and Business Resources
APRIL 15, 2002
SPECIAL REPORT: THE CORPORATE
Business' Killer App: The Web
No, this isn't Dot-Com Delusion Act II. It means
adding a couple of points to profit margins -- and that's nothing
to deride these days
About 3,000 years ago, civilizations situated around the Mediterranean
created some of the first trading customs. In those days, a Phoenician
merchant who was shipping a cargo of olives from Tyre in Lebanon to Alexandria
in Egypt would have drawn up a paper bill of lading listing the goods
and the name of the ship's captain. On the date of departure, the merchant
would tear the bill in two, keeping half and giving the other half to
A similar ritual still endures, with multiple copies of bills of lading
going to the various parties involved in shipments. At last, though, a
sea change is on the way. Hans Hickler has tackled the job of turning
this routine into a quaint memory. The chief information officer of Singapore-based
Neptune Orient Lines, Hickler is in the forefront of the effort to move
the paper-based shipping business onto the Internet. Since 1995, when
he established the first Web site for NOL's American President Lines,
he and his cohorts have steadily transferred to the Web the transactions
required to ship cargo via APL's 80-odd vessels.
The company now uses electronic bills of lading, online versions of the
letters of credit required for insurance, and real-time rate quotes for
specialized cargoes. Today, 38% of APL's customers conduct their business
via online transactions, up from 8% in 1999. And 25% of APL's North American
customers never see a paper bill of lading.
"JUST BUSINESS." The reduction of paper-pushing
means APL employees suffer less tedium and do more problem-solving or
sales support. "Over the past two years, we have seen close to a double-digit
increase in our shipment volume, but a 20% reduction in the cost of processing
bills of lading," says Hickler. Now, he adds, "I can't think of one thing
we're building that doesn't sit on top of our Web. We don't think of it
as e-business anymore -- just business."
As the economy has slowed, many companies have come to the same conclusion
as Hickler: The Web is business' killer app. That may sound like the same
disingenuous boosterism that inflated the dot-com bubble of the late 1990s.
But in the current environment, killer app doesn't mean taking the world
by storm -- it means adding a couple of points to profit margins -- or,
in APL's case, narrowing losses. Executives have learned not to expect
miracles from the Web, even as they integrate it into every phase of their
They've also learned to think of it as any other tool that has to justify
its expense. According to an April study by Forrester Research, budgets
for one element of the corporate Net -- e-business technologies -- should
shrink by 14% in 2002 at 900 large and midsize companies. Other analysts
think e-business initiatives may get funding increases of 5% to 10%, but
that would still be modest compared with the high double-digit annual
spending increases seen as recently as 2000, when getting "Amazoned" (left
in the dust by dot-com startups) was the executive-suite fear du jour.
"NO-BRAINERS" FLY. With the dot-com threat
having dissipated, any corporate Web initiative that "doesn't save money
this calendar year, doesn't get money this calendar year," says Brad Rucker,
executive director of digital enablement at systems integrator Electronic
Data Systems (EDS
). "If it can't displace effort or expense, it doesn't get funding." In
other words, only "no-brainers" fly, and plenty are taking flight.
For companies that have traditionally encouraged education for their staffs,
for example, moving courses to the Web has proven to be quick, easy, and
effective. Take the case of tech behemoth IBM (IBM
), which has 319,000 employees. "The first area where we have experienced
incredibly high rates of return is e-learning," says Ralph Senst, vice-president
for dynamic workplaces at Big Blue.
The company claims to have put 40% of its internal educational offerings
on the Web, up from 5% two to three years ago. IBM says using the Web
saved it $300 million in 2001, on everything from travel costs and accommodations
to maintaining office space for educational work.
And pushing education online is saving IBM money in other ways. "Now we
can keep track of the skill sets of our employees," an exercise that used
to involve manually putting flags in personnel files, says Senst. The
push into e-learning has also fostered online collaboration at Big Blue,
which has long sought more inclusion for the 60,000 employees who work
in so-called nontraditional settings (either at home or at the office
part-time). Senst says setting up specially equipped online team rooms
with virtual white boards and document-sharing systems makes travel unnecessary,
since it connects geographically separated parties with a minimum of hassle.
Another no-brainer is redesigning Web sites to make it easier for customers
to place orders or interact with a company. "In my mind, there's no excuse
these days for not having a transaction Web site, and it's surprising
how many companies still don't have one," says Hans Hwang, a partner at
consultancy and systems integrator Accenture (ACN
). With many companies on their second or even third Web-site iterations,
designers have begun to learn from their mistakes and are moving away
from "brochure-ware" to sites where customers can do something useful.
FOUR-FOLD INCREASE. Verizon (VZ
), the nation's largest local-phone company, last year spent $10 million
to revamp a site many customers had found confusing and buggy. Launched
last October, the redesigned site has enjoyed a four-fold increase in
While the previous version couldn't accept orders, the new one lets customers
sign up for new phone service or change their existing service. About
1,400 customers submit repair requests via the Web site each month. In
fact, the site is already handling 2% of all inquiries and sales at Verizon,
says Maria Malicka, an executive director at the company. Verizon hopes
to recoup its $10 million initial investment by 2003, as a more customers
place orders online.
