The Internet Pioneers

The emergence of the World Wide Web and Mosaic has convinced early corporate adopters of the viability of doing business online

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By Clinton Wilder
Issue: Jan. 9, 1995
Last year, the Internet caught on as a worldwide communications tool--the ultimate wide area network. This year may be remembered for corporate users discovering the Net as a tool for doing business online.

Tens of millions of people now use the Internet, which has been an important research source for scientists and academics since the 1970s. Use of the so-called global "network of networks" is growing by an estimated 8% a month, meaning usage nearly doubles every year. Se emingly overnight, an entire industry of Internet access software and networking providers has sprung up.

With IBM offering and Microsoft Corp. planning to offer direct Internet links in their new desktop operating systems, the Internet bandwagon shows no sign of slowing down. If you haven't already added a ".com" electronic-mail address to your business card, you will soon.

'The Right Thing To Do'
But even with the Internet's awesome ability to reach millions of customers and its role as an efficient backbone for both internal and external communications, corporations have been relatively slow to harness the Net's potential as a business tool. "It surprises me that there aren't more of us on the Internet already," says Rick Pocock, general manager of marketing communications at General Electric Co.'s plastics unit , which posted an Internet home page in October. "It seems so much the right thing to do."

Historically, business has stayed on the sidelines of cyberspace. It's been made wary by the Internet's renegade-culture reputation, arduous Unix commands, and very real lack of security. But in the last few months, the emergence of the World Wide Web network and the wildly popular Mosaic graphical browser has significantly reduced the complexity of viewing Internet data.

The immediate reaction: Hundreds of businesses have established a home page--the first screen of a hypertext system-on the Web. They range from small businesses like Alberto's Nightclub in Mountain View, Calif., and the Vermont Teddy Bear Co. ( Note to readers: Web address doesn't seem to be working ) to corporate giants such as GE and Lockheed Corp. Regardless of who creates these home pages, all are equally accessible to the same market--Mosaic users.

"Mainline businesses that never would have thought of connecting to the Net a year ago see it as an opportunity they can't pass by anymore," says Mary Cronin, author of Doing Business On The Internet (Van Nostrand Reinhold, 1994). "Critical mass has arrived."

If Mosaic and the Web constituted the Internet's "killer app" of 1994, Cronin predicts widespread electronic financial transactions will be viable over the Net this year.

Still, security remains an issue. It's the No. 1 concern of corporations eyeing the Internet, and even the most ardent corporate users of the Net for information distribution recoil at the thought of sending digital cash online. Although dozens of security software suppliers and partnerships like Microsoft-Visa International and CommerceNet-RSA Data Security are working to solve the problems, adequate security for financial transactions just isn't there yet.

'That's Why Banks Have Vaults'
In fact, nearly all large companies that use the Net for internal and external communications have built firewalls--combinations of security algorithms and rou ter communications protocols--to prevent outsiders from tapping into their corporate databases or E-mail. "You wouldn't run your business without a front door," says David Spector, VP of corporate technology at banking giant J.P. Morgan &Co. "You have to guard your premises and assets. That's why banks have vaults."

How can businesses use the Net to improve communications, reach customers, and sell products? To answer that, Internet pioneers in four industries explain their applications: J.P. Morgan in finance, Hyatt Hotels Corp. in travel and hospitality, Schlumberger Ltd. in heavy machinery, and GE Plastics in manufacturing.

J.P. Morgan &Co.
Although J.P. Morgan has a reputation as a conservative and slow-moving money-center bank, its embrace of the Internet has been bold and decisive.

Not so long ago, fearful Morgan executives referred to the Internet as the "I-word," admits corporate technology VP Spector. But today, professiona ls at the nation's fifth-largest bank use the Net to keep abreast of the latest university economic research and get online support and software updates from technology suppliers.

"Walk the floors and you'll see Mosaic browsers everywhere," says Lisa Ezrol, an associate at J.P. Morgan's New York headquarters. "It's really become ingrained in the way people operate here."

