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A guide to navigating the Net.

Is the Internet really the "best thing since sliced bread"? Or is it all hype? Take a look at how three companies use the Internet to compete and how they cope with security headaches.

The Internet. Also known as the information superhighway, it stretches across 100 countries, offering a rapidly growing number of people around the globe access to oceans of information. From a business perspective, access equals opportunity. Indeed, the Internet seems poised to take its place beside the telephone as an indispensable tool in global business communication. But can you really profit from conducting commerce in cyberspace? The answer is "yes."

Once the province of computer scientists, academics, engineers and students, the Internet wasn't always business-friendly. But in the mid-1980s, commercial organizations and the public linked up with the Internet. Every year since 1988, the Internet has doubled in size. The watershed year was 1993, when the development of special software enabled the Internet to offer multimedia.

Today, the Internet has grown beyond an infrastructure capable of supporting boundless volumes of electronic mail. It's become a slick, sharp-edged marketing tool. Last year alone, thousands of companies turned to the Internet as a new way of bringing their goods and services to consumers. Publishers, for instance, can envision delivering their complete product cycle - from an author's first desktop proof to fulfillment of a consumer's request for a copy of the finished book - hot off an Internet-driven press.

The Internet will be used in some fashion as a productivity tool in virtually every industry imaginable. For example, engineers at Johnson Controls - an independent supplier of automobile seating for the American automobile industry - use the Internet to exchange designs and engineering data with automakers.

And in case you have any lingering doubts about the size of the potential consumer market, consider that from September 1994 to September 1995, 6.5 million, or 7 percent, of all American homes accessed the Internet, compared with 3 percent the previous year, a recent study found. An additional eight million homes plan to go online by September 1996.

The growth in the number and types of access providers attests to the value of this market. In addition to small access providers and start-ups, telecommunications monoliths like AT&T and MCI and even cable companies plan to offer Internet access in the near future.

WHO'S TAPPING IN?

In response to this explosive growth on the consumer side, more and more companies are discovering that the Internet is a powerful communications tool that provides access to a wealth of information that once may not have been unearthed easily. Companies can connect their local-area networks, communicate with customers and suppliers and tap into the vast consumer pool and information resources of the Internet.

The usefulness of the Internet depends on your perspective, whether that's a marketing, financial or consumer point of view. The benefits to be had aren't necessarily cost savings, although you can build a case that the Internet is a cost-effective communications alternative. The actual numbers depend on many implementation variables. But for most companies, the advantages, especially marketing opportunities and productivity strides, transcend cost. Here's a look at three companies that rely on the Internet to meet very different needs.

J.P. Morgan, a financial firm, has introduced an Internet-based RiskMetrics service. Investors log onto RiskMetrics every day to access a wealth of complex risk management data the bank assembles. They can measure financial risks on more than 300 financial instruments in 15 bond, currency and equity markets around the world. Correlative data show how movement in one market may affect other markets.

Every morning after 10 a.m., when the RiskMetrics data is updated, thousands of banks and corporations access the service over the Internet. RiskMetrics datasets (numerical calculations for financial instruments in different currencies) and technologies enable these users to assess their market risk and estimate the potential effects of changes in market conditions. They can concentrate on building risk management systems instead of spending time collecting hard-to-find data.

The network links J.P. Morgan financial professionals with the company's key audience, including clients, vendors and the academic community. The company is betting that this proximity, coupled with easier access to information and speedy communication, will give it an edge over other financial institutions.

R.R. Donnelley & Sons Co. - a Chicago-based printer - is finding many applications for the Internet connection it established last year. The company now uses fully digital computer-to-plate technology, which eliminates film, trims production time and enhances quality. By using this process, Scientific American magazine slashed production time on a 204-page anthology from weeks to days and increased printing efficiency. As R.R. Donnelley's global digital network expands, magazines like Scientific American will transmit page layouts and digital data, including advertising, for all editions worldwide, extending deadlines and enhancing flexibility.