Another smart idea is on the desktop PC of EDS's Rucker, who uses a homegrown
application that his boss, an auto-racing fan, dubbed Pole Position (no
relation to the best-selling 1980s Atari video game of the same name).
The application's automobile graphics represent the data flowing in from
an automated sales-force program used by EDS to track where revenues come
RACE CAR OR CLUNKER? Pole Position is a four-quadrant
chart, with one axis representing total sales revenue and the other the
win percentage of Rucker's unit. In the top right quadrant is a Formula
One racer, representing Rucker's service offerings that frequently prevail
over fierce competitors, in such areas as Web design or database consulting.
There's a dump truck in the top left quadrant, representing wins against
easy competition. In the bottom right quadrant, Rucker watches a sporty
roadster, representing wins against good competition but not a lot of
revenue generated. And in the bottom left quadrant, there's a clunker
with its hood up, which needs no explanation.
Each vehicle is color-coded for profitability. Rucker calls these types
of overlays "dashboards." He says they're cheap, easy to build, and often
make it much easier for employees to grasp the key data bottled up in
complex systems without having to understand the programming behind them.
Dashboards are frequently found on so-called corporate portals: single
Web sites into which big companies are increasingly integrating their
multiple commerce or intranet sites. Such sites highlight an effort to
collect information from disparate computer systems across a company --
an indication that the Web is eliminating the boundaries between once-distinct
fiefdoms such as customer relationship management (CRM), enterprise resource
planning, systems integration, and e-mail.
"SINGLE VIEW." It's a key effort, since companies
that want to take their use of the Web to the next level are looking for
better ways to get their employees the best information. This is the basic
philosophy behind CRM: to collect in one place every piece of information
about a customer and make it easier to keep clients happy. "CRM gives
everyone in an organization a single view of the customer," says Marc
Benioff, chairman and CEO of online CRM vendor SalesForce.com.
Corporate portals also help companies better control the way their data
is presented to employees and the public. With every employee looking
at the same page, it's easier to communicate clearly on such matters as
human resources and payroll. "Whether you are a Hewlett-Packard (HP
) employee in Paris or Bangkok, you get the same look and feel on your
Web page," says George Bailey, a partner in the technology practice at
consultancy PricewaterhouseCoopers, who helped HP build its companywide
Combining Web operations into a single site can save more money than you
might think. Glenn Kelman, vice-president for marketing at corporate portal
software and integration specialist Plumtree, claims that one of his customers,
Eli Lilly (LLY
), hopes to save $27 million a year as a result of increased productivity.
Among other benefits, the new portal lets staff scientists use an electronic
molecule library through a Web browser, making it easier for them to integrate
this activity with other tasks.
A BANE NO MORE. "A lot of companies are doing
layoffs and can't afford to run every Web site in the company separately,
so they consolidate on a portal," says Kelman. "Instead of launching and
managing 100 different internal Web sites, they manage one. This drove
the portal deployment at Merrill Lynch (MLC
) and Solectron (SLR
Most interesting, however, are the glimpses of the new capabilities the
Web can give a company that puts enough of its operations online. Take
Verizon's new initiative. The company was able to add a feature that allows
roommates to easily divvy up phone charges on a single line, solving a
problem that has been the bane of college dorms since the dawn of phones
Or witness the efforts by Mentor Graphics (MENT
), a Wilsonville (Ore.) maker of design software for electronics companies.
When its engineers get a complex query from a partner, they first consult
an internal Web-based knowledge database that contains answers to customers'
most frequent queries. Putting the answers in an easily digestible form
cuts the engineers' workload by as much as 15%, says Tom Floodeen, general
manager of worldwide customer support. Once Mentor Graphics makes the
database available to clients via the Web next month, its customer-service
workload should fall further.
Jet-engine maker Pratt & Whitney, a subsidiary of United Technologies
), already uses this approach to get incredibly detailed performance records
from customers. It allows customers to use the company's portal almost
daily to input key performance data, such as how hot an engine burns and
how many revolutions per second a turbine spins -- valuable information
for determining when engine service is required.
Pratt also has embraced reverse auctions, registering dozens of vendors
on its site and sending out requests for parts to the entire group rather
than having to call each one, according to Dave Brantner, director of
e-business. Shipper APL, meanwhile, has set up a Web interface that allows
customers to view the status of their cargo shipments and request notification
when a shipment is delayed or a problem arises. "That's a complete shift
from how our customers used to manage their business with us," says Hickler.
"They used to pick up the phone."
Most likely, such steps are only the beginning. As companies lurch toward
using the Web more aggressively, they're likely to find wider applications
for information that has been locked inside their aging computer systems.
With global economic growth expected to remain sluggish for some time,
executives will need every edge they can get to squeeze out more profits.
That's where the merger of e-business and traditional business could yield
Salkever and Olga Kharif,
with Amy Tsao and David Polek
Top of page.