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Talk Is Cheap

Communication is a substantial but rarely considered cost of doing business; electronic mail is changing all that.

In 1976, Centec Corp., a small, year-old Reston, Va. -- based computer systems company, had a problem. The company, which manufactures computer products and provides process engineering services for other companies, was beginning to do business nationally. Centec needed to keep in touch with its laboratory in Salem, Va., with a new office in Fort lauderdale, Fla., and with clients throughout the country.

"We were calling all over the country because we were beginning to sell nationally," recalls Paul Minor, president and co-founder, "and we were building up a tremendous phone bill -- it was running around $5,000 a month." Centec had to cut the cost of communicating, but at the same time it needed to communicate even more.

Fortunately, chairman Charles Matheny, who taught courses in data communications before helping Minor set up Centec, had heard about electronic mail. EM was then a relatively new system of delivering messages by computer. "He recognized that this might be a way to increase our communications and also save some money," says Minor.

EM had potential for numerous applications that were just beginning to be perceived. Some of the earliest computer researchers discovered that before shutting down for the night they could type a message into a computer's memory for the morning shift to read. The notion of using a computer as an electronic "mailbox" formed the basis of EM.

The first true EM system, developed during the late 1960s, was Arpanet, an elaborate network that tied together companies and government offices involved in high-level research for the Department of Defense. By 1976, when Centec first became interested in a system of its own, only a few vendors sold EM systems or services. The market has grown, but it is still in its infancy. According to most estimates, there are only about 200,000 regular EM users in the United States.

The term electronic mail is used for a wide range of services and the related technology, from telex to INTELPOST, the Postal Service's new program of transmitting facsimiles of letters via the Intelsat satellite. But in the context of the modern office, EM is a computer-based message system. The beginner is advised to think of EM as a communication system using terminals and a computer. A chief executive officer, a secretary, or a sales manager can zip a memo to a person down the hall or dispatch a purchase order to a plant across the country; they can communicate with employees only, or with bankers, consultants, or heads of Fortune 500 companies who are also EM users.

For the most part, EM replaces telephone calls and written memos and letters. A company can compose and distribute an electronic newsletter; headquarters can dispatch copies of a new insurance form; an annual report can be edited by officers in different locations; engineers can check specs with their counterparts at another company. Security measures prevent someone else from reading a user's mail or sending junk mail. A system might involve only 2 people, or, in the case of an EM service such as International Computer Services's Dialcom, 30,000.

To use EM, one needs a terminal, the necessary software, and, for most business applications, a large minicomputer such as a Digital Equipment Corp. PDP11, which costs about $40,000. The terminal can be as simple as a keyboard and display unit easily attached to a telephone or as complex as the console of the largest mainframe. An EM program is elaborate and requires some power to run it. As with all things electronic, though, the trend is toward simplicity: Apple Computer Inc. now markets a $250 scaled-down EM software package, but it only permits Apple II+ owners to correspond instantaneously or overnight, using standard telephone lines. Terminals, software, and computer can be purchased, rented, or leased, either individually or as a system. The most basic requirement is a telephone.

Using EM is no more difficult than using a typewriter.One EM vendor claims to be able to teach someone to send messages in about five minutes. Sitting at a terminal, the user types in a personal identification number, the name of the person or group being addressed, the recipient's code number, and a message. Direct lines (in the case of an in-house system) or telephone lines carry the information to a central computer, where it is stored until the addressees retrieve it, by using a terminal much as the sender did. Messages may be read and then expunged from the computer's memory, filed for future reference, routed to a third party, or printed out if it is necessary to have a hard copy.

When it decided to use EM, Centec already had had some exposure to the process: One of Matheny's friends had been intimately involved in Arpanet and, because Centec did some defense-related work, there was a "mailbox" on the system for a while. But in 1976 only a handful of companies offered commercial EM.

Centec wasn't interested in an in-house system, which would have been far too expensive, so it shopped among the services. "We took a look at several," says Matheny, "but found that, in general, they were too complex. They'd been designed by computer people and had lots of marvelous features but were difficult for people to sit down and use. They were also somewhat slow and expensive."

Matheny also had friends at International Computer Services, a company based in nearby Silver Spring, Md., which was developing an EM package. He made some suggestions, and when they introduced Dialcom it was to his liking. Centec began using Dialcom in late 1977. Notes Matheny: "If the competition turned out to be more cost-effective, we'd look at them."

