A Gifted Outsourcing Relationship | Article

bottle in bucketIn 1997 Mike Lannon’s wife had an exciting new assignment, requiring her to travel from Boston to Atlanta. Like all good husbands, he wanted to have a beautiful bottle of wine delivered to her hotel room to convey his congratulations. He got on the phone and discovered to his horror there was no way he could send wine as a gift.

He was crushed. Then he said to himself, “Why can’t I get this done?”

The idea fermented. Lannon then founded Sendwine.com to help oenologically inclined consumers send bottles of their favorite first growths as gifts. In the beginning, the consumers ordered their varietals over the phone. The company’s sales sparkled during its first holiday season in 1998.

Based on its success, the founders decided to expand their product line. At the same time, they migrated to the Web. Gifts number in the top four categories for consumer purchases online, joining travel, computer-electronics and entertainment.

Today the company, now called Send.com, has 20 different product lines, ranging from cigars to cars. The company partners with local specialty retailers to fill its orders and deliver its gifts. Like a winemaker mixing a champagne cuvee, Send.com has merged e-commerce with old-fashioned retail.

The company’s customer is the discriminating, busy professional. These buyers “don’t want to hunt down the perfect gift at 15 retail stores,” says Ken Surdan, vice president, technology for the Boston-based company. “Our customers come to our site, make a purchase and leave,” he reports.

Outsourcing the Infrastructure

Most Send.com buyers purchase more than one gift with each order, making repeat business a foundation of its profitability.

Of course, a consumer’s interest sours like an opened bottle of wine if the Send.com site doesn’t operate properly. The dotcom joined hands with NaviSite, a Web hosting provider in nearby Andover, Massachusetts, to keep the site operational. NaviSite hosts all the hardware, software and networking for Send.com. “We outsourced our infrastructure because we felt they could do the job better than we could,” says Surdan.

Consumer sites that can’t afford to be down require back up, reliability and redundancy from their outsourcing providers. Surdan says the start-up didn’t want to spend its valuable capital on the network capacity required for the reliability it requires.

Speed to market was another reason Send.com chose to outsource its infrastructure. The company is now working on its third generation Web site, which it must have ready for the upcoming holiday season. These dates are immutable, giving Send.com no breathing room if it does not want to miss its lucrative selling season. The same dynamic occurred when Send.com decided to outsource. “We had to build a reliable infrastructure very quickly,” he reports.

Send.com selected NaviSite because its offices are just 45 minutes from its own. Surdan says he likes the idea that his outsourcing provider is located in his backyard. The two can meet face to face to pour over details both strategic and tactical. “We work together before there is a problem,” he says.

Before selecting NaviSite, Send.com visited the supplier’s data facility. “We wanted to be comfortable with its data center and management model,” the executive explains.

Staying in Sync with the Supplier

Of course, NaviSite’s “competitive pricing” and “good references” helped the decision-making process, too.

Surdan says the service level agreements (SLA) clearly cover issues that NaviSite can control. If a router isn’t working, NaviSite must fix it. But sometimes there’s a problem “in the clouds.” In that case, “no one owns the issue,” Surdan explains.

The two partners maintain “tight operational communication.” Surdan informs NaviSite of any policy changes at Send.com and NaviSite reciprocates. The buyer tries to “stay in sync” with the supplier. “We want to be sure we get the attention we need” as the data center grows with customers who rent more square footage than Send.com.

One hot topic is growth. Send.com shares its long-range growth plans so NaviSite will have the capacity available when its buyer needs it. The two parties plan for scalability together.

Surdan is a strong believer in outsourcing. “The smaller the business, the more you need outsourcing. It’s very difficult to justify doing everything yourself,” he says.

Lessons from the Outsourcing Primer:

  • The smaller the company, the greater the need for outsourcing.
  • Companies with immutable deadlines need to outsource because they can’t assemble the infrastructure they need in the time allotted.
  • Small start-up companies don’t have the capital to spend on infrastructure. It is more cost effective to outsource these capital intensive needs.
  • Constant communication between buyer and supplier help the outsourcing relationship. Some buyers select outsourcing providers located nearby so face-to-face meet

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