November 24, 2004

eBay's Spanish rebellion - have they hit the transactional Brick Wall?

Over on the Register they are reporting on a rebellion - they called it a strike - by eBay's users in Spain. Initially, this just seemed to be a bunch of grumbling spaniards, but the rebellion quickly spread to other countries. What seems striking to me is that Spaniards are not the grumbling kind, so things must be pretty bad out there.

It's fun reading! Reading between those lines, it all comes down to the business model goal of pandering to features. Back in the early days of building systems, the architect is faced with a very heavy choice: features or cost. It's generally an either/or, and for the most part features wins in the market place and features wins in the mind space.

A brief explanation of the problem space. When you build a feature that is transactional in intent, there are three standards it must meet, one after the other. Demonstrable, which means you can demo it to your boss, and to analysts, to the extent that they get what it is you are trying to say, and immediately order it into production. Or, if they are analysts, they immediately stock up on options, and then write their Buy recommendations.

Wisely, the developer ignores all that, and then moves the feature to the next standard, which is Usable. This means that under most users and most circumstances the feature actually works. People can bash and bang at it, and any series of 10 user tests makes everyone smile. At this point, even the developer can only smile with joy as his new feature goes into production.

But there is a further standard: Transactional. This means that the feature returns a complete result in every case. It doesn't mean that it always works - that's beyond the ken of mere mortals and most developers. Transactional means that the result that is returned is completely reliable, and can be used to instruct further actions. It is this focus on errors that allows us to get to the real prize for Transactional software: the ability to build other software systems on top.

A few examples: an email is transactional, as you don't ever receive half an email. A bank payment is not, as people are required to find out what happened. A web request can be transactional but a web session is not. That's why there are warnings on some sites "don't push this button twice when buying..."

Most features never make the Transactional standard. Most users don't know it even exists, until they discover their favourite feature doesn't have it. And even then, the mystery just deepens, because nobody says those magic words "oh, the software never made it to Transactional status."

Here's how the progression works:

Firstly, the feature comes into use and it has a lot of bugs. The users are happy enough that they ignore the errors. But then the euphoria dies and the tide of malcontent rises ... then there is a mad push to fix bugs and the easy ones get fixed. But then the bugs get more complex, and each failure involves more and more costs. But by now, also, there are some serious numbers of users involved, and serious numbers of support people, and serious numbers of revenue bux pouring in, and it is no longer clear to the company that there are remaining problems and remaining costs...

So the company institutionalises a system of high support costs, pushing errors back onto compliant users who can be convinced by some convenient reason, and the developers start moving onto other projects. These are all the wrong things to do, but as the user base keeps growing, insiders assume that they are doing something right, not wrong.

As one CEO infamously said, "People keep sending me money." Until they stopped, that is.

To get a full appreciation of what happens next, you have to read Senge's _The Fifth Discipline. His book uses feedback notions to describe how the machine seems to run so well, and then all of a sudden runs full speed into a brick wall. The reason is partly that which worked at user base X won't work at user base 2X, but it's more than that. It's all the factors above, and it can be summed up in one sentance: the failure to move from Usable to Transactional.

You can see this in many successful companies: Microsoft's current security woes are a result of this, they hit the brick wall about 2001, 2002 when the rising tide of virues overtook the falling star of Internet/PC growth. e-gold, a payment system, hit this very problem in 2000 when they went from 10 times annual growth to zilch in a quarter.

On the strength of one article (!) I'd hazard a guess that eBay and Paypal are now entering the phase of running fast and achieving no traction. I.e., the transactional Brick Wall. To be fair, it's a bit more than one article; Paypal have never ever had a transactional approach to their payment system, so it is really been a bit of a mystery to me as to why it has taken so long for their quite horrific hidden cost structure to bite.

Posted by iang at November 24, 2004 07:26 AM | TrackBack