Reality check

Going online has created a difficult balancing act between the delivery of business services and the cost of an all singing, all dancing technology platform. Either way IT managers and CTOs are facing a daunting task of building a web infrastructure, which moves at Internet speed, and won't break the bank.
Reality check
By Greg Wilson
Thu 30 Nov 2000 04:00 AM

Going online has created a difficult balancing act between the delivery of business services and the cost of an all singing, all dancing technology platform. Either way IT managers and CTOs are facing a daunting task of building a web infrastructure, which moves at Internet speed, and won't break the bank.

Amazon.com, arguably the biggest name in e-retailing, is upgrading its core IT infrastructure as part of its bid to become the most customer centric company in the world. Over the last several months the company has gone about ripping out internally developed systems, built in the dark ages of the Internet, to make way for a collection of software, services and hardware to create a true corporate class IT infrastructure.

The agreements, with vendors such as HP, Oracle, Manugistics, E.piphany and SAS Institute, are an acknowledgement of the weakness of Amazon’s technology underpinnings — weaknesses that the company highlighted itself in it’s last 10-Q statement filed with the Security & Exchange Commission late in October. “We need to add additional software and hardware and upgrade our systems and network infrastructure to accommodate both increased traffic on our Web sites and increased sales volume and to fully integrate our systems,” said Amazon.com in its report.

“Without these systems, we may face additional systems interruptions, slower response times, diminished customer service, impaired quality and speed of order fulfilment, and delays in our financial reporting.”

With US-based analysts still voicing doubts over the company’s cash flow situation, and no sign of profitability on the horizon, Amazon is continuing to spend money faster than they make it. However, the technology investments signify an awareness that the company has to control costs, find efficient ways to ship merchandise, optimise logistics, understand its customers and analyse ways to deliver products to specific segments.

It’s unlikely many of the localised Web ventures, which have gone online within the last 12 months, are going to reach the magnitude of Amazon.com. But the challenge facing Amazon’s CEO Jeff Bezos in the everyday juggling act of the business needs for scalability, database performance, applications, integration, storage and high availability versus cost and customer satisfaction, illustrate the difficulties of going online. To steal the analogy of Sun Microsystems CTO & president, Ed Zander — it’s like trying to change the wheels on a moving sports car.

Further evidence of the difficulties of online hardships are apparent in Europe and the US, which are littered with the remains of failed online ventures — pure dot-com and otherwise — all providing testament to difficulties of managing the intricate dynamics of the business/technology balancing act. “I was discussing [the difficulties] with two of my friends, who are also CEOs of regional dot-com companies,” says a pensive Fahad Al Sharekh, CEO of recently launched Arabic portal site, Ajeeb.com. “We agreed that the only thing that was constant and you can always count on are ‘problems,’ besides, continuous bills.”

Further confusing matters are a number of local variables which can be thrown in, such as low PC penetration, unreliable connection, the generally high cost and low speed of Internet access, the logistical nightmares of order fulfilment, the high cost of online transactions in the region and the lack of local statistics all of which add an element of uncertainty to any long term planning.

With many of the region’s brick & mortar and fledging dot-com organisations at the start of the Internet learning curve, the question of how to build a successful Web-centric business in the region and a flexible IT infrastructure to go with it, is at the front of IT managers minds. Organisations have to deploy Web infrastructures, which take into account the frailties of the emerging Web economy, and develop a Web infrastructure, which is both economical, yet flexible to cope with the boom days ahead. “We have to be fluid and flexible in adapting to any problems that arise,” says Arabia.com’s CTO, Barig Siraj.

The early proliferation of portal sites has already generated scepticism about just how many of the initial wave online operations have conducted the prequisite level of planning. “Most of the Web sites that are coming up at the moment — correct me if I’m wrong — go out and get five to ten million dollars and they buy [brand name servers], the Oracle platform, license the content and then they think they have a portal. But there is no difference between this portal site and any other,” so where is the business value, says Klaus Lovgreen, managing director and co-founder of AME Info.

Other industry pundits share Lovgreen’s views. However, it’s not just a question of having an idea that will differentiate a site, it’s a case of having the right plan in place to enable a Web venture to adapt to just about any eventuality — be that either best or worse case scenarios.

