This is the version of Saved By The Burst (originally published November 20, 2006) that was included as part of the IASA's Dependency Identification and Management collection.

One of the more popular ideas from the dot-com days was to create a Virtual Currency Exchange. It's hard to say why. Perhaps their founders believed that merchants and consumers really needed yet another “layer of abstraction” in e-commerce. Perhaps they thought that merchants would sign up in droves when they heard about the opportunity to give away another percentage of each sale to another middleman. Whatever the reason, consumers avoided the dizzying medley of incompatible exchanges, leaving only a single VCE contender (PayPal) to remain after the dot-com bubble (and all of the “real” money behind it) dried up.

A Perfect Partner

Diez B. Roggisch's worked for a large travel agency that did a lot of third-party hotel reservations. It was a fairly simple process: the agency accepted their customer's credit card number; they then contacted the hotel and reserved a room with it; and after the customer's stay, the hotel billed the credit card and gave the travel agency a referral bonus.

At the time, small agencies did third-party reservations manually with phone calls, paperwork, and fax machines, while larger agencies (like Diez's) had their software dial directly into the hotel's reservation system. The process was tried, true, and just about as old as credit cards themselves. And therein lay the problem: it wasn’t new.

The company’s board of directors had been drooling over the dot-com pie and knew that the only way they could get a slice of that was by doing “something new” in the world of travel. Something online. Something e-. Maybe even something i-.

The Chief Technology Evangelist

To help the company transition into a dot-com, the board brought a new executive aboard. Though his official title was Chief Information Officer, he preferred being called the Chief Technology Evangelist. As he put it, he was always on top of technology. From mastering that Heathkit he got at eleven to hacking away in that new thing called “Java,” the CTE embraced the newest technology in all of his endeavors, and nothing was any newer than “virtual” currency in the dot-com era.

The Chief Technology Evangelist searched high and low for the best Virtual Currency Exchange in the market. He eventually settled on one that functioned like all the rest did at the time: when a customer was ready to make an online purchase, she would be transferred to the VCE website to complete the transaction. This final step involved giving real money (via credit card) to the exchange, receiving virtual money in return, and then explicitly giving that virtual money to the travel agency. Later the travel agency would then, in turn, take that virtual money and request that a check for real money be issued so they could pay the hotels. In theory, the idea sounded completely unnecessary and a rather obnoxious way to interrupt the customer's shopping experience. That was okay: this was exactly what any online travel agency would have needed.

Designing the Impossible

As Lead Software Architect, Diez was involved with the company’s dot-com initiative from its inception. Though he liked the Chief Technology Evangelist personally, he balked at his idea of using a Virtual Current Exchange. It was simply unnecessary, Diez argued, and didn’t fit into their business model at all. And then he crossed the line; he said it would be impossible to do.

The Chief Technology Evangelist didn’t like the “I”-word. It was like a cross between nails-on-a-chalkboard and a 6x6x6 Rubik’s cube. Words that start with lowercase “i"—iBank, iThermostat, iMusic, iEtcetera—those were good. But this I-word? Sacrilege. Everyone knew that with technology, all things were possible. All the more reason to push ahead.

The Chief Technology Officer implored Diez to go back to the drawing board and find a way to make it happen. No matter how hard he tried though, Diez just couldn’t see a way around a fundamental problem: hotels require a credit card to reserve a room, and virtual money and credit cards operate on two totally different planes of existence.

Diez reported back that there was simply no way they could use a Virtual Currency Exchange. He even suggested an alternative route: accept the credit card information directly from the customer then pass it to the hotels. It was simple and the same way their business was already operating off-line. But the CTE would have none of this; instead, he offered his own solution to the problem: reserve hotel rooms in their name with the travel agency’s own corporate credit card. Though Diez agreed this solution would “work,” his spirit sank once he realized the layers of complexity this would introduce. Building this system was going to be anything but easy.

The Rise of the Dependencies

The main reason that hotels are tied to credit cards is because of the highly profitable class of services called up-charges. An up-charge can be anything from that 75¢ local phone call to the $8 bottle of water consumed from the mini-fridge. Without a credit card on file, hotels would have a pretty difficult time collecting those extra few dollars after checkout, especially from those guests who deem the up-charges a bit too excessive. Which happens to be all of them. It would be almost impossible for a travel agency to collect excessive up-charges via a Virtual Currency Exchange days after the stay. Almost impossible.

The board was a bit wary of the Chief Technology Evangelist’s strategy; it just seemed too complicated. But the CTE’s argued that technology and collections agencies could overcome any complications and that this was the only way to vault them into the already-booming world of dot-com. He also pointed out that customers would be prepaying for their stay, thereby allowing the travel agency to collect interest before paying their own credit card bill, which could make up for any losses and perhaps even earn them a little extra profit. Plus, with their level of credit card volume, they would be able to negotiate a cash-back deal similar to those associated with consumer credit cards. That was all the board needed to hear: they gave the CTE the go-head and ponied-up enough financing to complete the system that, by then, had ballooned to an estimated 100,000-hour beast of a project.

The Fall of Dot-Com

Halfway through development, the dot-com bubble burst and eventually claimed as victim the Virtual Currency Exchange that the Chief Technology Evangelist had partnered with.

Although Diez designed the system so that it could interface with a different Virtual Currency Exchange, the entire workflow was dependent on the virtual money paradigm, which had now largely become bankrupt. There were talks about partnering with the one remaining VCE, but those talks went nowhere; it was painfully obvious that consumers were perfectly content with using real money for online transactions. That meant credit cards, not Virtual Current Exchanges.

In the end, the board decided to cut their losses and cancel the project. The system that cost then several million dollars to develop was completely scrapped; they didn’t even bother trying to find a buyer for its remains. The Chief Technology Evangelist resigned (at the board’s “recommendation”) and the cadre of human processors and customer service representatives brought on to handle the expected upsurge in business were all let go. The board’s last action on the matter was to order that their website be taken down; they were to have absolutely nothing to do with that whole internet nonsense.

Five years later, the company has finally recovered from their extensive losses. They have even lifted their embargo on the internet and put their modest, brochure of a website back up. And that's a good thing, too. They are just in time for Web 2.0.

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