The bank's odyssey as a leading Internet user began when it was trying to solve a mundane but important problem: Information technology (IT) vendors were taking too long to provide technical help. Spector, a 15-year veteran of Internet use, saw the Net as the best and quickest way to report problems to vendors and get software patches or online technical help in return.

After what he calls "a lot of gnashing of teeth and writing of white papers," Morgan signed up for an Internet gateway in March 1992 with access provider Advanced Network &Services Inc. of Elmsford, N.Y. (acquired by America Onl ine Inc. last November). The result: IT problems that previously took days to fix are now resolved within hours, even minutes.

That, it turns out, was just the beginning. "Once that hurdle was out of the way," Spector explains, "we got the businesspeople thinking about other uses of the Internet."

Next came Internet connections to university economics departments, because J.P. Morgan's business strategists need to stay on top of the latest theories and predictions from economists worldwide. "More universities and research institutions are publishing their papers on the Net," Ezrol says. "We needed access to that leading-edge thinking."

Today, thousands of J.P. Morgan employees at company sites worldwide are essentially free to scour cyberspace for whatever data they need. Mortgage-backed securities analysts call up government census data to analyze trends in property values, for example, while entry-level research analysts hunt down corporate financial reports. "I often don't know the total extent to which our businesspeople use it," says Spector. "People find new uses every day."

Online Phone Book
Because J.P. Morgan sprawls from its New York headquarters to places like Brussels and Hong Kong, employees at all levels communicate with one another by sending E-mail over the Net. In addition, paper-bound employee directories that quickly fell out of date have been replaced with an online phone book that is updated at least once a week. The phone book also features a "fuzzy matching" search utility, developed in house, that lets, say, a trader in London track down a Singapore colleague whose name the trader can't quite recall how to spell.

J.P. Morgan also has decided to become an Internet information provider. In October, with controversy raging in the financial-services industry over complex financial instruments called derivatives, J.P. Morgan went live with RiskMetrics, a risk-measurement service.

RiskMetrics runs staggeringly complex mathematical formulas to help instit utional investors measure the potential risks of various investments. Every day, J.P. Morgan posts RiskMetrics data sets on the Web, as well as on CompuServe and Telerate, a financial online service used by traders with specialized workstations.

For now, RiskMetrics is offered free on the Internet. So what's in it for J.P. Morgan? "The goal is to establish ourselves as a leader in providing information," says Spector. "Being positioned as experts is good for our business." Adds Ezrol, "We wanted to advance the public's awareness of risk management."

In December, Morgan added a government bond index, mortgage refinance index, and mortgage purchase index to its regular Web postings. The two mortgage indices, along with a mortgage-rate survey to be introduced this month, are part of a line of indices called J.P. Morgan Matrix.

J.P. Morgan's latest Internet application involves using the Net as a recruiting tool for colleges and graduate schools. With demand for entry-level talent at an all-time high, J .P. Morgan doesn't want to rely on printed brochures that sit on the shelf of a campus career development office. Instead, the bank late last year began a pilot program of posting regularly updated electronic recruiting materials on the Web. The bank actively promotes the service on the campus of the Massachusetts Institute of Technology, and it plans to expand its promotion efforts to other campuses this year.

Hyatt Hotels Corp.
Hyatt Hotels figures that consumers who travel a lot in cyberspace also travel a lot on Earth. That's why the Chicago-based chain has embraced the Internet as a major new distribution channel for booking its hotel rooms.

Hyatt went online Oct. 11 with TravelWeb , a Web home page where prospective vacationers can browse through electronic information and digitized photographs of Hyatt's 16 resort hotels in the U.S. and the Caribbean.

Hyatt plans to offer similar "electronic brochures" of its 87 non-resort hotels in the U.S. and Canada on the Web by the spring. Before then, Hyatt will leap from electronic information to electronic commerce, adding the capability and security to permit booking of hotel reservations with a credit-card number over the Internet. "The Internet is of major importance to our business," says Steve Yastrow, Hyatt's VP of resort marketing. "Ten years from now, the business we'll do electronically will be in numbers we can't even imagine right now."

