Relating DNS management to Opportunity Costs and Managerial Accounting in the 21st Century
As we transition into the 21st century with new technology, and the population of the world becomes increasingly reliant on the internet, it’s more important than ever for companies to ensure content is delivered correctly. Each internet user who accesses a website represents a dollar amount to the website owner. Whether that is a result of ad space that the website owner is leasing out, or the website sells merchandise directly from the site, it is critical that each visitor is able to access the site without interruption.
For ecommerce companies like Amazon.com, Shop.com, Buy.com, and others, you can imagine how critical it is for their websites to resolve properly. In months leading up to the holiday season especially, volume to these types of sites expands exponentially and the bulk of their annual revenue is generated.
Have you ever typed a domain name into an address bar and hit enter, only to find that a screen that reads something along the lines of “page cannot display”? Just about every internet user has at some point in time, and there are a few different reasons this could happen. One of the main reasons that this occurs is because the website’s DNS is not resolving.
First, it is important to understand what DNS is. People speak in words, while computers speak in numbers. As such, domain names were developed to help people navigate the internet. It is harder for people to remember to type a long number into an address bar than to just type “google.com” into the address bar. Behind the scenes, DNS servers need to match up the “google.com” that you type into the address bar to the corresponding IP address, represented by a long number, then connect you to that IP address so that you can access the site. Most companies maintain their own DNS and point the traffic generated by their domain names accordingly. But there are options when it comes to managing and pointing domain name traffic. Some companies use default servers provided by their domain name registrar, others use premium outsourced DNS servers.
Opportunity Costs related to DNS outages
Anytime a website does not resolve, revenue is not being generated and opportunities are lost. What is the cost to a company like Amazon.com, Shop.com, or Buy.com? $.50? $1? $10? $20? $100? Let’s say a company believes each visitor to their site is worth $10 of revenue; what happens if a DNS outage prevents 100,000 people from visiting the site? That represents an opportunity cost of $1,000,000, simply because the site is not resolving and the opportunity is not captured. Additionally, does the potential purchaser then have a negative impression of the site? Would they be less inclined to visit the site subsequently? This is difficult to measure, but definitely something for the website owner to consider.
The Solution
There is only one way to truly mitigate the risk of DNS outage and the ensuing opportunity costs that can occur; outsource your DNS to a premium third party provider that has the bandwidth and redundancy to guarantee uptime. Doing so absolutely prevents incurring the opportunity costs associated with your website not resolving, emails not being delivered, and transactions not occurring.
Added Benefit: Managerial accounting decisions based on DNS traffic tracking
Outsourcing DNS to a sophisticated provider also affords you the ability to better analyze site metrics and make managerial decisions to focus efforts based on this. For example, if a company launches a new brand, product, or enters a new market or country, DNS analytical tools allow the site owner to analyze traffic patterns for each site. How many visitors are coming to each site? Where are they coming from? This allows the company’s management to perform ROI analysis on each site and either discontinue operations or focus marketing efforts more.
Conclusion
To conclude, it is imperative for 21st century businesses to consider the potential opportunity costs around not managing web traffic carefully. Not only does mismanagement of DNS present an opportunity cost, but outsourcing DNS to a provider that can provider sophisticated analytics allows companies to make managerial accounting decisions about the return on investment in new web based properties.
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