Why Web Sites Fail: Cost

This article examines the reasons why Web initiatives frequently do not meet their intended goals. While there are as many reasons for failure as there are different kinds of Web sites, this series is based on experiences I have had over the past 5 years as a Web site builder and refers to Web sites that are used for client acquisition, customer relationship management and e-commerce. One reason: an often pernicious issue ' cost.

Overview

The simplest answer to why many Web sites fail to provide a return on investment is that they cost too much. In September of 1999, the median cost of a medium Web site was $170,500 and by May of 2001 the price had dropped to $120,00 according to b2bonline.com (www.btobonline.com/cgi-bin/article.pl?id=5973). While the decreasing cost is due in large part to the overall devaluation and maturing of the Internet sector, many sites still cost more than they should. Here are some reasons why:

Project Management

The more people who work on a project the more it will cost. During the Internet bubble, project teams were larger than they needed to be, and hourly rates grossly inflated. Even though Web development has matured there are still ways to further reduce cost, including:

• Hire the smallest team possible: The more hats each individual wears the less the project costs. When evaluating proposals from consulting companies, factor in the amount of internal time required to complete the project. Understanding the total cost includes cash paid out and internal billing time.
• Streamline the approval process: Since a Web site can involve different business units, consider creating micro-sites instead of one big site. This will reduce the need for approval from different stakeholders and limit the scope of a project. Also remember the basics: schedule and budget. If the project is delayed it will probably go over budget. Make sure that every aspect of the project is understood before commencing. If something is being done for the first time double the amount of estimated time it should take.
• Phase in features: Start with a definition phase that includes everyone's ideas. Gather as much information from customers, employees and partners as possible and collect the information in one document for future reference. Then determine what ideas have the most value and leave other ideas for future releases. Also after production has begun, limit participation to only those that will create the site and those that are part of the approval process. Also ensure that your development team understands how the site will need to scale. Not accounting for future features in the site's technical architecture, frequently adds unnecessary costs over the long term.

Scope

Many Web projects include unnecessary components and features that reduce ROI. Determining the value of a particular feature can be subjective but quantifying the cost doesn't have to be. Here are some guidelines that account for the true cost of a feature:

• How long will the feature take to develop, who will need to approve it and how many people will be required to complete it?
• How expensive will the feature be to maintain after it is launched?
• Will the feature require promotion? If so what kind and at what cost?

Understanding the total cost of ownership, including production, ongoing support and promotion is critical to assessing the value and consequently the project's scope. The key is to understand what the benefit to the audience is and what impact it will have on increasing revenues. Utilizing input from customers, employees and partners is critical to determining value and provides a sound foundation for determining the scope of a project.

Tools

There are a variety of different tools necessary to build a Web site. These include different kinds of technologies as well as the vendors contracted to create the site. While the right tools are dependant on each individual circumstance here are a few tips that can reduce cost.

Maintenance software: While incorporating a content management system [CMS] can make the site less expensive to maintain, it isn't always cost effective. A recent article by Internet.com based on a study from Jupiter Research, notes that the majority of companies that have bought CMS are less than satisfied with the overall ROI and performance of the system (see http://cyberatlas.internet.com/big_picture/applications/article/0,,1301_1718951,00.html). Often it is less expensive to train internal staff to update pages or use an application such as Macromedia Contribute than purchase a CMS (www.macromedia.com/software/contribute/).

Code: Buyers beware whenever code other than HTML, Javascript and even Flash is being written to operate a Web site. Code that adds functionality often marries the owner of the site to the vendor who created it. Site owners often do not realize this marriage has taken place and are surprised to learn that the divorce can be very expensive. Furthermore, purchasers often do not adequately understand the technology they are purchasing. A clear understanding of what one is buying will increase ROI.

Vendors: the Internet bubble attracted the usual shady characters that are drawn to easy profit. While many of the get-rich-quick opportunists have left the industry, many less than reputable vendors exist. Always check references and read the fine print of contracts whether it's buying a domain name thru a hosting company or purchasing customer relationship management software.

A good example of a start up that spent too much on developing their Web site is Boo.com. This online fashion retailer broke many rules that seem flagrant today, including:

Underestimating the cost of site development. Boo.com spent $75 million on site development and was out of business within a year after launching their online store. Shortly thereafter the technology assets were sold for $375,000.

Building a site that was largely unusable. The site not only worked poorly on most computers, due to plug-ins and excessive download times, but would often crash a visitor's computer outright.

Poor project management. The project team often lacked a plan, ensuring delayed launches and cost overruns.

Boo.com didn't fail because international retail e-commerce is inherently flawed. It failed because management didn't adequately understand what they were developing. This myopic business approach is a formula for failure in any market. Building a Web site that delivers ROI, requires knowledge of all aspects of development. In the end, it is the informed purchasers who most often receive the highest return on their investment.

