Information Sheets > True Benefits

Never before has an information technology generated so much media coverage and so much public interest, as the Internet.

The world wide web has implications for the future of business and for society as a whole. The problem is that most coverage so far has focused on extreme examples of the technology and the companies associated with it, rather than its far greater benefits for business as a whole.

The rocketing share prices of internet companies and predictions of their impending demise, undeniably make great reading - particularly for corporate CEOs. So too do the fantastic successes of companies like Amazon which simply could not exist without the Internet, or the millions of "hits" on web sites that no direct mail campaign could ever hope to match.

All of this hype has, however, created a cloud of misunderstanding that is obscuring the technology's much broader implications. Because for every Amazon or Yahoo, there are thousands of other businesses who could be using Internet technology - including intranets, extranets and e-business - to improve their internal processes, transform their relationships with their customers and suppliers and increase their bottom line profitability.

CHAOS OR CONFUSION?

Much has been said about the facts of "web life" - the minimal cost of entry to the market; the power shift from producer to web consumer; the plethora of players on the net; the death of brand pull; the fickle nature of web surfers and the phenomenal speed of change.

Following this logic, it's easy to envisage a chaotic scenario where new web players constantly challenge established leaders, resulting in a rapid turnover of web winners, none of whom has the chance to deliver the hoped-for value from the web before they themselves are superseded.

This does not mean existing consumer-orientated businesses should ignore the web. Increasingly, consumers are demanding web-based access to goods and services and this demand is set to explode as internet access extends to TVs, mobile phones and other personal devices.

Businesses must offer existing and potential consumers at least as much as they can get through other channels - and opportunities for extending the scope of products and services need to be explored and exploited.

At the same time, the web channel should be seen in the context of the rest of the business and its economic benefits and risks must be fully appreciated.

While some of the risks have been outlined above, the benefits of web commerce revolve around the potential to grow business exponentially and at minimal cost, since it is the customer who effects the process. It is well known, for example, that a banking transaction on the web costs one hundredth the amount of the same transaction via branch.

Yet seeing the web only as an opportunity to increase sales, or to add a new type of customer service, is largely missing the point. While many organisations are addressing their need for a web site, this is like having a single telephone installed in your company so that people can phone in from anywhere in the world - but failing to recognise that you too could be using the same system to communicate with your employees and business associates.

This is the hidden treasure of the web and internet technology. This treasure can be uncovered today and it is of real and enormous value. The reality is that virtually every business can exploit the power of internet technology to improve (often dramatically!) the effectiveness of its everyday activities.

For a start, it is consummately easy to share information across an organisation by using an intranet to replace paper copies and keep information up-to-date. It is an often quoted example, but IBM quite literally saved millions of dollars worldwide simply by putting its internal telephone directory onto its intranet.

Web-based technologies also enable information to be extracted from legacy systems and presented via user-friendly interfaces at a fraction of the cost of earlier development projects. BP, for example, reduced its purchasing costs dramatically by sharing worldwide purchasing information - extracted from a myriad of different legacy systems - over its intranet.

Effectively applied, these technologies can revolutionise the timescales and costs of extending legacy applications to satisfy new business needs.

For example, a company with several legacy systems serving different stages of the same process and which currently require the same information to be entered several times, could rapidly implement an intranet workflow solution which both tracks the end-to-end process and automatically handles the data hand-offs between any number of legacy systems.

Such a solution does not need to replace these systems, yet can eliminate the inefficiencies inherent in their current use.

The bespoke order processing systems used by many manufacturing organisations - where re-keying of information at each stage in the order-to-delivery process results in lost time and potential inaccuracies - are a prime example of where this approach can quickly provide huge value, extending the useful life of legacy systems and adding the flexibility to quickly adapt systems to reflect changing business requirements.

Add to this the fact that the security and reliability problems historically associated with the internet have been all but overcome - allowing geographically dispersed businesses to take advantage of the huge cost savings internet communication offers over traditional WANs and VANs (typically 90%) - and the argument for adopting the new technologies becomes compelling.

Then, of course, there are the opportunities opened up by emergent intranet-based developments such as knowledge management, which promises to free up internal access to what for many businesses is their most valuable asset - the knowledge and expertise of their employees - to an extent never seen before. How many CEOs would feel comfortable ignoring the possibilities presented by that?

EXTENDED ENTERPRISE

But why stop at the boundaries of the enterprise? The internet and its associated technologies (particularly extranets) hold tantalising possibilities for extending the concept of the enterprise to include every business involved in the supply chain, thereby steamlining the whole process of supply chain management.

Computer hardware manufacturer Adaptec, for example, has introduced system-to-system communication with its suppliers over the internet - through an application enabling its own ERP system to communicate with any of its suppliers' systems, replacing fax and data input. This has helped to reduce manufacturing cycle times by over 30%, saved over $10 million / 9 million ecu in inventory costs and given the business greater flexibility.

Taking this example further, if a business had access to everything to do with customer stock levels, rates of depletion and historic seasonality, it would be unnecessary for it to forecast demand. Goods could be manufactured and delivered just-in-time, based on real-time customer information.

Similarly, if the same information were made available to the company's suppliers, then they too could manufacture and supply components, just-in-time.

Until now this type of scenario has been the stuff of dreams, but the low cost of internet communications and application development means it is eminently achievable and affordable.

Supermarket chain Sainsbury has taken strides in this direction in promotions management. It now allows many suppliers direct access via an extranet to all relevant information concerning promotions, to the extent that processes such as JIT manufacturing can be managed "in flight", thus reducing substantially the nearly $50 million / 46 million ecu cost of getting promotions wrong.

Clearly such change is not simply about technology - it involves major process and culture change and requires much higher-level, more active partnerships between organisations than are typically the case.

But some organisations will very quickly grasp the mutual benefits of this type of relationship. And it will be those companies' competitors who will feel the impact of the true benefits of internet technology - they will become uncompetitive overnight.