NETTING PROFITS IN CYBERSPACE; SILICON VALLEY COMPANY BLAZES MONEY-MAKING PATH ON TO WEB IN BUSINESS-TO-BUSINESS DEALINGS.

Byline: Steve Lohr The New York Times

As the leading maker of the networking gear that keeps the Internet running, Cisco Systems Inc. is an Internet company through and through. Yet recently, Cisco has increased its bet on the Net even further.

The Silicon Valley company not only sells Internet equipment, but since August it has been selling its gear on the Internet. The results have been impressive - and could portend how businesses may finally turn the Internet into a money-making medium.

Sales from Cisco's site on the Internet's World Wide Web have reached nearly $5 million a day, or more than $1 billion a year. By July, the company expects its rate of on-line revenue to hit $2 billion a year, or nearly one-third of its total sales.

And the on-line order taking is just one Cisco operation that has moved onto the Internet. Its credit checking, production scheduling, basic technical support and routine customer-support inquiries are also handled on line. The benefits, Cisco says, are faster service, quicker production cycles and savings - measured in everything from labor costs to printing charges - of $535 million a year.

As a wired Silicon Valley company, of course, Cisco can move its business-to-business dealings onto the Internet sooner than many others. But Peter Solvik, Cisco's chief information officer, insists that before long companies in any field can do the same.

``As the Internet gets fully deployed, what we're doing is going to become commonplace,'' Solvik said. ``Business-to-business commerce is the killer application of the Internet.''

The promise of cyberspace has typically been portrayed by technology enthusiasts in visionary terms - a populist vision of on-line shopping, playing games, watching movies and doing homework. No facet of entertainment or education, culture or commerce, and certainly no American household will be untouched by the technological transformation led by the Internet, the visionaries say.

Someday, it may happen - as it did with the telephone, initially an instrument of business-to-business communications that only later became a household necessity. Yet to glimpse the biggest opportunity for using Internet technology soon, shift focus from the visions to the details inside the gray offices of corporate America, where workers handle chores like purchasing, accounting, customer service and employee benefits.

These tasks make up many of the nuts-and-bolts operations of the modern economy, consuming millions of hours of labor and hundreds of billions of dollars a year.

If such work can be made more efficient, the economic payoff could be considerable. No wonder companies have come to view Internet technology as a communications tool that can reduce the expense of many transactions, whether buying factory equipment from outside suppliers or processing expense accounts.

Various electronic systems for linking businesses have been available for years, but these usually required costly private data networks and tailor-made software. As such, these first-generation electronic communications were available only to an elite group of big companies and their chief suppliers.

But Internet technology - a set of public domain software standards and a global web of computer networks - is transforming these economics, making it cheaper and easier to set up in-house corporate networks and establish electronic ties with outsiders of all sizes.

As a result, the corporate dash to the Internet is not merely for big companies from Silicon Valley to Detroit. The race also includes thousands of small strivers, like Dakota Electric Supply Co. in Fargo, N.D., and Strong Tool Co. of Cleveland.

Today's corporate uses of Internet technology fall into two broad categories: electronic communication inside the company walls, which often replaces mountains of paperwork; and electronic communication outside the company walls, as a means of conducting business-to-business commerce or sharing information with suppliers and customers anywhere in the world.

``We're trying to reduce transaction costs, and the Internet is the way to do it,'' said Arne Breikjern, a marketing manager at Dakota Electric Supply, a 125-person concern that sells goods ranging from light switches to telephone cable. ``That's as true for us in North Dakota as it is in Silicon Valley.''

Dakota Electric Supply's Internet site on the World Wide Web went up in October on a business-to-business commerce service run by IBM. Dakota Electric Supply, a $40 million-a-year business, has invested $5,000 on the site so far. And, though the network has received e-mail nibbles from as far away as Australia, sales have been scarce.

Still, Breikjern is not discouraged by the slow start. ``I have absolutely no doubt that a large portion, perhaps even a majority, of our business will be done on the Internet someday,'' he said.

CAPTION(S):

Box

Box: From Seller...to Buyer