When the Trane Co., a commercial heating, ventilation and air conditioning company, embarked on a massive re-engineering effort, executives turned to the Internet to help the company retool. By building a new computing infrastructure - an "internetwork" - the company now does business more effectively, rapidly and with greater agility. Trane wanted to drastically simplify its processes, make quantum leaps in customer service and double revenues. But its mainframe-based computer systems weren't equipped to make those leaps, and private-line solutions lacked flexibility or proved too costly and labor-intensive. By adopting a virtual private data network, Trane was able to link 120 sales offices, warehouses and corporate offices, and it plans to further expand the network.

Traffic is kept secure by carving out a virtual private data network with addressing, encryption and authentication features. The new network allows Trane employees to communicate through electronic mail and gives them access to parts, product and pricing databases. It enables them to deliver price quotes to customers in hours instead of days, identify parts in seconds and configure jobs in real time.

CONNECTING THE DOTS

If these three case studies have won you over, you're probably wondering how to get on board. Basic dial-up service is one way you can connect. This option, however, doesn't provide the bandwidth, reliability or the level of access that a dedicated attachment of 56 KBPS, T1 or T3 can ensure. Otherwise known as the "pipeline," these attachments represent the sizes of circuits available to provide access. Bigger bandwidth means faster access and greater availability.

Selecting a commercial provider with dedicated capacity can be an efficient and cost-effective way to access the Internet. Using a dial-up mode over the public network can be frustrating, because access is seldom immediate. Some Internet access providers specialize in Internet implementation and operation, such as enabling and outsourcing services and security solutions. Depending on your objectives and your budget, these extras may make using the Internet simpler, more secure and more productive.

Security is perhaps the major concern for companies using the Internet to communicate with customers, employees or other key audiences. In a poll of chief information officers in companies using the Internet, 46 percent of the respondents indicate security breeches are their chief concern when it comes to doing business over the Internet. And their fear is often justified. For instance, without a firewall in place, the data transmitted over the network is vulnerable to piracy and vandalism. In addition to a firewall, you can also deploy a security product that prevents outsiders from accessing data.

In the same CIO survey, one-third of the respondents said they're concerned about viruses transmitted over the Internet. Infections can destroy databases or disable information systems. Virus detection software can maintain the health of a network and the information systems installed on it, and the firewall that protects against theft can also protect against virus attacks.

Employee misuse is another potential problem. Visions of employees "surfing the net" on company time dance in the heads of some executives. But usually the employees who use the network as a legitimate information-gathering tool and as a streamlined way of communicating far outnumber those who misuse the Internet.

GET A GRIP ON YOUR GOALS

Finally, the age-old question - how much will it cost? - is a difficult one to answer, which inhibits enthusiasm among the ranks of some financial officers. The cost of access depends largely on the implementation. The cost of installing a dedicated T3 circuit, for instance, is significantly higher than the cost of simple dial-up access. On the other hand, a less expensive, dial-up link may actually be more expensive when you take into account downtime, such as time spent waiting for file transfers. The bottom line? You need to have a good handle on what you want to achieve through Internet access, because otherwise it's impossible to project costs and, therefore, to assess the best options.

Some companies are carving their own secure virtual private data networks out of the giant, high-speed backbones of Internet access providers. In August 1994, for instance, the Big Three automakers and their suppliers announced plans to standardize on TCP/IP (the protocol for the Internet) for intercompany communications. This move allows the automakers to start the long drive away from proprietary protocols, and to take advantage of the conductivity and cost-effectiveness of internet working.

That's just one route. As companies blaze a trail through the Internet, they'll undoubtedly devise or encourage solutions to some of the obstacles and gray areas involved in electronic commerce. Can you imagine doing business without the telephone? In the not-too-distant future, it may be just as impossible to conduct business without the Internet.

RELATED ARTICLE: THE ONLINE RECEPTION LOBBY

Are you setting up a Web site on the Internet? Join the club: More than 2,000 companies, large and small, climb on board the Internet each month, says Karsten Blue, president of CERFnet in San Diego. The market is huge: More than 40 million Internet users are already plugged in, and the universe is growing at the rate of more than 200,000 users every month, he reports.

