|
|
 THE STAT 26Percentage of wireless customers who use their cell phones to take picturesMore Vitals
| |
FEBRUARY 4, 2004
The Payoff from Cheaper Web Tech Thanks to the dot-com bust and continuous improvement, sites today are paying less for better hardware, software, workers, and services In 1999, Kamran Pourzanjani helped found comparison-shopping site Pricegrabber.com. Unlike a lot of e-commerce startups back then, Pricegrabber didn't use venture capital and had to struggle to get going. With the dot-com bubble nearing its zenith, Pourzanjani couldn't compete with VC-funded startups and established outfits offering new college grads fat signing bonuses as well as perks like on-site massage. He did manage to get his hires, but it was a long and arduous process. Times have changed -- just a bit. Pourzanjani, now Pricegrabber's president, says he can get entry-level software engineers for $37,000 a year vs. as much as $50,000 before the bubble burst. Perhaps more important, his company -- now with $50 million in revenues -- has been able to cut or hold down the cost of computers and software for Web work and hosting. DOWNWARD SPIRAL. Call it the perfect tailwind for the Internet. Demand for goods and services delivered over the Web has continued to grow rapidly even as the dot-com bust lowered the cost of Web technology. And it helps that the number of Web visitors keeps rising. "Our growth has enabled us to leverage the costs of our network and data communications downward," says Ajit Patel, CIO of clothing retailer Chico's FAS (CHS ). "The [improved] economies of scale have allowed us to reduce the cost per transaction." Indeed, Pourzanjani estimates that Pricegrabber pays 35% to 40% less than five years ago to run its Internet operations. Take bandwidth. The telecom meltdown has spawned a downward spiral in prices for delivering data over high-speed networks. Pourzanjani says he pays $300 per megabit of bandwidth today vs. $800 in 1999. It's not just a matter of raw transport costs, either. More and more phone companies are also providing services such as firewall protection and network-security monitoring dirt-cheap -- for a few hundred dollars per month. Those value-added services could be had in 1999 -- but at a higher rate and rarely from the same provider. Part of what's happening is explained by Moore's Law, which holds that prices of computing at a given level of performance roughly halve every 18 months. Beyond that, though, software innovations have made it possible to ramp up Internet or e-business capabilities for less. OPEN-SOURCE BOUNTY. Consider software used to create virtual versions of data centers -- facilities where big chunks of data for, say, banking transactions are stored -- which once required a roomful of computers. The modern version is created by software that can divvy up space on existing computers. "There's a ton of underutilized capacity" on most servers says Drew Ladner, CIO of the U.S. Treasury Dept. "With these [virtual data centers] you can use the same infrastructure for whatever business demands you have." Other software options include more mature open-source programs. Pricegrabber uses open-source stalwart MySQL as the primary database for its Internet site. MySQL lacks some features of big, powerful databases from IBM (IBM ) and Oracle (ORCL ), which sell for tens of thousands of dollars, plus hefty annual maintenance fees. But MySQL has improved greatly with the rise of Linux and other open-source software. MySQL was a bare-bones database five years ago, but today a venture-backed outfit supports its code development. That company, also called MySQL, as well as dozens of volunteer open-source programmers, have developed many more features to give the software a broader array of uses for larger and larger data sets. So MySQL has gained a reputation for being an exceptional database for powering Web sites. "We have stopped looking at other databases," says Pourzanjani. SPOTTY BARGAINS? At the customer end of the spectrum, digital storefronts such as eBay (EBAY ) and Yahoo! (YHOO ) Shops have made moving a small business online a nearly painless process financially. These storefronts don't get just basic services such as credit-card transaction capability. Also provided are advanced sales-measurement tools and pricing metrics that allow virtual shop owners to mind the store and keep an eye on competition with the click of a mouse. When Pricegrabber launched, such intricate offerings weren't available on what were, at the time, very crude online storefronts in hard-to-access malls or tucked away in the far corners of eBay. Still, not everyone feels that their Web activities have gotten cheaper and easier. Chico's Patel believes that the cost of running his company's Web site has fallen in some aspects but risen in others. For example, Chico's has built its Web platform atop customized software that requires a lot of hand-holding -- the cost of which doesn't seem to be falling. On average, however, the glass appears to be more than half-full for e-commerce merchants and businesses that are building out their Web sites. Just as PC purchasers pay nickels on the dollar vs. a decade ago, cheaper, faster, better has become the mantra for Net technology buyers.  By Alex Salkever, Technology Editor for BusinessWeek Online
BW MALL
SPONSORED LINKS
Buy a link now!Get BusinessWeek directly on your desktop with our RSS feeds.  Add BusinessWeek news to your Web site with our headline feed. Click to buy an e-print or reprint of a BusinessWeek or BusinessWeek Online story or video. To subscribe online to BusinessWeek magazine, please click here. Learn more, go to the BusinessWeekOnline home page  | | |
 Copyright 2004, by The McGraw-Hill Companies Inc. All rights reserved.Terms of Use | Privacy Notice |
Printer-Friendly Version