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The Wired Enterprise: Here Come the Intranets

Few technologies have been so rapidly accepted as intranets. Effective at lowering costs and improving communications internally, they are playing key roles in customer support too. But they are also presenting fresh challenges, including how to apply the right amount of control to what is inherently a decentralized operation.

(originally published by Booz & Company)

Borrowing from technology designed first for the Internet, companies are now creating intranets as powerful management and integration tools. Here is how some of the leaders have gone about the task.

Truly transforming technologies often present challenges in direct proportion to the benefits they offer. So it must have been with the telephone; so it surely was with the computer; and so it may be with intranets, the in-house rendition of the global Internet.

Few technologies have been so rapidly accepted as intranets, which have gone from conception to virtual ubiquity in less than two years. Nearly every member of the Fortune 500 has deployed an intranet or is in the process of doing so. For the most aggressive early adopters, intranets are already strategic assets, lowering costs, improving communication and empowering employees.

But they are also presenting fresh challenges to management. These include overcoming the reluctance of employees to try something new, applying the right amount of control to what is inherently a decentralized operation and coping with political battles among a company's divisions and business units, which can have radically different hopes and fears about the changes that intranets will bring.

Intranets apply the technology of the Internet to an enterprise's internal networks, a simple concept with profound consequences. By adhering to standard Internet protocols -- simple software-based rules for the transmission of data across networks -- intranets allow different computer systems within an organization to speak to each other, often for the first time. Using the hypertext language and browser model of the World Wide Web, intranets present a tool that is graphic, simple to operate, even fun to use.

A tool that makes information more broadly and easily accessible within an enterprise could not be more timely. The leaner, flatter organizations that are the legacy of years of re-engineering have a greater need to know than the old hierarchies. The mutual dependence of work groups, departments and business units calls out for a new medium to exchange ideas, establish mutual goals and track progress.

On a more prosaic level, intranets are cheap and easy to implement, and they leverage rather than replace existing systems. Many corporations have spent a painful decade or more deploying systems in the last major paradigm of information science, client/server, in which applications are split among powerful servers and desktop computers across a network. Adding an intranet only requires installing a new server and distributing the appropriate software across the existing network.

Not surprisingly, the high-tech companies have moved the furthest and the fastest in adopting intranets. After all, companies like Sun Microsystems Inc. and Silicon Graphics Inc. have used the Internet for many years, and to varying degrees played key roles in its creation.

But there is nothing intrinsically different about the management of a high-tech enterprise, and the lessons learned by these pioneers are relevant to any company installing an intranet.

In any case, companies in other industries are not so far behind. Already intranets play a key role in customer support at US West Inc.; in human resources at the Lockheed Martin Corporation, and in marketing and communications at Levi Strauss & Company. Nonprofit organizations, academic institutions and the national laboratories are all moving rapidly to embrace and integrate intranets within their information and management systems.

Why are intranets proliferating at such a pace? "The biggest reason is that they are unlocking value in existing information systems,'' said William J. Raduchel, vice president and chief information officer at Sun Microsystems. The simple "page and link'' metaphor of the World Wide Web, where one reaches new sources of information by clicking on highlighted words or phrases on so-called Web pages, provides a key to previously inaccessible data.

Mr. Raduchel has to look back 40 years to find a tool of comparable impact. "The last technology that really changed the way offices work was copying machines, not personal computers,'' he said. "Networks are the electronic equivalent of copiers. They let multiple people see information. Creating a Web site is the electronic equivalent of handing out copies, but it has the virtue of being independent of time and place. The copier let anyone be a publisher; the Web lets anyone be an electronic publisher.''

Because it is essentially a publishing medium, the intranet lets content creators maintain ownership of their data, in the sense that they control how much information is made available as well as the manner in which it is presented. They decide, for example, whether to publish their data in a format that can be read by a browser, or whether to make the information accessible to any of the powerful querying tools that can now be embedded in a browser.

"I don't want to give away my data; nobody does,'' Mr. Raduchel said. "But I love to use my data to get recognition and gain influence." On the intranet, he added, you not only control the data, but you also get the credit.

