How to prepare for e-business.

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BY STANLEY ZAROWIN

ike it or not, technology now defines our world: Workplace technology that started as handy (but still optional) business tools in the 1980s evolved into a high-priority requirement in the 1990s. As we enter the new millennium, it has taken another quantum leap, going from a priority to a prerequisite for doing business.

Luddites no longer can reject technology as a social evil, nor can traditionalists dismiss it as an extravagance. From online retailing to data warehousing and from business-to-business Internet links to online teamware, technology is embedded in the way most business is conducted—indeed, in the way many of your clients, customers and suppliers live their lives.

As evidence of how entrenched technology has become, consider the fact that it’s now possible to manage a business, trade on the stock market, research a technical question, prepare a tax return, shop for anything from eggs to steel ingots and even send a love letter by e-mail accompanied by a dozen roses—all while ice fishing on a remote lake in the Upper Peninsula.

NOT JUST FOR NERDS

At the birth of personal computers in the 1980s, only a handful of technogeeks used and appreciated their power. But by the early 1990s the PC (and those powerful little electronic chips that are the heart of the new technology) had invaded both the corporate world and people’s homes. A complete public mind-shift followed—evidenced by the fact that the laptop has become as ubiquitous as the briefcase; even preteens walk around with cell phones; and a growing number of senior citizens regularly exchange e-mail and digital photos with their grandchildren.

Despite the phenomenal growth and overwhelming influence of computers, the majority of small businesses still lag in applying technology. According to a survey by Sage Research, 67% of small businesses do not have a basic computer network, and only 8% of them plan to install one this year. Foot-draggers generally give two basic excuses for the omission:

• Technology is too challenging: “It’s too much and too fast, and we just can’t catch up.”
• It’s not really necessary: “We’re still able to do our business with paper and pencil, thank you very much.”

Those rationalizations don’t acknowledge what many recent converts to technology are discovering: The longer one delays, the larger the gap and the harder it is to catch up. And though many businesses still can function adequately with paper and pencil, their customers—and their competition—are not sitting on their hands.

PEOPLE GET READY

In a recent survey by PC Computing magazine, 54% of white-collar workers confessed they lacked the skills needed to take advantage of the current technology—forget the technology that’s right around the corner. (Just because workers can successfully click on a reply button to respond to e-mail does not mean they have e-mail proficiency.) The survey also found that most users developed even their limited skills not through formal training but by trial and error—a slow, frustrating and inefficient process.

Although it’s true that as technology matures the need for special training will decline—because tomorrow’s software and hardware will be much more intuitive and loaded with built-in teaching drills—that time is not here yet. Training is still essential. All financial professionals must assess the consequences of their knowledge gap and determine how much effort they must invest in learning to use the new tools effectively. Managers must budget time and money not only to bring their staff members up to speed but also to stay ahead.

Relatively speaking, today’s hardware is cheap. Just a few years ago a top-rated PC cost nearly $4,000. Today the price of a fully loaded, fast machine is around $1,000—and dropping.

JACK BE NIMBLE, JACK BE QUICK

For years conventional wisdom held that it was profligate to buy the latest, hottest computer. After all, what difference did it make if a tax return prepared on a slow machine took a few seconds, or even a few minutes, more? But any tax department manager will tell you, if you multiply a few minutes by a few hundred tax returns, the lost time translates into a very sizable loss of revenue opportunity.

Old, poky machines are more susceptible to breakdown delays. And what turns off an eager user faster than when technology fails or lumbers along at a snail’s pace?

Some may believe that a case for buying the fastest machine was valid a few years ago—before the fast Pentium chip was introduced—but is moot now. They argue that even today’s slowest Pentiums can handle most current business applications effectively. In today’s Internet environment, it’s not the speed of the computer that causes delay; it’s the poky modem and network and dawdling Internet access provider, they say.

