downtime, at a
time when many companies are starting to see their Web sites
becoming increasingly important as revenue generators.
The collapse of a heavily marketed Web site under an initial surge
in demand is far from remarkable. Nectar follows the 1901 census
site and online tax return debacles. Despite two years' planning,
and a marketing budget of £50m, not enough consideration was given
to contingency plans to keep the Web site, the prime customer
response vehicle for the Nectar loyalty card, up and running.
The costs of such a failure can be immense. In the publishing
sector alone, businesses have invested up to 30% of their brand
equity in their online presence, according to a recent report
published by the Newspaper Society and commissioned by Netscalibur.
The costs in terms of reputation are important for nascent online
offerings and established brands alike. And as Web sites start to
generate real revenue, downtime can hit the bottom line.
For the average mid-sized European company with an
e-commerce-enabled Web site, analyst firm Ovum estimates that
downtime can cost as much as £700 an hour. The indirect costs to
brand and reputation are much greater.
Companies cannot be expected to predict the unforeseen. But they
can be expected to have contingency plans in place so that their
Web sites can cope with unforeseen events and sudden surges in
demand.
Whether dealing with peaks of traffic from users trying to trace
relatives from the 1901 census, or logging on to sign up for new
services such as Nectar, companies must ensure that their Web
hosting is resilient enough to cope with fluctuations in demand.
And they must be prepared to be flexible in the manner in which
their supporting infrastructure is managed.
Businesses wanting to migrate from the dangers of a single point of
network failure are increasingly looking to work with virtual
network operators. They are choosing to work with suppliers that
are not heavily in debt from building costly Internet datacentres
that need to be filled. These companies are able to cherry-pick
network capacity or hosting rackspace from other service providers
according to demand, and add value by managing the Web-hosting
process and investing in customer service and technical support.
There is a growing acknowledgment that outsourcing Web hosting is
as much about security and peace of mind as it is about cost
cutting. Some 45% of companies outsource their hosting, and Ovum
predicts this will grow by 16% in the next 12 months. Managed Web
hosting providers can offer complex, scarce skillsets that can
often not be found in-house. They can also deliver service level
agreements. When a Web site is profitable, businesses will be
prepared to pay a small premium to keep it that way.
Companies are not only entrusting their online presence to their
Web hosts, but increasingly their reputation and their market edge.
Yet the credibility and growth of the online marketplace is being
jeopardised by elementary errors and lack of experience.
IT directors in businesses that have invested heavily online should
ask themselves what would happen if their company's Web site were
an overnight success. Would they sleep easy in the knowledge that
they could trust their Web host?
Simon Harrison is managing director at Web hosting supplier
Netscalibur UK