Makook.com, one of the winners of Dubai Internet City’s incubator awards, has spent the last 12 months putting together an extensive business and technology roadmap, for what the company founders hope will become the regional e-Bay. The dot-com venture, which is in the ‘making it happen,’ stage is currently assessing technology options. “Always plan for the worst,” says an upbeat, Rishi Bhojwani, one of the co-founders of Makook.com. “When planning the technical architecture, we looked at everything — we looked at the best case, the worst case and everything in between. We did a very extensive study,” explains Bhojwani.

However, Bhojwani’s partner in Makook, Khalid Al Tyer adds that the technical aspects have to be tied very closely to the business aims of the site: i.e. making money. “The most important aspect for me is the viability of the business, can you survive… it’s about the value proposition — do you have that for your customers, your investors and at the end of the day yourself? Only then should [companies] start looking at the technical side. Then you can spend millions on applications or something a lot less, depending on your business needs.”

For all those companies that are still directionless when it comes to e-business, another of DIC’s incubator winners is positioning itself to offer a form of e-services. Vertscape plans to offer companies in the region, Europe and the States a platform to carry businesses all the way from their initial Internet connection to the use of B2B exchanges. But company CEO, Meghana Rao is already advocating that companies contemplating going online should outsource everything.

“One thing [companies] could do is go and buy everything, but they are unlikely to do that,” predicts Rao. “It costs too much and then you have to pay somebody to maintain it.”

Adds, another director of Vertscape, Chirag Patel, “but that doesn’t make sense, you want to concentrate on your business.”

But will the Internet and e-business generate an urge to embrace the previously taboo IT management concept? Yes, says Rao, “[Outsourcing] is a foreign concept… but you have to do it correctly. You need to know what to outsource and what to keep internally. When you do the maths, people go for the idea,” she adds.

Early evidence suggests that outsourcing is certainly in vogue amongst the first movers in the region. Some companies have outsourced mundane coding, but most have outsourced everything from hardware to software, and retained core competencies to manage the relationship and deliver business value.

Working with US-based hosting partners brings a bundle of benefits to emerging dot-com and traditional businesses — namely the rapid resolution of management issues, cost and quick deployment. Effectively for a few hundred dollars a month, they will remove the headache of availability, security, scalability, backup/recovery services and all the skills and software needed to manage it.

In a survey of the nominees for the recent Business.com/Visa awards, 64% of respondents hosted their sites on servers in the US and remotely managed their online services. Of those same respondents less than 8% had offices in the US, whereas 48% had headquartered their operation in the UAE.

Alongside the obvious benefits of teaming up with hosting partners, basing servers in the US enables local Web sites to deliver services to pan-Gulf Web surfers quicker. For example, as most Middle East countries don’t have Internet interconnectivity between them, requests to a Saudi hosted Web service from a Web surfer from Lebanon has to go on a long convoluted round trip back and forth between America.

With servers hosted in the States, organisations can reduce the number of satellite hops visitors have to do. “The Satellite hop back to the Middle East, is usually a bottleneck for the countries in the region,” says Siraj.

However, hosting servers in the US will not be enough for the larger dot-com organisations in the region. Many of the larger portal sites have hosted services with ISPs in different countries around the Gulf, to provide a mirror site residing in the US. This considerably speeds up the service says, Fahad Al Sharekh. Ajeeb already mirrors its Boston based service with Saudi ISP and sister company Alamiah.net, and is planning similar mirroring stations across the region.

Makook.com is already considering forming strategic partnerships with regional ISPs to host mirrored sites to their local market. “If for example, we hosted with [a company] in Singapore and we saw that for the Saudi market it was slow to access the site we would have two options,” says Bhojwani. “We can mirror our site into a Saudi [ISP] server or we could host the site again in the region.”

But hosting services in the US has its own downfalls. Ajeeb.com has been through several hosting partners in the US, which couldn’t meet the whole group’s growth expectations. “We have been using US Web hosting companies since 1995,” explains Fahad Al Sharekh, CEO of Ajeeb.com. “However, as our demands grew, we noticed that some Web hosting companies could not grow with us. It was a painful and expensive trial and error, until we finally settled on the current web hosting company, which we are very happy and comfortable with.”