Publishing is the first application most companies made available on their intranets, just as it was on the Internet. Typically this means putting paper-based documents, like corporate policies and procedures, into electronic form, or translating commonly used data bases, like product catalogues or employee directories, into HTML, or hypertext markup language, the lingua franca of the World Wide Web. Once transposed, these documents are available to any employee with a browser, like Netscape Communications Inc.'s Navigator or the Microsoft Corporation's Internet Explorer.

These sound like humble uses for such a powerful tool, and they are, but they have the virtue of being easily accomplished. It is not hard to show a positive return on investment when hundreds of thousands of pages of paper can be replaced with an internal Web site. No less important is the reduced demand on clerical staff and self-appointed company experts to find elusive bits of information. No one need page through manuals when the answers are a mouse-click and a "hot link" away.

"Some of the cost savings are tangible but many more are intangible,'' said David Leong, Internet technologies project leader at the Sandia National Laboratories, which has deployed employee directories and a conference-room scheduling application on an intranet linking its sites in Albuquerque, N.M., and Livermore, Calif. The savings for Sandia are a mixture of reduced paper and clerical time.

But even among Sandia's technically sophisticated work force, employee buy-in to the system has not been automatic, Mr. Leong said. "One of the lessons learned is that the cultural and political barriers are much harder to overcome than the technical barriers,'' he said. "People are just used to a certain way of doing things.'' Employees accustomed to having a paper bulletin about the labs delivered to their desks are not necessarily inclined to seek out its electronic equivalent on an intranet Web page, he noted.

For many companies, the adoption of an intranet was eased by a previous positive experience with the Internet. "The Internet brought home the paradox of commercial networks,'' said Marc Andreessen, co-founder and senior vice president for technology at Netscape, the leading provider of intranet software. "It became clear that it was easier to find information on a Web server in Australia than on your own internal system. Now the investment going into intranets is 10 times the amount going into the Internet for commercial use."

Cypress Semiconductor Inc. put its catalogue of chip products on the Web only to find that 30 percent of the traffic on the site was generated by its own field sales force. The Web page was more up to date than the catalogue's paper versions, and it was accessible from anywhere in the world. Cypress soon produced an intranet version, which could offer more sensitive and proprietary information to employees.

The Federal Express Corporation began giving customers access to its internal package tracking system via the Web in December 1994, saving untold dollars in telephone service calls as a result. This, too, became a popular tool for employees.

"We looked at that and said, how can we bring it in-house and save money and time?'' said Angela Maynard, the company's head of program management. "It was a natural transition for us.''

Federal Express first put corporate manuals and an employee directory on its intranet, but it is now testing an electronic expense accounting system, deployed entirely on internal Web pages. Longer term, the company is looking at ways to put browser software on the wireless handheld computers carried by its couriers, giving them full access to the intranet in the field.

At Federal Express, and at many early adopters, the initial deployment of the intranet was a grass-roots phenomenon, not unlike the infiltration of corporate America by personal computers in the early 1980's. The decision to publish information on an intranet came not from the executive suite, but from individuals or groups much further down in the organization, who took it upon themselves to acquire a Web server and create the initial sites.

At US West, the Denver-based telecommunications company, the intranet was originally the vision and creation of a single engineer, who dubbed it the Global Village. But as the intranet expanded from simple information exchange and publishing to include transaction processing and data base retrieval, US West management realized that the Global Village was a resource that had to be managed.

"It was probably about a year ago that we started saying this is a serious business tool, how do we manage it as a strategic business asset?'' said Patricia Hursh, US West's intranet manager. "We had to make a move to centralized management, processes and controls to make this thing usable." But central management does not extend to authorship. "The information on the intranet needs to be owned by the part of the business that produces it,'' Ms. Hursh said.

