Running The Tightest Ships On The Net

In the competitive market for operating Web sites, a military style makes a difference

Think of it as War Games meets Revenge of the Nerds. In the command center at Emeryville (Calif.)-based siteROCK Corp., eight staffers tap on keyboards and watch rows of overhead screens spew out data on the performance of their customers' Web sites. One twentysomething staffer suddenly yells to a colleague across the room, who races over to help troubleshoot. According to the "two-man rule," two heads reduce human error.

Dave Lilly, siteROCK's chief operating officer, beams as he watches through soundproof glass. The duo quickly runs through procedures laid out in 30 thick binders to help pinpoint the Web site's problem. The activity follows a tight script based heavily on the 53-year-old Lilly's six years in the military, part of them as chief engineer of a nuclear submarine. The goal: to engineer human reliability, using military processes to create teamwork, orderliness, and quick resolutions in an often chaotic business. "If processes can work on a nuclear submarine where you have 19-year-olds taking orders from 22-year-olds, they'll work anywhere," he says.

NORAD OF THE NET. Sound extreme? Perhaps, but siteROCK isn't alone. Advanced Internet Technologies Inc. (AIT), a Fayetteville (N.C.) company that hosts, or runs, Internet sites for other businesses, also is steeped in military methodology. It's headed by 13-year Army veteran Clarence E. Briggs III, a burly former infantry major who runs a rigorous two-week "boot camp" for new hires and sizes up the market the same way a general would a battlefield. Meanwhile, siteROCK's chief competitor, NOCpulse Inc. of Sunnyvale, Calif., dubs itself the NORAD of the Internet, for North American Defense Command Center. Although it has no military roots, NOCpulse requires staffers to follow scores of procedural documents on its internal Web site, dubbed The Bunker.

Indeed, a new counterculture is springing up at the gritty core of the Internet industry, among the companies that handle the meat-and-potatoes Web site operations and other mission-critical tasks for businesses. Gone are the pool tables, noontime massages, and touchy-feely managers that marked Silicon Valley's Internet boom of the late 1990s.

In is a breed of no-nonsense manager who believes discipline and precise execution can create a top-notch Web company with outstanding customer service and business smarts. "Internet-operations work requires rock-solid processes," says Corey Ferengul, senior program director with market researcher Meta Group. These companies "offer quite a contrast from the willy-nilly management of early service providers."

Promising--and delivering--reliability are key to survival. More than 65 companies have sprouted up in the past two years to run and manage sites for Internet startups and traditional companies alike. Analysts say that's far too many, even for a market that research firm IDC projects will grow to $177 billion by 2004, up from $116 billion in 1999. Moreover, the competition is getting tougher, with big players such as WorldCom Inc. entering the market through its September acquisition of Web hoster Digex Inc. To stay in the game, small startups are trying extreme management to convince corporate customers that their systems are foolproof.

But is a boot-camp approach the best way to go? It can be--to a point. "The military has a great track record of managing people on an ongoing basis," says M. Diane Burton, assistant professor of management at Massachusetts Institute of Technology's Sloan School of Management. "It can be a competitive advantage" if used correctly. A case where the strategy worked is Electronic Data Systems, the granddaddy of technology outsourcers. When Ross Perot founded the company nearly 38 years ago, he applied management methods taken from his eight years in the Navy. EDS today is a $19 billion company and still has a regimented image, even though Perot sold it 16 years ago. "Warfare is the most complex task in the world," says Perot's son, Ross Jr., who now runs his dad's second military-style consulting business, Perot Systems Corp., founded in 1988. "It makes sense that many of the same processes are applied in business."

The regimented atmosphere and military themes, however, may be tough to stomach for skilled workers used to a more free-spirited atmosphere. AIT, which recruits heavily from nearby Fort Bragg, may go too far for some. If newcomers are surprised to learn that many employees gather willingly every morning before work for PT, or personal training, they might be shocked to learn that the company has an arms room stocked with 12-gauge shotguns and 9-millimeter handguns. It's kept locked, but has been opened twice during hurricanes, when the company feared looters might storm headquarters. "We're paranoid about our customers' security," says CEO Briggs, claiming clients are comforted to know their sites are electronically and physically secure.

IRONCLAD. Striking a balance between hard-core military processes and an innovative environment will be key to the success of these startups. When customers demand new services or technology, siteROCK, AIT, and NOCpulse will have to bend to provide them. The CEOs of the companies insist their ways do not include any authoritarian business methods, and instead they encourage bottom-up feedback from employees. In fact, siteROCK, which counts Commerce One, Gap, and Microsoft among its customers, nixed a photo of employees posing with a salute. "We don't want to appear rigid," explains a company spokesman.

If used effectively, military-style leadership boasts valuable lessons for other Net execs. Most important, ironclad processes can make sure customers don't fall through the cracks. That has been a longtime gripe for Jean L. Scrocco, curator of the online Spiderwebart Gallery. In 1998, three years and two hosting providers into her Web efforts, Scrocco decided to bet heavily on the Net and shuttered her physical art store in Morris Plains, N.J. She quickly had doubts as Spiderwebart staggered through two more hosting providers, suffering weeklong lapses in service. "I was starting to look for another building in New York or Las Vegas," she says. In 1999, she hired AIT, and her woes lightened. "We still have some trying times, but we know we're going to get a fast response and professional treatment," says Scrocco.

Business strategy is another area where ex-military execs bring a colorful, determined flavor. AIT holds monthly war games called Intelligence Preparation of the Market, after the army's pre-engagement processes known as Intelligence Preparation of the Battlefield. Staffers probe competitors' businesses for weak points and target customers to lure away. So far, it's helping privately owned AIT stay ahead of the game, with 50% of its new customers coming from competitors. End result: AIT's revenues jumped 177%, to about $20 million, in 2000. Briggs says the company is profitable, but he would not disclose numbers. SiteROCK and NOCpulse, however, have no clear timetable for reaching profitability. NOCpulse recently went live with its first half-dozen customers, while siteROCK says its 60 customers pay an average of $128,000 a year.

The military's emphasis on training and milestones also carries over well to business. When siteROCK considers promoting an employee, the worker sits before superiors who pepper the candidate for 90 minutes with questions, such as: What would you do if Mae-West, one of two critical Internet hubs in the U.S., went down? "We want to come up with some of the most difficult situations and see how they react under pressure," says Lilly.

SiteROCK employees also are required to read through several three-inch-thick binders of standard operating procedures before they can work in the command center. As each shift turns over, the staff must shuffle through 90 minutes of paperwork before handing over the keys. "Not everyone would be able to do this job. You have to be able to follow directions and follow the processes," says Lori Perrine, a customer-support specialist at siteROCK.

Still, the real stress remains on these underdog managers, toiling to find equilibrium between discipline and innovation in this pressure-cooker market. There's still no manual for that.

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