Centec had number of in-house microcomputers when it signed up with Dialcom. Although they weren't large enough themselves for EM, they could plug into Dialcom's mainframe. Today, Centec's system consists of 15 terminals, several of them portable units, public and private-network telephone lines, and Dialcom's computer in Silver Spring.

Initially, Matheny and Minor were the principal users of electronic mail, but soon other employees were seduced by the system, with rewarding results. "After we installed Dialcom, you could plot our phone bill -- it just went down on a beautiful curve," says Minor. "It dropped off several thousand dollars during the first few months, with a lot more communicating going on."

Having used EM for five years, Minor is sold on it: "It's very cost effective... It's a lot cheaper and more reliable than mailing a letter, and a lot cheaper than the telephone."

The one advantage electronic mail doesn't have going for it at the moment is a high public profile. Unlike record keeping, word processing, or data-bank search and retrieval, EM is one computer skill with applications, benefits, expenses, and shortcomings that aren't yet fully appreciated or understood by most businesspeople.

"It's still a buzzword in the business community," observes the head of a national association who is enthralled with EM after having used it for only eight months. "People really don't know what it is, but when you begin to talk about its potentials, their eyes light up." Each new user discovers fresh possibilities. "Asking what you can do with EM is like asking what you can do with a pen," says one CEO.

Matheny points to his own daily correspondence to illustrate EM's uses. "Yesterday, I received a message from one of our marketing people -- someone who's out on the road a lot -- asking me to meet with a potential client; he also 'carboned' a copy to his boss. Then we got a message from our office in Cincinnati with the waybill number and estimated date of arrival of a computer systems shipment, which I 'copied' to several people who needed to know about it... And, finally, I got a fairly lengthy message about a show, the National Computer Conference in Houston that we're going to have an exhibit at."

"The other thing we've done," says Minor, "is, when we get major clients, we give them a terminal and a 'mailbox' so that they can communicate with us whenever they want to."

Minor notes that because a computer receives, stores, and recites the messages on demand, EM is unaffected by distance, time, or the availability of other people. The sender types in a memo or report when it is convenient. With a small portable terminal that connects to any telephone, correspondence is as easy from a hotel room in Paris as from the office in New York, and once in-flight telephone service is a reality, communication will be possible en route. The recipient enjoys the same ease and efficiency. As a result, the EM user doesn't have to wait for a stenographer to return from a coffee break, wonder whether a partner has reached the L.A. office, or calculate what time it is in Madrid. "You don't have to wait for the mailman, or play 'telephone tag' with people," says Minor.

As a result, white-collar efficiency increases 15% to 20%, according to a number of studies, and it isn't unusual for a typical executive to save from 30 minutes to an hour of work time each day. James Bair, of Bell-Northern Research Inc., estimates that heavy use may yield savings of up to two hours: 30 minutes of wasted time (only 28% of telephone calls are completed the first time, whereas 100% of EM messages are, and phone calls average 9 minutes, compared with 3 minutes for EM), one hour lost to interruptions and restarts, and at least 30 minutes of professional time for clerical tasks.

With EM, the savings accrue at virtually every step. The cost of composing an EM message is significantly less than that for a letter. Because of the informality of the medium, typos are tolerated, prompting executives to compose their own letters rather than go the dictatetype-revise-and-retype route. And with many terminals, editing can be done offline, that is, without using computer time. The cost of transmitting an EM message is generally less expensive than the alternatives.

One EM system charges about 18? to deliver a typical message at night (the average charge is 50?) compared with the Postal Service's 20? charge for three-day service or an overnight delivery service's $9.50. The costs of preparing and sending a letter -- executive time, secretarial time, paper, mail-room time, postage -- may well exceed $15. Another EM service, Telemail, estimates its equivalent "all-in" cost at $4.10.

Minor notes that Dialcom quickly chopped more than $2,000 from Centec's monthly telephone bill but says the company hasn't calculated all of its savings. "You realize that you're saving money, and recognize that you're working more efficiently," he explains, "so you simply accept communications as one of the built-in costs of doing business."

Manufacturers Hanover Trust Co. and Owens-Corning Fiberglas Corp. concluded that the system was responsible for major savings. Owens found that EM, competing with memos, letters, and phone calls, averaged a savings of 25? per message, cutting annual costs by $500,000. Manufacturers Hanover discovered that employees were saving as much as an hour a day and pegged the potential savings at $2.5 million.