US West's most successful program to date, Facility Check, is typical of the evolution to more interactive and strategic intranet applications. Prior to the creation of this application, the company's customer representatives could make only vague, uninformed estimates of how long it would take to deliver a new telephone line or other service, because they had no way to access the corporate data base that monitored the availability of facilities. Commercially available data base querying tools were all too costly and complex to deploy to these employees.

"Sometimes we would make a commitment to the customer and not have the physical plant to fulfill it,'' Ms. Hursh said. "So we built a front end where the rep could put in the customer address, and behind the scenes, a program would search our data base and bring back some very plain-English description of the facilities available. They could then make a realistic commitment to the customer.'' Because the system uses a browser for a front end, she said, "you really don't have to train people; in five minutes they're up and running."

US West has not done a formal return-on-investment analysis on Facility Check but Ms. Hursh said that it is a huge win in terms of reduced cost and increased customer satisfaction. Other benefits of the intranet application are that it runs on any computer in the company, whether PC, Macintosh or Unix workstation, and the time to deployment was a fraction of a conventional program.

"Facility Check was delivered in less than two months with fewer than five people working on it,'' she said. "When you compare that to traditional information systems development, it doesn't take a rocket scientist to see this is worth pursuing."

US West, like most companies, found that the grass-roots model works as long as the applications deployed on the intranet are relatively static and tangential to key business processes. But as applications grow more interactive, and more tightly entwined with critical processes, some degree of central management and authority becomes important, just as it is in traditional computing. Companies must find a way to strike a balance between the spontaneous creativity of the grass-roots efforts and the need for security and accountability.

Lockheed Martin has also grappled with the transition from grass-roots development to central management.

"Early on, we got a company-wide Netscape license, and everything was flying along at light speed, with no umbrella, no corporate policy,'' said William Buonanni, program manager of Lockheed's World Wide Web initiative. "That was right for the time. Central policies really did not come about for a year. It allowed us to grow without being overbearing."

And the intranet was indeed needed. Lockheed found that its history of corporate growth by merger left it with a plethora of incompatible computer systems that could not communicate with one another. "I really did not have a way to send a document to 20 different people,'' Mr. Buonanni said. "Now suddenly, there is a very easy way to do that. I could see the light bulbs going off as people realized what this could do.''

Creating intranets is easy because they all adhere to a few Internet standard protocols and languages that have been in the public domain for many years. For Lockheed, that meant adopting TCP/IP, or transmission control protocol/Internet protocol, across the company's myriad networks, and downloading the Netscape browser to each of its 140,000 desktop computers. Some of this technology is free; none of it is expensive.

But the "freeware'' aspect of intranets and the World Wide Web's sometimes frivolous image can make it hard for senior management to take these programs seriously, Mr. Buonanni said. "In the old days, we would go to management and say we need $3.5 million for a new D.A.S.D.,'' he said, referring to a high-density disk drive used in mainframe computers, "and they would say, 'O.K., we budgeted for that.' Now when I ask for $35,000 for a Web server, it can be a tough sell.''

The history of mergers means that getting adoption in all 80 Lockheed business units can also be a challenge. Some applications are seen as a threat, like a recently introduced human resources program that lists positions within the company and allows employees to apply on-line, matching their skills and qualifications to all available openings. It then sends their résumés, and allows the employees to track the review process, all from their desktop browsers.

"We are trying to make it go company-wide, but some of the businesses are backward-thinking,'' Mr. Buonanni said. "They think if their employees see opportunities they'll go to other Lockheed businesses. They don't see that it might entice other employees to come to them." On the other hand, he noted, a corporate-wide litigation-tracking system has been universally adopted. Why? Because Lockheed's chief counsel mandated its use.

But even companies where intranet usage is pervasive at the grass-roots level find that the endorsement of senior executives is critical. Silicon Graphics, a maker of computer workstations that is based in Mountain View, Calif., is one of the most thoroughly "webified'' businesses, with literally thousands of applications deployed on its intranet. But while the number of internal Web sites had already climbed to more than 100,000 before management ever got involved, it has more than doubled since.

