Marketing Expert's Corner
This article written in 2006
First there was hardware. Then software. The 80's brought us firmware. By 1985, Lotus and Microsoft were competing over vaporware -- software that wasn't really there yet. In the late 80's we saw the first shovelware, software bundles which rapidly turned into shelfware.
Then, around 1990 Microsoft took vaporware to a whole new level, inventing plasma-ware: this is software that a vendor announces with no intention whatsoever of ever delivering. Remember Microsoft's Cairo and Bob, or OSF's DCE, or IBM's AD/cycle and the San Francisco Project? Later, Microsoft would dream up Hailstorm web services that were fantastic in every sense of the word. This kind of baloney is what keeps the Gartner Group in business.
Well, this millennium has finally brought forth something new in the "ware" arena: hamster-ware. This is software that's a prop, a Hollywood movie set designed to satisfy the user, but that doesn't actually do the work. Behind the scenes are people and manual processes that deliver the goods... transactions are completed by "the hamsters."
You might think this Taber Report is an April Fool'sedition: nope, this is March. No kidding, there are times when a software interface is masking a manual process. Hamsterware is most often used in web interfaces, where the user interacts with a browser, but the software performing the commerce or customer support transaction runs on servers at a vendor company. Inside those servers are where the hamsters live.
In most situations, using manual processes to substitute for software automation is a disaster of reverse-scalability. For example, a notable dot-com disaster wasEveryCD.com, whose claim to fame was that they could get you any CD ever published. They were forced by Amazon.com competitive pressures to offer good prices, on top of massive selection. Problem was, their invoicing and order management system had so many bugs that they needed hamsters to keep the business running. I ordered from them 10 times, and every single order had hand-written corrections. EveryCD.com quickly burned all its capital feeding the hamsters.
But there were far more successful examples, in companies that thrive today. One of the major on-line mortgage brokers has a slick web UI, allowing you to submit your application with ease. The service claims to "get the best deal from several banks, with approved loans in just a few hours." In the early days of this business hamsters behind scenes were dialing phones and running fax machines. It took them years to automate the hamster tasks and really scale business.
Similar antics happened in early on-line stock trading services. Over the years, straight-through-processing software seamlessly replaced the hamsters.
Both Google and Yahoo still employ hamsters in their online ad services, but take very different tacks in how they expose this to customers. Google hides all the hamsterwerkes, and does everything it can to reinforce the impression that the customer is dealing with a giant robot. Google's ad approval process is nearly instant, but days later their hamsters will occasionally look into any ads that are behaving suspiciously. Yahoo goes the other direction, making it clear that all ads are reviewed by human editors...even when they aren't. Consequently, Yahoo's ad approval cycle is between 8 and 72 hours, but they market the advantages of the human touch.
Another area rife with hamsterwerkes is BPO -- business processes that ought to be fully automated, but do not have the characteristics that make for economical automation. These hamster operations are typically in India or other low-cost labor centers, and can work well with the right kind of supervisory and management software.
Several of the audio transcription services (that send you the text of your voicemail as an SMS message) use Filipino or Vietnamese hamsters to disambiguate audio that Nuance's algorithms can't understand.
A final area for hamsterwerkes is data cleansing and address validation, which is often sold as if all the work were being done by incredibly advanced software algorithms. While AI algorithms can do amazing things, there's too much variability and quirkiness in names, addresses and phone numbers. It's usually more cost effective to use a few brute-force heuristics for initial filtering and do the really advanced pattern recognition with eyeballs and the human brain.
When Hamsters Work
Hamsterware works when conventional software is not yet ready to do the trickier parts of the job. Classically, hamsterware is used in the early part of the product life cycle, when algorithms haven't been developed yet or the process is simply unknown. Hamsters are used to accelerate time to market, and to create very rapid feedback loops so that the software or service you end up building will do the right thing (as opposed to "what the engineers thought was needed"). In some cases, there's too much variation for algorithms or heuristicsever to be developed -- in this case, the cost and complexity of hamsters are baked into your business indefinitely. But in general, the use of hamsters should be temporary for any specific customer, even if they must be an ongoing part of your operation.
Hamsters work best when:
It would be more costly, time-consuming, or error-prone to develop an all-software approach.
The customer either doesn't care that humans are in the loop, or has been successfully convinced through marketing that the hamsters add value over automatic solutions (e.g., security guards monitoring computer screens to notice subtle things that a software monitor would miss).
The hamsters' work is presented over a web interface, so they can be doing their work from anywhere. It's even better if you use web services, so that individual elements of the hamster processing can be automated over time without causing user-perceptible change.
Response time is measured in minutes or hours, not seconds. It's even better when the customer doesn't care what timezone the work is being done in.
The work of the hamsters can be very tightly defined, executed, and managed. This may mean 35 pages of checklists, but there have to be really complete procedures for handling every exception.
The hamsters have a very well contained cost structure, one that scales well with volume.
The software surrounding the hamsters provides sensible default behaviors that mask changes in individual hamster-staff, or outright outages due to disasters or other problems.
In business school, we all learned that high return is correlated with high risk. But you have to manage the risk to get a return, and hamsterware can be a deadly strategy, particularly:
When an automatic solution would be a reasonable compromise for users, or when a competitor has an equivalent or superior offering that does not require hamsters. This can degenerate into a competitive nightmare.
When the hamsters are expensive and their costs rise faster than their perceived value. This burns cash.
When training and performance are spotty, or when the service levels of the hamsters are unstable and can't be brought to satisfactory levels. This leads to unhappy customers.
When the human element of the hamsters can't be hidden. This can lead to competitive and press embarrassment.
When no other competitor is using hamsters, and the market's expectation is that your value is provided entirely by software. If your marketing materials make it sound like "it's all software," this can lead to lawsuits.
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