Surprisingly, small finns are doing more business on the Internet than corporate giants. According to Bob O'Keefe, author of Interesting Business Sites on the Web, "Selling through the Web will be a major benefit for small to medium-sized firms. Larger companies already have a presence in traditional marketplaces, so they'll primarily use the Web for customer service/customer support and internal information distribution."

To illustrate the differences in large-company and small-company objectives, Blue points to Sun Microsystems, which wanted to quantify its Internet and Web usage. The company mainly uses the Internet to allow individuals to obtain product literature and software updates and to answer frequently asked questions. "In a single month the finn saved nearly $950,000 by not having to mail out more than 5,000 literature packages and nearly 7,500 software modules," says Blue. "By allowing customers to access the customer-support help desk themselves and download solutions, they saved an additional $250,000."

By contrast, small firms are more likely to use the Internet to level the playing field competitively, he explains. "Hot Hot Hot, a specialty shop in Pasadena, Calif., that deals in exotic hot sauce, sold more than $60,000 worth of sauce over the Web last year nearly a quarter of their total business." Adds O'Keefe, "The Internet and the Web let smaller companies provide the services of a larger firm at a relatively fixed cost."

Of course, you probably won't want to launch a full-fledged marketing campaign on the Internet for that new product just yet. "Even the pioneer in electronic selling, 1-800-Flowers, doesn't see the Web as a big revenue producer for another two years," warns Blue. But most companies don't expect many direct sales anyway. The real value is in encouraging people to visit the site, take information and request a sales representative to contact them, or to get them to visit a store, he explains.

Whatever your objectives, start by setting up a Web home page, "an electronic 'reception lobby' where people can come in and browse through the company, look over its products and services and determine if it's something they want or need," Blue says. "The cost of buying your own Web server, software and high-speed data link is usually $30,000 to $60,000 or more," he estimates, "and that doesn't include the security devices you'll want to add to keep computer hackers out and to protect your corporate data. You'll also have to add the cost of the services of an in-house Unix guru to nursemaid the software used to access the Net."

Once you've launched your Web site, don't just sit back and wait for business to roll in. Study how many Internet users visit your home page on a weekly and monthly basis and then analyze why they're going to your home page and what they're looking at, advises Blue. This will help you improve your Web presence and produce better marketing results. "And you can surf the Web yourself, visiting competitive and noncompetitive home pages to see what they're presenting, how they're presenting it and what you like or dislike about their home page so you can improve your own Web presence," he adds.

Depending on your product or service and the purpose of your Web site, an effective home page doesn't necessarily have to be sales-oriented. You can use it to develop new strategic alliances or cooperative product development and marketing efforts, or to reduce the number of direct customer service or support calls you receive.

To help gauge your success in using the Web, here are 15 questions to ask yourself about your site:

1. Does your Web site attract your target customers?

2. Do you know what your customers look at and why?

3. Do your customers spend enough time at your site?

4. Does your site contain elements that make your customers want to return?

5. Does your site extend your customer base?

6. Do your online and other customer sets overlap?

7. Is your message delivered effectively?

8. Does your message move your customers to action?

9. Do you facilitate that action?

10. Is your site personalized for your customers?

11. Does your site provide added value to customers?

12. Is your site truly interactive?

13. Does it protect your brand?

14. Does it leverage your brand?

15. Does it extend your brand?

Mr. Diehl is treasurer and controller of ANS CO+RE Systems in Elmsford, N.Y. You can reach him at (914) 789-5300 or at fwd@ans.net.
COPYRIGHT 1996 Financial Executives International
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1996, Gale Group. All rights reserved. Gale Group is a Thomson Corporation Company.

 
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Title Annotation:includes related article; using the Internet
Author:Diehl, Fred
Publication:Financial Executive
Date:Jan 1, 1996
Words:2405
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