"At first you have this organic model of growth by imitation, where good sites begat satisfied users, who begat better sites, in a kind of virtuous cycle,'' said Brett Monello, Silicon Graphics' manager of corporate Web systems. "The other thing you need is a validation of this whole process in the culture. When your chief executive will stand up and say, 'This is a Web-based business, get used to it.' That's a formal validation."

At Silicon Graphics, every project has its own Web site on the intranet, and the result is fewer meetings, fewer phone calls and less routing of documents, paper or electronic. There is also less tolerance of ignorance. "If a Web page exists with all the information and an employee shows up at a meeting without having checked that, you will see a rejection of that kind of behavior,'' Mr. Monello said. "Checking out the Web allows you to have more productive meetings.''

As at many companies with a decentralized management structure, Silicon Graphics consists of many work groups that are dependent on each other to meet their goals. "In many cases, the success of a particular division is tied to its ability to create a program that it expects other people to participate in,'' Mr. Monello said. "More and more, the Web is the way groups search out and let those who they will be dependent on know what is expected of them."

In such a Web-centric environment, a group's ability to generate compelling Web sites is key. "To the degree to which your Web site is ugly or boring, you will be more or less successful,'' Mr. Monello said. At Silicon Graphics, there is now a premium on artists and other creative people not normally counted among program developers.

Other companies have determined that, important though it is, Web-site development is not one of their core competencies, and is better outsourced. The U.S. Web Corporation, a company formed last year in Santa Clara, Calif., to develop sites on the World Wide Web for commercial clients, now says that half of its revenues comes from creating intranets.

A cookie-cutter approach to intranets will not work. Each must mirror the culture of its company. At Silicon Graphics, every desktop computer is configured to be its own Web server, and employees are free to create sites devoted to the best sushi in Silicon Valley and other arcana. But such an approach might not work well in a more traditional corporate culture.

Intranets also shape culture. At Levi Strauss, for example, the intranet helped move the company from an internal environment of competition to one of collaboration, and brought it closer to its goal of becoming a "learning'' organization, said Dianne Woods, Levi's vice president for global strategies and organizational development. "In a learning organization," she explained, "employees capture their knowledge and learnings and make that widely accessible." With the intranet, she added, Levi's "employees learn from one another and they work smarter, with an ever-increasing capacity to respond to their environment.''

Sun Microsystems' management has always prided itself on a rapid decision-making process, one that draws on many participants' knowledge of a trend rather than depending on a particular senior executive who is waiting for hard evidence. Sun's intranet fostered this approach, said Mr. Raduchel, the company's chief information officer.

"We learned from our Japanese partners the value of being participative in decision-making,'' he said. The intranet "allows you to be participative and asynchronous; I don't have to have everybody in the same room or on the same conference call. We can make a decision in a day rather than in a month. That's part of our ethos."

It is safe to say that few if any of the intranet's progenitors foresaw its ability to disrupt and transform the organizations it touches. They were, after all, pursuing other goals, like on-line commerce and interactive television, when interest in corporate networks overwhelmed the planning for those markets.

It may be too early to place the intranet alongside the copier or the telephone, but its ability to democratize the flow of information within an organization is already having far-reaching effects.

"Ultimately a firm is just a massive information system -- at its core, it is a way of making decisions,'' said Sun's Mr. Raduchel. "Intranets change the way that operates because they rewire the central nervous system. It is a profound change.''

And Now It's Extranets

The term "intranet'' was coined to denote an internal network with an architecture based on the technology of the global Internet. But now, some of the most aggressive early adopters of intranets are looking for ways to open up these networks to the outside world, or at least a carefully controlled subset of the outside world, like their key suppliers or largest customers. They are building "extranets.''

There is a paradox here. One reason intranets have flourished is that they are relatively free of the two biggest problems on the Internet: performance and security. On the Internet, your performance is equal to the slowest link in a long ambiguous chain, and the best security measures money can buy are only a fresh challenge to the world's hackers. Intranet performance, by contrast, is determined by the bandwidth of your internal network, and if access is limited to internal users, security is a much smaller concern.

