March 28, 2001, 3:17 PM — Although it's no secret that avoiding Web downtime is a No. 1 priority for CTOs everywhere, many are still toiling to turn the costs associated with preventing downtime into bottom-line savings for the company.
To determine precisely how much a crippled Web site may or may not cost a company over time, a CTO must consider a variety of accounting methods. Producing accurate estimates may help justify important decisions and expenditures, including outsourcing and technology costs.
Identifying potential losses
First and foremost, when determining which metric will best quantify the consequences of online business loss, CTOs need to consider which aspects of their business are most vulnerable to lost seconds, minutes, and hours, says Sean Moriarity, vice president of technology at Pasadena, Calif.-based TicketMaster Online-Citysearch.
Depending on how active a company's site is throughout the day, examples of business losses following an outage -- in many cases irretrievable losses -- include missed sales opportunities from advertisers and customers, damaged credibility, and brand name degeneration, according to Donna Scott, an Austin, Tex.-based analyst at Gartner Group.
"For the content sites, it creates a bit more work, because [outages are] not as clear to the bottom line," says TicketMaster's Moriarity. "It's a little different when Yahoo has an outage vs. eBay, for the same reason that [it's different] if ABC News went off the air vs. the Home Shopping Network. One is eyeballs; the other is transactions."
Moriarity says a common-sense, standard ROI approach typically serves a CTO best for prioritizing sensitive areas that could be harmed by Web site downtime. TicketMaster Online-Citysearch has set the importance of its three discrete business units in this order: ticketing, then online personals, and finally the Cityguide business. In this company's case, ticketing is the most crucial environment given that Ticketmaster Online-Citysearch is paid per ticket sold online.
"For each ticket [we] don't sell -- and we sell a lot at peak -- that hits the bottom line," he says. "When you live with these business realities everyday, generally the answers are very obvious."
Looking for hidden costs
Lost revenue may be the most obvious consequence of Web site downtime, but there are many other factors to consider, says KBKids.com CTO Shawn Davison. Other unpredictable elements that should be considered in the event of an outage or site glitch include customer confidence, investor interest, and negative publicity.
"Just because you can get to the home page, doesn't mean you can buy [an item]," says Davison. "The longer you're down, the more difficult it will be to put a cost associated with downtime."
Based in Denver, KBKids.com is a wholly owned subsidiary of Kay Bee Toys that resulted from a joint venture of Brainplay.com and Kay Bee Toys in June 1999.
Davison says KBKids.com relies on third-party Internet performance monitoring firms, such as San Mateo, Calif.-based Keynote Systems, for a "good, non-biased perspective" on performance and availability to acutely measure daily activity on the Web site and to help pinpoint factors affected by potential iincrements of inactivity.
Your company will incur more costs if it issues redeemable credit to customers as compensation for unavailable or slowed Web site activity. That can be a tricky proposition, depending on the business type and customer expectations. KBKids.com does not institute a credit policy.
"It's too difficult to know who's being impacted at that moment when you're experiencing downtime to set that blanket policy," Davison explains.
Quantify outsources responsibility
Outsourcing Web mission-critical applications could be a solution for companies willing to let an outside party bear the responsibility of maintaining a site's uptime and performance levels. When factoring potential downtime cost into that relationship, however, be aware that there may be negative effects.
The solution "isn't how much does an outage cost you and how much do you outsource. That implies outsourcing delivers a higher level service than you can yourself," Moriarity says. "To turn over that responsibility to a group that doesn't have the depth of talent to their business is dangerous."
