Mitigating eBusiness Growing Pains

INTRODUCTION
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, is everywhere.

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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 online.

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 there first.

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 different backgrounds.

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.

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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 U.S.

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 experience.

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 more selective.
  
• 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.

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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.

SUMMARY

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.

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Introduction

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.

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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 wins

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 speed.

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 stay there.

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 sites.
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.

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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 chance.

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 weeks.
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 and referral.

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.

Summary

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.

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