Yastrow's enthusiasm is based on two qualities of online information that make it well-suited to the travel and hospitality business: The information is customizable, and it's easily updated. By contrast, a printed travel brochure, no matter how glossy and colorful, is neither. "Every brochure on the rack is an average of six months out of date, and consumers often can't even find the one they want at the travel agency," says Yastrow. "We also find that consumers put less credibility in traditional one-way advertising. An int eractive system helps them feel the information is more relevant to them."

Hyatt's TravelWeb is the creation of Thisco (The Hotel Industry Switch Co.), a technology concern in Dallas that links 20 hotel chains' reservations systems to the airlines' computerized reservations systems for travel-agent bookings.

Taking The Plunge
While those chains eventually will use TravelWeb for Internet commerce, Hyatt is among the first of them to take the plunge. "We're the only industry that has its own electronic distribution system in place," says Yastrow.

TravelWeb will enable anyone with a PC to do what travel agents have done for years--book a hotel room without picking up the phone or sending a fax. Today, consumers calling hotels' toll-free numbers account for more than 70% of all hotel bookings, according to Thisco.

Going online has given customers more flexibility. "They can get information 24 hours a day, whether our reservations office is open or not," notes Rick Riess, genera l manager of the Hyatt Regency Kauai in Hawaii.

In Hyatt's brief foray into cyberspace, the hotel chain already has learned what many other companies in dozens of industries have found out about the Web: It's a vast source of market research. Because distributing information on the Net is an interactive process, the information provider can learn which hypertext links and screens are most popular with potential customers.

Hyatt has determined, for example, that Japanese TravelWeb users are most interested in a resort's golf facilities. That type of information guides business strategists planning Hyatt's resort development in Asia or Hawaii. "Being on the Internet helps us not only develop our marketing, but also our products," Yastrow says. "We consider it a long-term play, even more important than the bookings we get from it in the next two months."

Good Business Sense
With its Internet presence, Hyatt is following a principle similar to that of Ford Motor Co. in Dearborn. Mi ch., with its interactive CD-ROM disks or Fidelity Investments in Boston with its online ads on Prodigy: For big-ticket items, it makes good business sense to give buyers as much interactive information as possible.

"A resort vacation might be the most expensive thing they buy this year," says Yastrow. If travelers learn more about that vacation on the Internet, Hyatt execs say, they'll buy it from them.

Schlumberger Ltd.
Four years ago, Schlumberger made what turned out to be a prescient technology decision: Base its own global communications network on the Internet.

The $6.7 billion, New York-and Paris-based maker of oil-drilling equipment and electronics didn't foresee the explosion in Internet use for business, but it's happy to have played the role of pioneer. "With our scientific and technical background, the Internet was the model for connecting networks," explains David Sims, the Sugar Land, Texas-based manager of Schlumberger's informa tion technology (IT) group. "We adopted protocols to have a sort of plumbing system."

Schlumberger's decision was based on two success factors: efficiency and cost savings. The company, with permanent operations in 35 countries and employees in remote areas of 50 other nations, needed a network that could provide dial-up access from any location. "God didn't seem to put oil where people live," says Sims.

Today, Schlumberger engineers can receive E-mail or check the status of research projects in Dubai almost as easily as in Houston, thanks to what Sims calls a "private Internet."

The network, using the TCP/IP protocol and running at speeds of 9.6 Kbps to 1.544 Mbps, includes 20,000 Internet E-mail addresses, 20 internal Web servers, and 30 Gopher (a plain-text document delivery mechanism) servers. For security, all internal communications are protected by an Internet firewall. Sims asserts the company's Internet security risk is miniscule compared with the problem of computer viruses carried on dis kettes.

Others have followed Schlumberger's lead. Lockheed in Calabasas, Calif., uses a similar "internal Internet", and heating/air conditioning giant Trane Co. in La Crosse, Wis., is moving to an Internet-based backbone network from its current IBM Systems Network Architecture setup.

Drop In Voice Traffic
It's easy to see why. A recent Schlumberger study found that the company's overall communications costs have dropped by 2% since the conversion from its old X.25 network-even though Schlumberger has increased spending by 20% annually on the network and its IT infrastructure.