Although it’s true that most current applications run fine on even two-year-old computers, the biggest drain of computer power comes not from running any one application but from running multiple applications simultaneously. Experienced computer users have learned it’s more efficient to keep all frequently used applications open for immediate access. The most popular applications are a word processor, spreadsheet and database; and experienced users typically keep their e-mail and a Web browser available all day. They may run an instant messaging system and—if they’re wise—keep a virus check on full-time alert. Employees of a large organization probably have a network management system running in the background, too.

New or evolving applications such as speech recognition—although not yet widely used because it still needs polishing—soon will mature enough to make a significant contribution to efficiency. But speech recognition won’t work on an underpowered computer.

For all these reasons, wise managers upgrade their technology every year or two and claim not only a good return on the investment but also the advantage of nurturing personnel, who are more likely to appreciate and grow with the new technology.

ASP AND YOU SHALL RECEIVE

For years the words software upgrade conjured up images of hours of computer tweaking in an effort to salvage the old version’s defaults and shortcuts. Although today’s software has made the task somewhat easier, an upgrade still provokes under-the- breadth muttering.

But very soon that may be history because ASP is coming.

ASP stands for application service provider—a vendor that delivers software applications as needed via telephone lines and television cable. Within a few years, most users probably will not buy software on floppy disks or CDs. In fact, they may not even permanently load applications on their computers.

Instead, people will pay a fee to use software in much the same way they pay for metered gas and electricity. Rather than buy a software application and install it, a user will simply click on, say, a spreadsheet icon on his or her computer, which will trigger a near-instant download of the desired application from some distant ASP. The software will be transmitted via the Internet or whatever eventually replaces the Internet (more on that later). Once the application loads, the revenue meter will start ticking.

If, for example, you want to use the PivotTable function of the spreadsheet, just that part of the program will be transmitted, nearly instantly, to your computer. As you need more of the application, it will signal the ASP to transmit additional functions—much like the just-in-time (JIT) management inventory system that became popular in the last decade.

The bottom line: You’ll get—and pay for—only what you need when you need it.

As a result, you will not have to upgrade an application ever again. The leased software will be upgraded continuously in the vendor’s own server computer. What customers receive will be a fully optimized tool, ready to function immediately and flawlessly no matter what kind of computer it runs on.

THE NEW COMPETITION

Such a service will revolutionize the concept of software competition. If a software application fails to do the job promised for it, the end-user can simply switch to a competing product. The user will have no economic reason to feel locked into any one brand. Switching brands will be as easy as clicking on an icon.

This does not delight Microsoft, which today controls a majority of the PC software market—from the Windows operating system to scores of applications—because users are economically locked into them. In an interview recently, Bill Gates conceded that software leasing has been on Microsoft’s radar screen for some time. Versions of both Windows 2000 (its latest operating system) and Office 2000 (its latest office suite) already are optimized to operate from a network server, so Microsoft is ready for such an eventuality.

Meanwhile, complicating the software rental scene are recent introductions of free or nearly free software. Users can download Linux, an operating system just starting to compete with Windows, free from the Internet, or purchase an enhanced version for a modest fee. Linux has few applications so far, but that vacuum is being filled quickly. Sun Microsystems, a Microsoft competitor and a strong supporter of Linux, is offering free a suite of applications called StarOffice that is similar to Microsoft Office Suite.

Some specialty software is already being offered via lease arrangements. The first major test, in the tax software market, gets under way this year. (For more on the software leasing trend, see “Tax Software Hits the Net,” JofA, Sept.99, page 24.)

A Computerworld survey conducted last year found that 22% of its large corporate readers already leased some software, and another 9% planned to do so within a year. A handful of organizations, including Monsanto and Volvo, have leased special software applications for some time, and they claim it saves them money, time and loads of frustration.

For the moment, the most popular leased applications are generally the least mission-critical ones. That makes sense, for until users feel secure an application piped in via the Internet or private telephone line is reliable, they’ll avoid putting all their digital eggs in one basket.

An exception to the not-mission-critical qualification is in the area of e-business. Many companies want an e-commerce presence immediately—even before they are willing or able to invest to develop in-house resources—and are outsourcing complete services from professional e-business enterprises.