Although increasingly there are several organisations in the region, positioning themselves as hosting partners, particularly Etisalat subsidiary, Comtrust, and DIC, the majority of dot-com organisations see very little reason currently to change their hosting arrangements.

“We have been approached by several organisations in Dubai and India and but we haven’t been tempted,” says chief technology officer of ExpatSite.com, Manish Bhatia. “Until the service level increases to something that we want and we see it as a benefit to move the site then we will.”

When selecting a hosting partner, the terms of the service level agreement (SLA) are critical . Makook.com is looking for hosting partners across the globe, searching for the one company that will deliver 100% uptime when it goes live. “We’re going to be a service orientated company and we’re looking for 100% uptime from our service partner,” says Bhojwani. “Comtrust has a great architecture and platform, but they are only providing something like 95% uptime, which isn’t good enough. We want auctions running seven days a week, 24 hours a day. An outage even for a few hours that could affect a lot of things,” he adds.

Farooq Hasan, marketing manager with Comtrust, admits the company isn’t offering five nines of availability in its SLAs. However, there are a lot of variables outside Comtrust’s sphere of influence, which the company cannot control, such as the Visa network. “There are many different components in putting together these solutions which affects our ability to guarantee uptime,” says Hasan. “However, we’re building our ability to offer [SLA].”

However, the bottom line appears to be price. A number of Web ventures claimed that they could get much better deals with companies in the States than they could locally. For example, AME Info hires its Linux based server in the States for $235 per month. Comtrust on the other hand, offers two rates, a premium — for 4600 Dhs per month —and a standard service for 2000 Dhs per month.

According to Hasan, Comtrust’s service is competitive and it gives an added peace of mind to the user. “Our services are offered by real people in the region, not based in the States. This gives customer peace of mind.”

Hosting issues aside, the majority of Web centric businesses have also outsourced their software development, to resolve both skills, cost and time to market issues.

Also companies have turned to open source software to produce their platform. Both AME Info and ExpatSite.com outsource the physical coding of their Web software to third parties, which enables both organisations to keep the number of in-house staff to a minimum. Both sites have used open source software such as Linux to avoid time consuming licensing issues with vendors, and enabling both sites to get online quicker and at less cost.

Depending on the nature of the online business, various different Web ventures are going to develop a software strategy to fit their particular needs. In the case of AME Info key to putting its Web infrastructure has been an interest in all things ‘Internet,’ and the ability to find free or cheap software online that offers specific functionality to the company’s Web services. Due to the targeted nature of its services, Lovgreen doesn’t foresee a day when it has to vastly increase the amount of money it’s putting into its Web infrastructure. “If you look at the software packages, just from the development point of view, I haven’t been able to find one piece of software for ‘x’ thousands of dollars, that I can’t find for $29.99 and modify yourself to do the same job,” says Lovgreen.

However, for those sites aiming for nothing short of portal dominance a substantial amount of investment has to be to made, both in the software platform and especially finding the skills to develop the Web software and services. Arabia.com has a team of 30 specialists to handle everything from the portal site’s maintenance to the delivery of new services. Key to the company’s Web portal is it’s Oracle backend and Vignette content management software. Although there are specialist skills in place the team also has a strong grounding in general Oracle skills.

However, with such a sizable team finding the relevant skills is difficult, “but not impossible,” says Siraj.

“A big problem we have is finding new recruits knowledgeable in our environment, since we are using leading edge software. We are expecting to train them upon recruitment. The biggest problem we have is finding staff which have the expertise in addition to the discipline to follow development methodologies in a team environment,” he adds.

However, it’s not just the techie skills that companies are going to need. For example, Makook is looking to recruit people with some form of startup experience, a skill which is rare in the Middle East. But when faced with recruiting from the US market, an element of an employees wage is likely to be equity in the company. “In the US the companies pay them in equity and salary. You commonly find people moving from high salary consulting firms to startups with lower salaries, but higher share options,” says Al Tyer. “It’s not the same here, the packages are all salary based. We’re trying to find a good fit for that for this region,” adds Al Tyer.

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