The following article was prepared by Mike Taylor, C.P.M. for distribution to NAPM affiliate newsletters. 
March 07, 2001

Caveat Emptor

Recent articles about dot com business closings are now mixed with articles about suppliers selling used computer and network equipment. Apparently their is a growing glut of high-end-used computer and network equipment on the market. It reminded me of a characteristic of the Internet and dot com world which might not be apparent to some buyers. "Virtual" really means "virtual" when talking about virtual private networks, web hosting, application services, and other Internet related applications. It can and might be anywhere.

The hardware and software tools needed to reliable connect a large business to the Internet are extensive. (it's what made CISCO such a hot stock for the last few years). Accordingly many high-tech companies never bother to buy their own, they just rent space on servers and equipment from a larger network service provider. As one vendor told me, "we just rent rack space from a big provider in Kansas City". Because of the way the Internet works, you can't tell where the equipment is (it could easily be in another country) and it really doesn't matter;..... until you start worrying about
continuity of service. If the equipment owner crashes, then all of the users renting space will have problems as well, even though individually they might be very healthy.

Think of it this way. Look at all of the businesses that are setting up shop inside of a larger store. Bank branches, insurance agencies, flower shops, and more, all rent space inside of the local Fred Meyer store. If Fred Meyer decides to close, then the independent flower shop we have come to depend on will go down with it, or at least be very disrupted while they find a new home.

Now consider that your e-commerce solution, application service provider, dot com company or virtual private network may all be running on space rented from a 3rd party service provider in some distant city or foreign country. Sure your immediate vendor may be healthy, but he may not be in
control of his own destiny.

Do you feel a draft?

Moral of the story, before becoming dependant on a vendor's service; talk about all of the rest of the supply chain that exists on the vendor's side of the fence. How are they providing the service to you and how will they assure that continuity?