So far, the most popular leases besides e-business are e-mail and groupware services. The least popular rental applications are desktop productivity programs, such as office suites with word processing, spreadsheets and databases, and that’s because such software is very mission-critical and most companies already have these applications in-house.

What’s the timing of the shift to software leasing? Considering the fact that the Internet has appeared to shrink time—as in the slang an Internet minute—trying to forecast a date is a waste of time. Forward-thinking companies such as Monsanto and Volvo already are taking the necessary steps.

WARP SPEED

Do you wonder how the present sluggish Internet (the world wide wait) will handle the massive transmission demands that are waiting in the wings, including leasing applications?

The answer is NGI—the Next Generation Internet. NGI, which is also being called the Supernet, will be a totally new communications network linked not by copper wire—the traditional conduit for telephone and Internet links—but exclusively by huge-bandwidth fiber-optic cables used by cable television providers. The Supernet eventually will provide plenty of super-high-speed bandwidth. It’s expected to be up and running no later than 2003. But don’t expect to be let aboard early unless your e-mail address ends in .edu; academic institutions will be the first to be wired into NGI. That doesn’t mean your enterprise shouldn’t prepare for it now. First step: installing 1-gigabyte Ethernet networks when they reach the market in about a year so you can plug in when NGI is ready.

TEAM ACCESS

The name of the game today is teamwork. The business environment has become so complex that it takes a team to successfully tackle many projects. Even sole practitioner CPAs are beginning to recognize the need to develop ad hoc professional teams—arrangements of convenience with other practitioners—as a way to expand and enhance their areas of expertise.

Short of sharing a physical office, how does one create a “location” for such a team? In a large organization it’s relatively easy: The information technology department cobbles together a network or an intranet that provides a virtual office where files can be shared and worked on collaboratively, even when the participants are miles apart.

Until recently, creating a virtual office was quite a headache for small enterprises that lacked the technical skill to patch together a network. Not only has the technology become simpler, but for those who want a virtual office without the trouble of creating their own, there’s now an outsourcing option: the virtual office rental, in which commercial organizations provide teamware services on a lease basis. For fees as low as $13 per month per user, the teamware service creates an Internet home page with an entirely outsourced network infrastructure. The site can be password-protected and can display announcements and news of any type, a shared calendar and links to other Web pages. And, of course, members can collaborate on files and hold threaded discussions to exchange ideas.

Most large Internet access providers offer such services. Other leaders in this field include HotOffice (www.hotoffice.com), InTandem (www.interactive.com), eRoom (www.instinctive.com) and QuickPlace (www.quickplace.com). Be aware that new services are launched nearly daily. It’s best to shop for options and prices. For more information, search the Internet with the keywords teamware services.

VIRTUAL PRIVATE NETWORKS

If your enterprise is geographically diverse and your employees need to be connected to the home base, standard communications choices not only are limited but also come with drawbacks. Long-distance phone connections are undesirable because fees are expensive, and users with Internet cable or digital subscriber lines (DSL) can’t take advantage of their high-speed capabilities to get into corporate networks.

There is one other option: a virtual private network (VPN). The setup requires a substantial upfront effort, so VPNs haven’t caught on with midsize and smaller organizations. That’s unfortunate, because they are far less expensive to operate than a long-distance link, and they’re fast, secure and flexible—easily connecting traveling and work-at-home employees with a company’s LAN. Very small organizations may find a VPN too expensive, but it’s a communication option midsize and larger enterprises should investigate.

For more information on setting up a VPN, contact your local telephone company, Internet service provider or vendors such as Cisco (www.cisco.com) or Intel (www.intel.com). And for a technical overview of the subject, go to www.internetwk.com/VPN/default.html.

All in all, the new technology is not just some new hardware and a few fancy applications; it’s a mind-set: a new way of thinking and a new way of doing things, including doing business. For many, it’s going to take some getting used to. It serves no purpose to fight it. It will not go away. If anything, it will become even more embedded in our lives. The good news: You will find yourself profiting from it. So enjoy.