Strategy & Operations » Leadership & Management » Enter the new corporate supertool

Legend has it that Alexander Graham Bell thought his new telephone invention would be really popular with people who wanted to listen to piped music. The idea that they would want to use it to talk to other people didn’t come until later. The Internet has a similar history. A communications system developed by the military, hijacked first by academics and then by teenage “techno geeks”, has now become Intranet, a super powerful corporate tool that will, If you believe the hype, revolutionise the business world.

It’s no misspelling. In the last three years the Internet has become a part of the common culture. If you don’t use it, you’re probably sick of hearing about it. But Intranets are different. They use the same software and have the same features as the Internet, such as e-mail, discussion groups and Web sites, but they are essentially private, operating on a company’s internal network.

Given the opportunity to exchange information at minimal cost with anyone, anywhere else in the world, many Internet users find they haven’t got much to discuss beyond Star Trek and the cast of Baywatch. But some of the world’s most powerful companies are now using the same software and systems, first devised by hobbyists and given away free, to gain strategic advantage over competitors, cut costs, and improve operational effectiveness.

According to US Internet analysis firm Zona Research, spending on Intranet software will surpass Internet spending by more than four to one and reach $7.8bn next year. Forrester Research predicts, more conservatively, that Intranet server sales will reach $1bn by the year 2000. A Forrester survey of 50 major US corporations found that 16% already have an Intranet and 50% planned to build one or were considering it.

Computer giants such as Sun Microsystems, Silicon Graphics, IBM, and Microsoft are falling over each other to repackage existing products and announce new product strategies targeted at the Intranet. Experts predict that it will revolutionise the way companies run the finance function.

“The harnessing of Internet technologies within a corporate environment is the most important development to emerge in the computer industry in the 1990s,” the Business Research Group said in a recent report. “The power of the Intranet will transparently deliver the immense information resources of an organisation to each individual’s desktop with minimal cost, time and effort.”

One of the main attractions of an Intranet is that the technology is cheap. Most companies introducing an Intranet will already have staff using networked desktop PCs sharing files across a high-powered server computer. Some will already be using groupware such as Lotus Notes and will be used to communicating electronically.

Some employees will be accessing the Internet already and may even have set up a “grass roots” localised Intranet, which means that they should have all the software they need. A study conducted last year by US Computer and funded by Sun claimed web technologies could reduce internal corporate networking costs by as much as $11m over four years for a large network.

Intranets also solve computability headaches. The server computers which form the cornerstones of an Intranet are based on open technology and common standards, allowing connections to all the different types of computer on a network. A PC user hooked up to an Intranet and using popular browser software such as Netscape Navigator or Microsoft’s Explorer can view and access a document no matter what kind of computer or software created it or where it is actually stored. In addition to regular documents, an Intranet can handle sound and video files, live video-conferencing, complex graphics and even animation, all accessed through the same browser interface.

The technology which drives an Intranet is also extremely intuitive and easy to use without much training. Each piece of information on an Intranet is joined to another by hypertext links. Employees use the links to skip from item to item, just by clicking on where they want to go. To make it easier to find the right information, the company can attach related documents or files to a particular “home page”. Alternatively, powerful search engines can trawl the entire Intranet, and even go out into the wider Internet, and bring back the right information.

Sensitive corporate information can be protected from the outside world by security software known as firewalls. When anyone on the public Internet tries to gain access to a company’s private Intranet, the software requests a password and other forms of identification.

Companies are using Intranets for a range of tasks such as storing and disseminating masses of data which would normally have to be printed for distribution to staff, circulating software upgrades, providing marketing and sales support, circulating training materials and timetables and providing employees with access to internal knowledge databases.

In a broader sense, the combination of Internet technology and traditional business applications creates a major opportunity for companies to increase internal productivity, improve service to customers, strengthen partnerships with customers and suppliers and reduce costs.

The new technologies are set to have a major impact on the role of the finance function inside companies. “Because you can install the application software on the company server and then the user can call up the application from their browser, you do not need to maintain the software on individual PCs. That is a huge management and cost advantage,” said Jonathan Butler, UK marketing manager of IT company Oracle. “It also means you can give people access to your accounting systems anywhere in the world.”

An Intranet can also reduce the administrative workload of the finance department, especially when the network is extended to include external suppliers and customers. Employees can browse through electronic catalogues of supplies, filling in a virtual shopping basket as they go. That could be converted into a requisition form which, after approval, gets sent as an electronic order straight to the supplier. In the other direction, suppliers can access the Intranet to check when they will get paid.

