Customer-facing applications, such as those used for e-commerce, online banking, news and social media, tend to be web-based and deliver value directly to customers by enabling users to efficiently order merchandise, buy music, perform banking transactions, get information and interact with friends. Poor application performance leads to lost revenue, reduced visitors and brand damage.

Enterprise applications are the lifeblood of your business. These workhorse applications have names like ERP, CRM, SCM, PLM and SFA and allow companies to manage critical processes. These processes include the ability to process orders, manage financial systems, control inventory, track patients and medical records, schedule workflows, manage logistics, design new products, manage sales organizations and support customers. With these applications, poor performance leads to lost business, decreased productivity and inferior customer service.

In fact, according to Aberdeen Group’s report entitled Application Performance Management: Getting IT on the C-Level’s Agenda, application performance issues could impact corporate revenues by up to nine percent.

Regardless of which class of applications is in question, applications don't always perform optimally — especially now that they're increasingly delivered via the cloud and accessed from a variety of devices and platforms. Worse yet, the majority of problems go undetected until end users complain. The result is a major hit to productivity, customer loyalty and the bottom line.

Simply put, improving application performance lowers costs and increases revenue. Where web applications are concerned, consider that conversion rates increase 74 percent when page load times decrease from eight to two seconds. Conversely, some research reveals that when a supply chain management application is down, these businesses lose $11,000 per minute. This article will explore the business impact of application performance and why the end-user experience is the ultimate measure of success.

Why Applications Often Perform Poorly

A primary reason applications often perform poorly has to do with the increased complexity of modern applications. We live in an increasingly multi-sourced world, where numerous elements converge for the first time in the form of the end-user experience.

Consider an online retail application comprising numerous functionalities derived from within the data center as well as third-party services beyond the firewall, like a shopping cart, preference engine and ad networks. Poor performance for any one of these services can degrade performance for an entire application; in fact, it's estimated that third-party services are responsible for the majority of the time it takes for a website or application to load.

Today, the average website connects to more than eight domains before ultimately being served to the end user. Serving a website or application means making sure all these pieces assemble in a way that yields the best possible service to the end user, whether internal or external to the company. Applications delivered to internal audiences have many of the same challenges as applications delivered to external audiences, including these complex delivery chains.

The cloud is another factor that often leads to poor application performance. The cloud is a shared resource, meaning that if your "neighbor" in the cloud experiences a spike in traffic, chances are your own application performance may be slowed. If you move a critical application to the cloud, you must understand how end users on the other side of the cloud – whether they are internal or external users – are experiencing the application, otherwise you risk losing your expected cost-savings.

Another factor causing poor application performance is the proliferation of browsers and device types, which leads to increased volatility at the internet edge. To combat this, you need to make sure your applications work well on the most prevalent browser and device types among your user base.

Finally, increased complexity in the data center resulting from multi-tiered architectures and virtualization leads to more potential points of failure.

While all of this is happening, it has never been more important for applications to operate at peak performance. Application users don't care who or what element in the delivery chain may be causing a performance malfunction, whether it's a third-party service, the cloud or the limitations of their device, for example. They just want the application to work, and their performance expectations are increasingly being shaped by industry leaders like Google and Facebook.

According to the Aberdeen Group’s report, “When Seconds Count,” two seconds or less is the threshold most end users are willing to wait for a website or application to load before growing frustrated and abandoning it. The cost of poor performance is huge, both in terms of lost revenues and employee productivity. Even a slight reduction in application performance can result in hundreds of thousands of dollars in lost productivity each quarter.

How Successful Companies Manage Their Applications

Today, many companies still stick to the “old” approach to application performance management (APM). In other words, they have a component-oriented mindset and examine the performance of individual parts of the data center through the stovepipes of network, server and database monitoring tools. The problem with this older approach is that it consists of point solutions delivering limited visibility; what's more, these approaches offer little correlation in terms of the business impact of performance problems, leaving IT with no means to prioritize problem resolution.

Almost all companies monitor how well their infrastructure is performing. But is that enough? After all, what's more important — knowing that a server is overloaded or knowing that an end user cannot process a transaction and the subsequent business impact of that issue?

What really matters is the end-user experience, for several reasons:

Application abandonment: The rate at which frustrated customers abandon applications translates directly into increased costs, lost revenue and a tarnished brand. Consider that the Aberdeen Group found a one-second delay in web page response time decreased conversions by seven percent.

Internal and external customer satisfaction: Businesses deploy internal applications to make workflows faster and easier. The result of poor application performance has exactly the opposite effect. There are times when applications can be performing so poorly that users resort to manual processes. Consider the large investments made in ERP systems. When users are forced to manually perform a job meant to be automated by the ERP system, the expense is costly and unjustified.

Lost business and higher costs: When consumers can't conduct business online with a company because of sluggish application response, they will either abandon the session and take their business elsewhere or turn to the help desk. In either case, the business loses money.

Today, successful companies are adopting a new generation of APM that is based on the end-user experience. It’s all about the end user and the view of their world of the application, not about infrastructure, and it's built into the entire application lifecycle, from development to testing to production. This approach allows organizations to build applications faster and resolve problems more quickly, and have more confidence in application performance once in production.

This new generation of APM is achieved through a unified, automated solution offering full visibility across the complete application delivery chain, from the end-user's browser, through the cloud all the way back to the multiple tiers of the data center. Combining these tools with deep-dive diagnostics that quickly pinpoint the source of problems is the key to faster mean time to repair.

How Organizations Can Ensure Optimal Application Performance

To ensure optimal application performance, organizations need to change from the old approach to APM to the new approach – from a component-oriented mindset to an end-user experience-oriented mindset. Fortunately, introducing end-user experience-centric processes does not have to be disruptive or expensive, nor does it need to entail a lot of training. An effective approach to APM requires best practices focused on continual improvement of the end-user experience. This includes many ingredients to be successful, including executive sponsorship, process integration throughout the performance lifecycle and resource allocation. Some organizations have found it helpful to build a Performance Center of Excellence comprising key players from the applications and operations teams within the IT organization.

In addition, organizations need tools that allow them to see and weed out every possible source of performance problems, from code-level issues that may impact application performance, to the interdependencies of networks, servers and other elements. This is true end-to-end transaction tracing and monitoring that begins with an understanding of the end-user perspective and spans the entire application delivery chain.

Conclusion: Monitor Application Performance Where It Counts

APM is quickly rising to the top of IT managers' priorities as a result of APM becoming a CIO-level initiative. APM continues to gain more attention at the executive level due to the relationship between application performance and business performance. This trend is substantiated by Gartner in their most recent Magic Quadrant for APM. Gartner notes that in 2011, $2 billion was spent on APM licenses, a 15 percent yearly increase. This is five times the 2.9 percent increase in 2011 overall worldwide IT spending.

Simply put, improving application performance lowers costs and increases revenue. Malfunctioning or slow applications can significantly impact an organization's ability to accomplish critical tasks. Understanding application performance from the end user's perspective is the foundation for identifying potential issues before they become application performance failures.

ABOUT Kristen Allmacher

Kristen Allmacher is a Solution Marketing Manager for Compuware's APM business. She has been working in the IT Service Management industry for more than ten years in the areas of R&D, strategic planning, product management, sales engineering and process improvements. In addition, her side hobby as a graphic designer has been utilized to design many software interfaces that are implemented and used today. Kristen is a Six Sigma Green Belt and is ITIL Foundation v3 certified. Her passion is in working with people, processes and technology.