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