The savings have come from a dramatic drop in voice traffic and the reduced need for expensive overnight-courier services. Today, instead of telephoning or pulling out the FedEx pack, Schlumberger employees can attach documents to an E-mail message using the Multimedia Internet Mail Extension protocol. "I hate playing telephone tag," says Sims. "With E-mail, you have a high level of confidence that your colleague will get the message and respond quickly."

Schlumberger just started using its Web home page as a vehicle for posting information outside the company. But even there it hopes to save money. In November, Schlumberger stopped printing its quarterly shareholders' reports on paper. Now the reports are available electronically at the Web site through Schlumberger's Shareholder Direct service.

In addition, Apple Macintosh users can download a three-minute QuickTime video of Ian Strecker, Schlumberger's executive VP of technology and communications, giving a speech titled "Harnessing Technology To Manage Change." For the future, Schlumberger plans to use the Web to post technical information about its products.

These days Sims says all who are hyping business on the Internet are simply preaching to the choir-those already committed to the Net. But still, it's gratifying to hear. "It's very flattering," Sims admits, "to see so much interest in what we have been doing during the last few years."

GE Plastics
There's a Web site where Net browsers can learn the intricacies of Lexan, Xenoy, and Cycolac. These aren't mythical action heroes in the latest interactive video game or acronyms for obscure network protocols. They're resins and polymers made by General Electric Co.'s $5 billion plastics business, which has turned the Internet into perhaps its best vehicle of distributing technical product information.

Since last October, when GE Plastics went live on the Web, its home page has been accessed about 3,000 times a day. The Pittsfield, Mass., unit is thrilled with the response. But it believes this application has only scratched the surface of the Internet's potential. "The Net is bringing our imaginations to a feeding frenzy," says Rick Pocock, general manager of marketing communications at GE Plastics. "There are so many opportunities here that are unexploited. New ideas are flowing every day."

From Net servers at its headquarters in the scenic Berkshire Mountains of wes tern Massachusetts, GE Plastics is proving how useful the Internet can be for a highly specialized manufacturer whose products won't ever be found in an electronic shopping mall for consumers.

More Graphical Access
GE Plastics developed its home page with help from One World Interactive, a new-media startup in nearby Spencertown, N.Y. GE Plastics also sells a customized version of Spry Inc.'s Internet in a Box, a starter kit that includes Mosaic for desktop Net users, to give customers easier and more graphical access to plastics information. "A lot of companies have done a nice job of PR with their home pages," says Pocock, "but we focus much more on the hard technical information that our customers seek."

GE Plastics views the Internet as a technology for getting closer to its customers. It explored other new media, such as CD-ROM and specialized electronic bulletin boards, but settled on the Internet last summer as the least expensive way to reach thousands of customers with ea sily updated product catalogs and technical specifications. "We were at an information crossroads," says a GE Plastics spokesman. "Even now, we're still in virgin territory to a large extent. The important thing is to keep looking at the information through the customer's eyes and to maintain that customer focus."

GE Plastics will next explore the possibility of using the Internet to distribute other types of information. One likely example: "Sharing The Knowledge," a series of 12 audio-visual courses that GE Plastics has used for five years to train thousands of customers in plastics technology. "We would be doing a service to the plastics community if we put that on the Net," says Pocock. "There's a real dearth of polymer-processing training in vocational schools across the country." Yet GE Plastics draws the line-at least for now-at customers ordering and purchasing products on the Web. "I can't say we're racing down that road," Pocock says.

GE Plastics certainly is in no mood to rush after the Tha nksgiving week firewall break-in by an Internet hacker, which caused no damage but raised plenty of eyebrows about security risks (Click here for story) . In addition to security concerns, GE Plastics has another reason to hesitate: a worldwide electronic data interchange (EDI) network run by its sister business unit, GE Information Services. "GEIS has very good order and billing systems," says a spokesman. "A lot of our customers are on EDI, and we're happy with the way that works."

But for anyone who wants to know more about Lexan, Xenoy, and Cycolac, the Internet will do just fine.

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