But as long as intranets remain strictly internal, their payoff will be primarily in cost savings and intangibles like improved interdepartmental collaboration. The value intranets add to an organization will be limited until they can reach out to encompass key transactions with business partners. Already, those companies that embraced the intranet early on are beginning to forge links outside the enterprise, acting on the assumption that the rewards will be worth the risk.

"It has begun to hit home what the benefits are to integrating these networks,'' said Marc Andreessen, co-founder and senior vice president for technology at Netscape Communications Inc., the leading provider of intranet software. "There is a great appeal to having the same type of system inside and outside the company. Now companies are starting to build extranets, taking intranets and connecting them together to reach out to customers and suppliers. Some of that is happening on the Internet, some on private networks.''

Most extranet applications are in their infancy, and in many cases, they have evolved from successful intranet programs. As with many of the first intranet applications, these are sometimes modest uses of a powerful tool, but the cost savings can be considerable.

At Silicon Graphics Inc., one of the first interactive applications on the intranet was a Web-based purchase requisition process, which automates and streamlines the purchasing of standard items. This consists of an on-line catalogue and electronic order forms, which employees can fill out and send on their way by clicking on the browser screen. Work flow software sends the virtual requisition to the appropriate manager for authorization, after which it is automatically routed outside the company, electronically or by fax, to the appropriate supplier, which can "drop ship" the requested supplies directly to the employee's desk.

The CSX Corporation, the giant rail transportation company, is currently rolling out TWSNet, a shipment tracking and processing application that uses Web technology and Sun Microsystems Inc.'s Java programming language to give customers access to the company's internal applications. The first phase includes shipment-status queries, E-mail, corporate address book, customer account information and an interactive shipment tracking map. Later phases will include freight-car ordering, freight claims and bill of lading submissions.

Within the next few years, companies will give key suppliers access to their internal data via extranets, so that they can continually restock key components. Of course, some companies have been doing just that for years, using electronic data interchange (E.D.I.) software or, more recently, the Notes program from the Lotus Development unit of I.B.M.

But both those solutions required that all of a company's business partners adopt and support a common piece of software, one that was often costly and difficult to learn.The advantage to extranets is again reduced cost and complexity, because browsers are cheap, inherently easy to use and universal. Because they all adhere to Internet standards, it makes no difference if a company is running Netscape software on its server while its key vendors run Microsoft browsers. That was not the case with proprietary E.D.I. programs or Lotus Notes, although it should be mentioned that Lotus is rapidly reconfiguring Notes to be Web-based and many E.D.I. companies are taking similar steps.

"The same people who thought Notes was great are finding that extranets give them the ability to have better customer and partner contacts,'' said Michael Hebert, a group product manager for the Microsoft Corporation. For companies nervous about trusting internal data to the Internet, private leased lines are a more secure, if costly, alternative, he said. "Virtual private networks are a technology that make it easier for people to roll these things out,'' he added.

As on an intranet, extranets let content creators maintain control of their data. A company need not let its business partners have unfettered access to the corporate data base, but can choose to publish only that portion of the data they need to see.

"It all really comes down to security and access, making sure that only the right people have access to only the right data,'' said Sheldon Laube, chief technology officer of the U.S. Web Corporation, which develops Web sites, intranets and extranets for customers on an outsourcing basis. "Even inside your company you don't give everybody access to payroll or other sensitive data.''

Ultimately, the lines of distinction between intranets, extranets and the Internet will blur, Mr. Laube said. Already, he noted, some companies offer internal data to business partners using unlisted sites on the World Wide Web. Is that an extranet, an intranet or the Internet in action?

"People who focus on the names rather than the function will get confused,'' he said. "Within a year or two, there will be no difference between intranets, extranets and the Internet. It will all come together.''

Reprint No. 97109

Illustrations by Ward Schumaker

Lawrence M. Fisher,, covered technology for the New York Times for 15 years and has written for dozens of other publications. Mr. Fisher, who is based in San Francisco, is a recipient of the Hearst Award for investigative journalism.
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