Big Business On The Net? Not Yet

Cover Story: Information Technology Annual Report

For millions of PC owners, there is only one network that really matters, and that's the Internet. This vast collection of interconnected computers is the fastest-growing network around: More than 25 million people will have access to the Internet by the end of this year, a more than tenfold increase from 1990, says Boston-based market researcher Yankee Group. The primary driver of this explosion of Net surfers is not interest in the Internet's educational offerings or even its famous (and infamous) chat areas. Today, the Net is being overrun by the business world. Yankee estimates that more than 21,000 businesses--up from just over 1,000 in 1990--are connected to the Internet. Today, more than 75% of all new users are logging on via corporate connections.

Even in the midst of this rush, however, business executives and information systems managers keep asking the same question: What exactly will the Internet do for me? "Right now, companies are pretty much still kicking the tires of the Internet," says Stephen Franco, a Yankee Group consultant. "They're not completely comfortable with it." The companies that have gotten around to hooking up to the Net are using it primarily for communications (table). Just as an internal local-area network (LAN) allows workers to share project data within the office and schedule meetings via E-mail, the Internet is emerging as a convenient way to approximate the same interconnectivity with staffers around the world.

MAJOR SAVINGS. IBM, for example, has a project aimed at supplanting its 20-year-old worldwide PROFs network, a mainframe-based E-mail system, with the Internet. Code-named Apollo, it provides 140,000 employees with access to corporate news, colleagues' telephone numbers, and other internal data. This setup can also provide access to people outside the corporate network. "The biggest productivity gain is not in keystrokes or doing things faster," says John R. Patrick, IBM's vice-president for Internet applications, "but the ability to reach out and observe firsthand what customers want and competitors are doing."

For Sterling Software Inc., a $434 million Dallas software maker, the Internet has been a great way to keep its 3,600 employees in 75 worldwide offices in touch with headquarters and customers. The company uses the Net to distribute E-mail, keep its various sales offices connected with far-flung research and development labs, and to perform interactive demonstrations of software for clients.

Most important for Sterling, the Internet is a whole lot cheaper than other networks. Geno P. Tolari, president of the systems group, says that just to hook up all the mainframe computers in its offices with dedicated phone lines would have cost $500,000. And since the company grows by acquiring smaller software companies--each of which uses a different E-mail system--there would have been large recurring charges for licenses and upgrades of the various programs and costly high-speed phone lines. By using the Internet for day-to-day business functions, "we estimate we save about $10 million per year," says Tolari.

VANITY PLATES. For many companies, the best thing about the Net is that it's a first step on the road to "electronic commerce," which means carrying out all sorts of transactions between companies--and consumers--across the network. To do business on the Net, though, a company must first have an "office" customers can visit. That's where the World Wide Web (WWW) comes in. This graphics-based network within the vast Internet contains thousands of "home pages" created by everyone from neophytes coming in via commercial services, such as Prodigy, to huge multinationals.

At this point, though, a Web page may be little more than an electronic vanity plate on the Information Superhighway. The best Web sites offer key information about a company, such as where, how, and why to buy products. But the majority are little more than high-tech ads. "No one can say what they need to do there. Companies have to ask themselves: `Does it really help you to do your job better?"' says Daniel Shubert, director of the client/server technical-services group for Electronic Data Systems Corp.

While companies clearly see a future for electronic commerce across the Internet, few are prepared to take the plunge now. They're waiting until the Net can offer the same level of control and security that they can achieve with their internal LANs. "Right now, the large commercial customers that I deal with have great reservations about the Internet for any mission-critical applications," says John T. Losier, president of Bell Atlantic Corp.'s large business-services unit. "There are security issues, network-access issues, control issues."

ONE BIG LAN. The good news is that these questions are being addressed. Novell Inc. and AT&T, for example, will introduce a secure alternative to the Internet later this year called AT&T NetWare Connect Services. The network will be run by AT&T, with Novell supplying software technology it has developed to make the worldwide network seem like one big LAN. Using its 12 years of LAN-software experience, Novell says it can provide a central directory that offers information on all resources on the network and keeps track of a network user's access rights to those resources--just like an internal corporate LAN. Others are also working on providing so-called secure-transaction schemes.

Finally, before corporations can seriously consider doing business on the Net, they need to make sure consumer and business transactions will be secure. Analysts estimate that it will take 12 to 18 months for a widely accepted method of encrypting transaction messages to take root on the Internet. Until then, the Net is likely to remain an interesting byway on the road map of corporate networks.

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