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438 Part Three Key System Applications for the Digital Age

FIGURE 10.11 COMPONENTS OF A WEB SITE BUDGET

locates the server in a vendor’s physical facility. The vendor maintains the facil-
ity, communications lines, and the machinery. In the age of cloud computing, it
is much less expensive to host your Web site in virtualized computing facilities.
In this case, you do not purchase the server, but rent the capabilities of a cloud
computing center such as Rackspace (a popular hosting site). There is an
extraordinary range of prices for cloud hosting, ranging from $4.95 a month to
several hundred thousands of dollars per month depending on the size of the
Web site, bandwidth, storage, and support requirements. Very large providers
(such as IBM, HP, and Oracle) achieve large economies of scale by establish-
ing huge “server farms” located strategically around the country and the globe.
What this means is that the cost of pure hosting has fallen as fast as the fall in
server prices, dropping about 50 percent every year.

Web Site Budgets
Simple Web sites can be built and hosted with a first-year cost of $5,000 or less.
The Web sites of large firms with high levels of interactivity and linkage to
corporate systems cost several million dollars a year to create and operate. For
instance, Bluefly, which sells discounted women’s and men’s designer clothes
online, invested over $5.3 million in connection with the redevelopment of
its Web site. In 2011, Bluefly had online sales of $88 million, and is growing
revenues at 10 percent a year. Its e-commerce technology budget is over $8 mil-
lion a year, roughly 10 percent of its total revenues (Bluefly, Inc., 2011).
Figure 10.11 provides some idea of the relative size of various Web site cost
components. In general, the cost of hardware, software, and telecommunica-
tions for building and operating a Web site has fallen dramatically (by over 50
percent) since 2000, making it possible for very small entrepreneurs to create
fairly sophisticated sites. At the same time, the costs of system maintenance
and content creation have risen to make up more than half of typical Web site
budgets. Providing content and smooth 24/7 operations are both labor-intensive.

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