And because the actual transmission is virtually instantaneous, a company can get information more quickly and keep closer tabs on developments. This opens another whole area for savings and profit making. The vice-president of finance for a California electronics company that uses EM notes, "We have a centralized cash system, and I used to have clerks spending 1 to 1 1/2 hours per day on the phone recording what cash came in so that we could keep fairly decent control of our receivables. Now we just put them on the Comet system... It saves us a lot of time and money."

The price tag for all of these benefits may range from a few hundred dollars per month for a service to more than $500,000 for a sizable, installed system. Most major manufacturers -- IBM, Digital, Wang -- offer computers that are capable of handling EM software, and several produce specific EM systems. Inhouse systems, however, are generally reserved for larger corporations -- the Exxons and Manufacturers Hanovers -- or for those with significant hardware already in place.

A small computer company, for instance, might lease EM software to use on its own mainframe. It would find a decent and growing selection from which to pick: Mailway (Wang Laboratories), DECmail (Digital Equipment), InfoMail (BBN Information Management), and Comet (Computer Corp. of America), among others. The software license fee, depending on the vendor and the equipment for which it is intended, might run from $10,000 to more than $60,000.

Small businesses without a computer orientation more frequently opt to use an existing EM system; the principal ones are InfoMail, InfoPlex (CompuServe), Telemail (GTE Telenet Communications), and OnTyme-II (Tymnet). Most charges are based on the amount of time a system is connected with the main computer ($9 per hour during the day for Dialcom). But other considerations, such as the time of day and charges for storage of messages, make point-to-point price comparisons difficult. "I'm always amazed at the different ways the various companies compute their charges," notes Matheny.

The cost of renting a single terminal (to be used by three people) and service on the system runs about $125 per month. Centec, with its 15 terminals and some 40 users, pays Dialcom $500 to $600 per month. The cost of an individual message consists of computer, terminal, and telephone charges, and averages about $1, which is less than the price of most business calls.

"In the final analysis," says the marketing director for one EM vendor, "each company has to evaluate its own needs and decide which system or services can fill them... before it can begin comparing costs -- frequently, it's a pretty close call."

Although it has much to recommend it, EM isn't for everyone, and those companies that can use it should be aware of its shortcomings. "Nobody really understands what this thing is all about until they start using it," says Thomas Marill, president of the Cambridge, Mass.-based company that markets Comet.

As a result, he says, there are some dissatisfied customers. In about one out of three cases, he explains, "people use it for a while. And then they say, 'It's not what we thought it was; we don't like it -- take it out." In the other two cases, he quickly adds, "Two or three people begin using it and then, after a week or two, they tell us, 'Oh, wow, now we understand what this thing is all about!" They're really enthusiastic." At Centec, says Matheny, "If you tried to take it away from our people now, you'd wind up with a fight on your hands."

But a prospective user must consider whether the volume of communication warrants EM, how fast and reliable the service is -- a function of how many private telephone networks and computers support it, the quality of maintenance, and how charges are calculated. The decision-making process most often begins with a detailed analysis of a company's written and telephone correspondence. And, once a company elects EM, there are hazards to be avoided.

Minor warns against the lure of the many options -- scheduling, accounting, databank search -- that many EM systems offer. "There's always the temptation to get into some of the other time-share features," he explains, "but they can burn up a lot of money. We try to stick to the primitive features." Another pitfall, he notes, is the cost of storing correspondence when it is no longer needed. "A couple of times our charges jumped because people were pumping up huge files of information and not deleting them. Our storage costs became excessive, so we had to impose some discipline." But, otherwise he has nothing but appreciation for EM.

"Now, my bill -- and I get more traffic than anybody -- is running about $30 to $40 a month," he says enthusiastically. "You know," he adds, "when you're in a growing situation, and your managers are all running off in different directions, and you're trying to keep everybody informed, EM is incredibly valuable."

When it comes to growth, Minor is something of an authority. In 1976, Centec had 14 employees and revenues of $302,000, but by 1980 it had mushroomed to 80 employees and $3.6 million in sales. The company placed 85th on the INC. Private 100 (INC., December 1981); this year it expects to do $6.5 million in sales.

"I'm not about to say that EM is the reason we're on the INC. 100 -- a lot of things go into that," notes Minor. "But it played an important part. It's been a valuable management tool for us."

Last updated: Aug 1, 1982

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