E*TRADE’s Rapid Growth Outpaces Its Technology, IDC Says

FRAMINGHAM, Mass., May 19, 1999 — E*TRADE's blazing growth rate is both a blessing and a curse. The company is adding customers and rolling out new services at an unprecedented rate, yet its technology appears ill-prepared to handle the mass increase in customers. According to International Data Corporation (IDC), E*TRADE is not alone. Its problems reflect the difficulties many e-commerce sites face.

"Too much growth can lead to serious growing pains," said Paul Johnson, senior research analyst with IDC's Internet and eCommerce Strategies program. "Just like the teenager who needs a new wardrobe every three months, Internet-based companies can quickly outgrow their technologies in a very short period of time. It's one of the perils of growing too fast and existing in Internet times."

When building e-commerce sites today, companies must piece together technology from a variety of software, hardware, and networking vendors. This piecemeal approach contributes to many of the problems. E-commerce sites don't have the opportunity to test the new technologies before deploying them. "Even during NASCAR races, drivers will pull into a pit stop to change the tires," Johnson said. "On the Web, going offline is a luxury most sites cannot afford."

The backbone of E*TRADE's online operations is its patent-pending Stateless Architecture. It enables more than 1 million visitors to use the site simultaneously and up to 150,000 customers to place orders at the same time. While E*TRADE was developing Stateless Architecture, it selected technologies that would enable it to support four times as many customers within the next four years.

"E*TRADE's technology strategy and investments while developing its Stateless Architecture were right on target. The company has done everything that a young Internet powerhouse is supposed to do. The most frightening result for other e-commerce firms is that these investments may still not guarantee success," Johnson said.

IDC believes that although the piecemeal approach creates challenges for e-commerce sites, it presents a plethora of opportunity for vendors who develop the technologies. "There is a tremendous opportunity for IT vendors to develop an end-to-end full e-commerce solution," Johnson said.

IDC's bulletin, E*TRADE: The Challenges of Managing a Complex E-Commerce Network (IDC #B18969), discusses the trials and tribulations that E*TRADE has experienced because of its rapid growth. The bulletin examines E*TRADE's growth and the software and hardware decisions the company made in developing its e-commerce site. E*TRADE's experience can be used as a case history on the industry. To order a copy of the bulletin, contact Sue Beauregard at 1-800-343-4952, ext. 4774 or at sbeauregard@idc.com.

About IDC

International Data Corporation is the information technology industry's most comprehensive resource on worldwide IT markets, trends, products, vendors, and geographies. IDC provides data, analysis, and advisory services to the world's leading IT suppliers as well as IS professionals in finance, insurance, entertainment, advertising, consumer goods, and publishing. IDC's research and opinions are based on the results of more than 300,000 end-user surveys, in-depth competitive analysis, broad technology coverage, and strategic analysis. IDC is committed to providing global research with local content through its 500 analysts in more than 40 countries worldwide. Additional information on IDC can be found on its Web site at http://www.idc.com.

IDC is a division of International Data Group, the world's leading IT media, research, and exposition company.

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