This article examines the reasons why Web initiatives frequently do not meet their intended goals. While there are as many reasons for failure as there are different kinds of Web sites, this series is based on experiences I have had over the past 5 years as a Web site builder and refers to Web sites that are used for client acquisition, customer relationship management and e-commerce. One reason: an often pernicious issue ' cost.

Overview

The simplest answer to why many Web sites fail to provide a return on investment is that they cost too much. In September of 1999, the median cost of a medium Web site was $170,500 and by May of 2001 the price had dropped to $120,00 according to b2bonline.com (www.btobonline.com/cgi-bin/article.pl?id=5973). While the decreasing cost is due in large part to the overall devaluation and maturing of the Internet sector, many sites still cost more than they should. Here are some reasons why:

Project Management

The more people who work on a project the more it will cost. During the Internet bubble, project teams were larger than they needed to be, and hourly rates grossly inflated. Even though Web development has matured there are still ways to further reduce cost, including:

• Hire the smallest team possible: The more hats each individual wears the less the project costs. When evaluating proposals from consulting companies, factor in the amount of internal time required to complete the project. Understanding the total cost includes cash paid out and internal billing time.
• Streamline the approval process: Since a Web site can involve different business units, consider creating micro-sites instead of one big site. This will reduce the need for approval from different stakeholders and limit the scope of a project. Also remember the basics: schedule and budget. If the project is delayed it will probably go over budget. Make sure that every aspect of the project is understood before commencing. If something is being done for the first time double the amount of estimated time it should take.
• Phase in features: Start with a definition phase that includes everyone's ideas. Gather as much information from customers, employees and partners as possible and collect the information in one document for future reference. Then determine what ideas have the most value and leave other ideas for future releases. Also after production has begun, limit participation to only those that will create the site and those that are part of the approval process. Also ensure that your development team understands how the site will need to scale. Not accounting for future features in the site's technical architecture, frequently adds unnecessary costs over the long term.

Scope

Many Web projects include unnecessary components and features that reduce ROI. Determining the value of a particular feature can be subjective but quantifying the cost doesn't have to be. Here are some guidelines that account for the true cost of a feature:

• How long will the feature take to develop, who will need to approve it and how many people will be required to complete it?
• How expensive will the feature be to maintain after it is launched?
• Will the feature require promotion? If so what kind and at what cost?

Understanding the total cost of ownership, including production, ongoing support and promotion is critical to assessing the value and consequently the project's scope. The key is to understand what the benefit to the audience is and what impact it will have on increasing revenues. Utilizing input from customers, employees and partners is critical to determining value and provides a sound foundation for determining the scope of a project.

Tools

There are a variety of different tools necessary to build a Web site. These include different kinds of technologies as well as the vendors contracted to create the site. While the right tools are dependant on each individual circumstance here are a few tips that can reduce cost.

Maintenance software: While incorporating a content management system [CMS] can make the site less expensive to maintain, it isn't always cost effective. A recent article by Internet.com based on a study from Jupiter Research, notes that the majority of companies that have bought CMS are less than satisfied with the overall ROI and performance of the system (see http://cyberatlas.internet.com/big_picture/applications/article/0,,1301_1718951,00.html). Often it is less expensive to train internal staff to update pages or use an application such as Macromedia Contribute than purchase a CMS (www.macromedia.com/software/contribute/).

Code: Buyers beware whenever code other than HTML, Javascript and even Flash is being written to operate a Web site. Code that adds functionality often marries the owner of the site to the vendor who created it. Site owners often do not realize this marriage has taken place and are surprised to learn that the divorce can be very expensive. Furthermore, purchasers often do not adequately understand the technology they are purchasing. A clear understanding of what one is buying will increase ROI.

Vendors: the Internet bubble attracted the usual shady characters that are drawn to easy profit. While many of the get-rich-quick opportunists have left the industry, many less than reputable vendors exist. Always check references and read the fine print of contracts whether it's buying a domain name thru a hosting company or purchasing customer relationship management software.

A good example of a start up that spent too much on developing their Web site is Boo.com. This online fashion retailer broke many rules that seem flagrant today, including:

Underestimating the cost of site development. Boo.com spent $75 million on site development and was out of business within a year after launching their online store. Shortly thereafter the technology assets were sold for $375,000.

Building a site that was largely unusable. The site not only worked poorly on most computers, due to plug-ins and excessive download times, but would often crash a visitor's computer outright.

Poor project management. The project team often lacked a plan, ensuring delayed launches and cost overruns.

Boo.com didn't fail because international retail e-commerce is inherently flawed. It failed because management didn't adequately understand what they were developing. This myopic business approach is a formula for failure in any market. Building a Web site that delivers ROI, requires knowledge of all aspects of development. In the end, it is the informed purchasers who most often receive the highest return on their investment.