Blowing through $100M isn’t easy. 3/21 Web Dev Weekly hed: Where are the guards at borders.com? dek: Blowing through $100M isn’t easy.
There have been many fatalities of late in the dot-com arena. The reasons for these fatalities are not new: bad ideas to begin with, poor implementation strategy, bad management, bad luck–the list goes on. Probably a pet store doesn’t need 500 employees; maybe the world is not ready for online furniture buying. But amid the fallout there have been some shockers.
This week I was listening to an NPR story on Borders Books Q1 earnings. It seems that while Borders Group as a whole made a pile of cash, they were taking a charge of $49 million against losses on the Web site. Apparently the online effort had already cost $100 million.
I want to work there.
For that kind of money, I would imagine that every employee gets a corner office in the Web site penthouse (don’t bother doing the math–we’re building a Web site for a rich client–it doesn’t matter), six-week vacations, huge salaries, and brand spanking new Sun UltraSPARC workstations for Web development work.
And then the server farms, oh boy. Co-located mirrored servers in at least seven U.S. cities, two in Europe, one in India, and two more in Asia–all Sun Starfire servers. Oh yes, all of them.
At this point we have exuberant employees and effusive servers and I have barely reached $20 million.
In short, what were the folks at borders.com doing? They already had a bookstore infrastructure. They had book databases; they had purchasing and shipping already worked out. Yet, they managed to lose a ton of money.
We’ll never really know how they burned through all that money, but the sensible among us know that a Web site for Borders Books should have been brought online for a much cheaper price tag. There are many in the Old Economy who know that they need to be involved in the New Economy but don’t know the real costs. A few consultants will lead them down the path of high-priced, high-tech solutions that may have nothing to do with the core business. In these situations it soon becomes obvious that there is going to be a large cash outlay before anyone sees a graphic on a Web page. I have spoken to people in this situation, and the main problem at this early stage, when about $2 million has walked out the door headed for Bermuda, is that no one has the courage to stop it. Rather, they believe that throwing more money at the problem will fix it. And it will–much, much later.
I wish I could say that we have seen the end of this, but we haven’t. This is the time when many Old Economy businesses will be moving to the Web, and many of them will have problems getting the right Web site advice for their business. If you are in this position, I leave you with this advice: If it seems too expensive, it is. If you are uncomfortable, call it off until you understand it. It’s your business, not the consultant’s–you will be the one to run it when they leave.
Garth Gillespie is architect and chief technologist for ComputerUser.com.