Yahoo: A Case Study in the Effects of Delayed Investment in Infrastructure

October 12, 2009

In my client reports, I have pointed out that Yahoo has been behind the eight ball because of its information technology decisions. Panama is an excellent case in point. But there are other examples such as recoding Delicious.com, the multiple search and retrieval systems, and the inability to deliver advertisers the type of user ad pinpointing the Mad Ave crowd has wanted for years.

I don’t think too much about Yahoo because it is not in the search and content processing game I play. The article “Yahoo Pays Its ‘Technical Debt’ with IT Overhaul” triggered my interest in the company and the thoughts captured in this short post. ZDNet’s point was that Yahoo had a “rat’s nest” of systems. The focus recently has been rationalization of the infrastructure. For me the key point in the write up was:

Pullara [a Yahoo executive] went into details about Hadoop, which he called a love story. Yahoo started building its own MapReduce platform, but decided to go open source.

When I read this paragraph, three points came to mind:

Yahoo is trying to follow Google. The notion of a Google legacy is directly relevant. The problem is that Yahoo is trying to tap into the Google legacy late in the game. I think it may be too late for Yahoo.
Yahoo, if the article is accurate, is now openly admitting that its numerous technical gurus had not taken steps to reduce the complexity and associated costs of the fragmented, disconnected chunks of its infrastructure.
The open source play may come back to bite Yahoo. The company’s ability to monetize strikes me as less effective because its new system has to stay one step ahead of those who can out do Yahoo with Yahoo’s own technology.

In short, Yahoo’s delay in tackling its information technology infrastructure problem has given Google plenty of time to build a big lead over Yahoo. Now the “new” Yahoo may be creating competitors who may find it easier to suck Yahoo’s blood than pursue Googzilla. The cost to Yahoo for its information technology blunders has been high and will become higher. Useful lesson for other firms in my opinion.

Stephen Arnold, October 12, 2009

Written by Stephen E. Arnold · Filed Under Business strategy, Financial, News, Technology, Yahoo

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Stephen E. Arnold monitors search, content processing, text mining and related topics from his high-tech nerve center in rural Kentucky. He tries to winnow the goose feathers from the giblets. He works with colleagues worldwide to make this Web log useful to those who want to go "beyond search". Contact him at sa [at] arnoldit.com. His Web site with additional information about search is arnoldit.com.