Why do we build businesses to crash systems

Many start-ups long for the spotlight to be turned on them by popular tech blogs such as blognation, mashable and techcrunch because of the traffic that will typically flow from mentions. Yet in most cases the initial spike in activity, trails off and the business which has geared up to handle the surge now finds itself with under-used capacity.

Sharp volatility in business activity is generally a bad thing, because it is wasteful. Capacity has to be created to handle peaks and left idle in slacker periods. Whilst the marginal cost of running such an environment may be low, the upfront investment demanded is usually disproportionate to the reward.

Yet some businesses create situations that cause the volatility eg sales of a scarce good are announced to be going on sale at a particular time; result in that the sales facilities are overwhelmed with demand.

Indeed, there was news today that China's Olympic ticketing systems crashed due to the sheer weight of demand for the second round of tickets, which were to be allocated on a first come first served basis.

Ticket sales for the Games were halted after demand proved to be far too much for the database to handle. The ticketing database could supposedly process 150,000 transactions an hour, but in just the first hour, the Games' site had 8 million hits, its hotline had 3.8 million calls, and 200,000 orders were taken from customers.

Given it was obvious there would be enormous demand for tickets, why did the organisers not employ a process that avoided there being a surge and thereby avoid the necessity to create an enormous infrastructure at great cost for a one-off surge? Of course, the PR people may contend that this is a great story showing how popular the games are, but the story reads as China Olympics screwed up by either not being prepared or stupid in not realising.

Some industries can only react to demand - eg power suppliers; but they typically introduce pricing mechanism to try to flatten the peaks. Likewise, transport infrastructure uses off-peak pricing to encourage travellers to avoid the peak periods. In either case, the factors that prompt demand are outside of their control.

Recognising this, some businesses actually exist to provide firms with flexible supply eg some data and hosting centres make available facilities that scale with you and you only pay for what you use eg XCalibre's Flexiscale hosting service.

But to inflict such volatility on yourself is plain daft, if you can avoid it.

posted by John Wilson @ 8:11 AM Permanent Link newsvine reddit


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