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May 24, 1999

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Intranet ROI: Leap Of Faith

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Companies are also gaining hard-number ROI by replacing old computer systems with intranet technology, which is proving to be far easier to develop and maintain than legacy or even client-server systems.

Empire District Electric, a utility company in Joplin, Mo., with 140,000 customers, used the Java programming language to build a new intranet customer information system (CIS). The system, which will go into production in August, cost $500,000 to build. Most of that money went to salaried company programmers.

The system, dubbed Centurion, handles customer information, usage records, rating charges, and most other details of any account. It's accessed internally by Empire employees using workstations equipped with browsers.

Ron Yust, the utility's director of IS, says Java's modular structure, rapid debugging cycles, and cross-platform portability helped the company write the application in a year using only three programmers. Yust says a comparable off-the-shelf client-server or mainframe CIS application package would have cost $3 million to $6 million.

Ron Yust

The lease for the mainframe to run the current legacy CIS costs $500,000 per year, giving Empire District an ROI of 100% on that savings alone.

Still, the original impetus for building the application wasn't cost savings, but survival. The new system's functionality is better than Empire's old mainframe CIS, according to Yust and early end users. And thanks to Java's flexibility, the program promises to be easy to update and change.

In the rapidly evolving environment of the utility industry, which is undergoing deregulation, Empire District desperately needed a CIS that was sophisticated enough to keep up with the company's shifting business model. For Yust, that was more valuable than any ROI he could formulate for the intranet.

Fresher Beer
Some users find that the same rule of return applies to extranets as it does to intranets. That's the case for Heineken USA Inc., in White Plains, N.Y. Late last year, the beer company deployed an inventory-forecasting and sales extranet application to its network of 450 distributors. While the application brings the company significant savings from a reduction in manual data entry and paper shuffling, Andy Thomas, VP of operations planning at Heineken USA, says the program's most significant contribution is in shrinking order cycle time and facilitating better inventory planning. With the new application, distributors only have to order shipments of the Dutch beer four to eight weeks ahead of time, rather than the previous 10 to 12 weeks.

"Our distributors had to order so far out that they couldn't be responsive to what was happening in the market," Thomas says.

But don't ask Thomas to quantify how much such an operational improvement will mean to the company in hard dollars. He didn't even try to calculate that figure.

Call it a leap of faith.