“That will cut out big areas of administration in the finance function.

If you can cut out that basic level where people phone up and ask ‘how much do we owe you?’, people can be moved up the chain to focus on more value added tasks,” Butler adds. “The Intranet technology allows that to happen. It is very hard to do it any other way because everyone needs to becomes part of the same virtual organisation.”

“Web applications offer a major step forward in re-engineering the traditional structure of the finance function”, he said. “It makes outsourcing of non-critical functions such as purchasing more viable. The bottom line for this radical advance in technology and operations is for finance to free itself from administration and to concentrate on improving services and the higher value activities of strategic planning, management and guidance for the business.”

Jyoti Banerjee, managing director of Tate Bramald Consulting, said Intranet technology should make it easier for finance directors and their staff to know what information is important to the business and ensure that it is produced and effectively distributed.

“They currently spend a lot of time creating information which they then have to distribute in labour intensive ways which are often quite wasteful because they do not know what people specifically need to make decisions,” he said. “A lot of redundant information is created and valuable information which is needed is not being created or distributed”.

In addition to the basic business processes, Intranets are being used to turn individual expertise and experience into a collective resource, accessible across the organisation. “Most people who are coming to us and asking about Intranets are saying how do we share the knowledge that everybody has,” said Neil Allcock, a senior manager with Arthur Andersen.

“It is quite hard to write down the tangible benefits of setting up an Intranet because a lot of it does come around to things like ‘how has sharing of knowledge increased my profit’. But I think most people believe that it does.”

According to a study conducted for Netscape last year by International Data Corporation, the benefits of Intranet technology are enormous. It looked at the experiences of four companies before and after they had set up Intranets and calculated that they all achieved a return on the investment of well over 1000% and recovered the costs of the project within six to twelve weeks.

“The results to date clearly show that for any company, not just those already contemplating an Intranet, the best strategy is to begin an Intranet deployment today,” said IDC. “The sooner an Intranet becomes a core component of the corporate technology infrastructure, the sooner the company can reap the benefits. The Intranet promises to fundamentally change the way workers communicate to a degree not experienced since the telephone.”

IDC found that the significant costs of installing an Intranet were related not to hardware or software but to personnel, mostly in the form of one-off application development costs and the on-going costs of maintaining the system and ensuring a steady flow of content.

The greatest savings came from increased productivity and were so impressive because the study covered major international companies: electronic design software company Cadence Design Systems; consultants Booz, Allen & Hamilton; visual computing and graphics company Silicon Graphics; and main-frame manufacturer and consultant Amdahl Corporation. “While an average increase in productivity of 10 minutes a day might not seem like much,” said IDC, “project this across 4,000 employees and a company can experience a measurable gain in productivity that can impact the income statement”.

That assumes, of course, that the extra 10 minutes aren’t spent debating the plausibility of Warp Drive with a colleague in Helsinki. A recent survey found that two thirds of chartered accountants working in business had access to the Internet but only a fifth used it for commercial purposes.

That survey, conducted by Tate Bramald, found 30% of accountants in business “still doubt that the Internet will be a powerful business medium even by the year 2001.”

Tate Bramald found that only a handful of companies had Intranets and concluded. “The message seems to be that widespread electronic commerce on the Internet is still more hype than substance.”

“There is a major technology which is sweeping across the world which seems to be bypassing the finance function in the UK.

“The UK finance director is not driven by technology. I believe he or she is driven by the business angle – unfortunately vendors have not been able to find a good business angle to help them understand the benefits they will get from using the technology,” says Banerjee.

“I do not think it is being sold anywhere very well from a business angle, it’s just that in America more people will buy it for technology reasons.

The ultimate yuppie kid manager wants the newest technology at the time – there are more of them in America than here.”

Allcock agrees that UK companies were not rushing to introduce Intranets: “UK-based global companies are very interested but I haven’t seen a lot of activity from strictly UK companies.

“The one thing that scares our clients is that they hear so many stories about the Internet being hacked. But an Intranet is more self contained so as long as you are careful about how you link out to the Internet and you make those links secure, security should not be an issue.

“In the States,” Allcock continues, “they probably started this process about a year or two years ago. We have an office in Atlanta which has gone from a handful of staff to 70 or 80 mostly doing just Intranet work – the cultural side as well as the technology side. It’s coming to the stage now in the UK where almost everybody has it on the agenda.”

Neil Baker is a freelance journalist.

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