Why Facebook’s S-1 barely scratches the surface of its infrastructure dependency

For the record, I am not a big Facebook fan. I think the user interface is ugly, the company’s data privacy shenanigans highly invasive and the ad revenue model sketchy. Who looks at the ads anyway?

But what do I know? I am simply a user by default, as most people are, because, for better or worse, Facebook is the social network to be on.

I do admire one thing about the company, though: Its maniacal focus on infrastructure is second to none. And anyone who thinks Facebook is overplaying its sensitivity to infrastructure doesn’t get it.

My colleagues Derrick Harris and Barb Darrow both wrote posts this week about Facebook’s dependency on infrastructure being crucial to its success — “Investors and users beware: It’s all about IT” and “For Facebook infrastructure concerns loom large,” respectively. Then, weirdly, a few stragglers in the blogosphere jumped on those posts and said Facebook is just going through the usual CYA process involved with filing an S-1 so that it doesn’t get sued if something goes wrong. One commenter in particular said the S-1 should be taken “with a grain of salt.”

I wholeheartedly disagree. In my opinion the S-1 barely scratches the surface of things that could go wrong with Facebook’s infrastructure.

Here is what it did say:

Our business is dependent on our ability to maintain and scale our technical infrastructure, and any significant disruption in our service could damage our reputation, result in a potential loss of users and engagement, and adversely affect our financial results.

And:

We plan to continue to significantly expand the size of our infrastructure, primarily through data centers that we design and own. The infrastructure expansion we are undertaking is complex, and unanticipated delays in the completion of these projects or availability of components may lead to increased project costs, operational inefficiencies, or interruptions in the delivery or degradation of the quality of our products.

In addition, there may be issues related to this infrastructure that are not identified during the testing phases of design and implementation, which may only become evident after we have started to fully utilize the underlying equipment, that could further degrade the user experience or increase our costs.

That is all fine and good, but once a company goes public, it’s a whole different ball game. There will be unseen pressures and expectations on Facebook that will undoubtedly affect its focus on infrastructure, and those pressures are out of its control.

With that in mind, here are some items left out of the S-1:

  • Important IT infrastructure investment will eventually be neglected as the pressure of being a public company forces Facebook to spend more time on meeting the demands of Wall Street than its engineering team.
  • Building in-house versus buying technology will flip in favor of buying from external vendors to meet a shorter time to innovate (Wall Street, again).
  • The promises made by external vendors will not meet the demands of Facebook’s infrastructure.
  • The technical complexity of the infrastructure will increase over time, resulting in ever-higher risks.
  • Projects will fall prey to scope creep and become “runaway.”
  • Wall Street (yup, again) will force a dependency on ROI as a project selection criterion, potentially slowing down Facebook’s power to innovate around its infrastructure.

Running IT infrastructure well is often about placing bets, not determining the “one right way” to build something. In order to make the right bets Facebook will need to take the time to make the right decisions for its infrastructure. This will be hard to do once the quarterly pressure from Wall Street bares down on the company. Keeping Wall Street at an arm’s length will be tough to do no matter how firm Facebook is about this intention.

Every company that goes public — and this is especially true of tech companies — starts out with this goal but slowly succumbs to the pressure. Would Google be so intent on diversifying its business if it didn’t have Wall Street on its back? The stakes are high for Facebook, as the leader in social networking, and everyone is out to knock the company down. My sense is that it will eventually fall prey to the same problems that every giant public company does and get sucked away from what it does best. In Facebook’s case, that’s IT infrastructure.

Question of the week

Will Facebook buckle under pressures from Wall Street and other outside forces?
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