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ACCOUNTING

LAN of Opportunity
 

Four business people tell how they selected their local area networks and offer advice in the selection process.
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Networks do more than help you share data and printers. They can transform your business

How's this for a low-cost networking solution? In 1990, long on ambition but short on cash, Pete's Brewing Co., in Palo Alto, Calif., shelled out $150 for a wheeled typing cart and plunked a PC on top of it. Then came the tricky part of the configuration -- deciding who in the specialty-beer company's three-person accounting department would get first dibs on the machine.

As an information- and resource-sharing device, the network-on-a-cart was, of course, limited. It usually started its days in the office of the clerk who input distributors' orders for Pete's Wicked Lager or Wicked Ale. When she was finished, she'd roll it over to the person who sent out invoices. Eventually, the thing would end up beside the desk of chief financial officer Jim Collins, who handled the general ledger. "Back then we used our credit cards to buy things," recalls Collins, "so it was difficult to contemplate sinking $25,000 into a network."

Many high-growth companies today are similarly hamstrung because they don't have the cash to buy a real network. Indeed, "sneakernet" -- carrying data on floppies from one PC to another -- has become the de facto networking protocol for small business.

But money is not the only obstacle. Although most entrepreneurs are unfazed by setting up a PC and loading application software, the technical complexity of choosing and installing a local area network (LAN) scares many off. Peer-to-peer or dedicated server? Which network operating system? What about dependability? Will the applications run fast enough? Will we need an MIS department to run it? What about security? To the managers of small companies, questions like these lead to migraines, not to improved margins.

Still, heartening news is coming back from companies on the networking frontier. Sure, some have taken a few arrows in the back. But the pioneers also have discovered that LANs do a lot more than allow employees to share files and printers and send E-mail. They can open up all sorts of business opportunities.

* * *

Virtual brewing
At Pete's Brewing Co. the infernal cart is still in Collins's office, but it has been relegated to a more appropriate role -- today it's a plant stand. Nearly all 40 of the employees at Pete's headquarters now have a 486 PC on their desks, and the company's production and accounting information travels over fiber-optic cable that snakes through the two buildings' five floors of offices. Since installing its 50-node No-vell NetWare LAN in 1992, Pete's has become by far the fastest-growing company in its market segment. Sales in 1994 reached $33.6 million, nearly triple the previous year's revenues.

Coincidence? Not according to Mark Bozzini, Pete's president. "Our ability to manage information has separated us from a lot of our competition," he says. A former Joseph E. Seagram & Sons marketing executive, Bozzini was hired in 1989 to take over day-to-day operations.

Smart production planning is essential in the beer business, a proverbial hurry-up-and-wait endeavor. Making a batch of Pete's Wicked Ale, for instance, takes up to 40 days; once bottled, the product loses its freshness in a couple of months. Back when order-entry people were queuing up to take turns on a single PC, there was little hope of running the brewing company as a just-in-time manufacturing operation. Says Collins, "Orders drive our production, but we couldn't get the data in the computer fast enough to forecast beer requirements."

The network allows several people simultaneously to tap into Pete's PC-based accounting system, Computer International's CA-Accpac/2000, and to tackle the 300 orders that come in from wholesalers each month. More than just data-entry clerks, the folks who used to queue up now have the time to analyze orders before they're filled, and they're counted on to spot ways to optimize production and shipping. Thanks in good part to improved information sharing, today Pete's excels at what Collins calls "the freshness business," turning its finished-goods inventory 20-plus times a year.

Meanwhile, Collins and Bozzini, both self-proclaimed information micromanagers, can quickly pull up reports on raw-materials costs, market-share shifts, and sales projections -- without leaving their offices. "We don't run out of packaging material or get caught with an unforeseen increase in sales," says Collins. Nor do Pete's wholesale customers run out of stock very often.

But the next time you're in Palo Alto, don't go looking for a brewery tour at the company's headquarters, at 514 High St. Since it opened, in 1986, Pete's has functioned as a kind of virtual brewing corporation, producing all its beers and ales under contract in St. Paul, Minn.

A wide area network (WAN) zaps E-mail, using Lotus Development's cc:Mail, back and forth between brewery and headquarters. Workers in St. Paul can now check order and inventory data on the server in Palo Alto. Data usually flow so fast over the 56-kilobit connection that users feel they are connected to a server down the hall, not one 2,000 miles away.

How did Pete's make the quantum leap from cart to far-flung enterprise networks? Pete's built its LAN the way most small businesses do: it hired a network consultant. Collins reports that the vendor, Chris Spence of Edge Information Systems, in San Jose, Calif., asked a lot of questions about the business before uttering a word about network interface cards, hubs, or open data-link interface (ODI) drivers. One of the most important questions: How fast do you expect the company to grow?

"I underestimated," says Collins wryly. "I told him we'd probably double in size every year."

The consultant got the picture anyway: expandability would be a major criterion for the network. That's why he recommended a server-based LAN, a setup that requires all the workstations on the network to interact with a central network server -- a single computer that holds the system's programs and databases and that generally is used to run the printer and other accessories. The other possibility, a peer-to-peer LAN, gives all the workstations on the network equal status: each can act as a client to or a server for the other machines on the network. Although both types of LANs have their advantages, some network consultants recommend server-based networks for sites with 25 or more nodes. They're faster than peer-to-peers when large numbers of users are involved, and they have more security features. (See "Peer-to-Peer or Server-Based?" at the end of this article.)

Once the decision was made to go with a dedicated server, Collins says, choosing a network operating system was a no-brainer. "Novell has something like a 70% market share, and there's a good reason for that. It's pretty bulletproof," he says.

All that technology didn't come cheap. Collins estimates the company has spent as much as $400,000 on computer resources since 1992. "It's been a major cost for us," he admits. But the network has kept head count down. "And quite frankly," he says, "it's impossible to imagine running the business without it."

* * *

Magnifying Resources
Networks have a way of pushing small companies to the next level -- endowing them with the sophisticated information management the big guys have but with none of the bureaucracy. Consider Elite Cos., a $5-million hotel-supply business located in Port Jefferson, N.Y. Elite prides itself on the service it delivers to its 3,000 customers, including all the national hotel chains, with a sales staff of 25.

"The network makes us look like a $1-billion company," says owner Sheila Skolnick, who started the business in 1984 in a spare bedroom in her Long Island home. She credits her network -- a 12-node LAN running InvisibleLAN, from Invisible Software, of Longwood, Fla. -- with allowing her to triple her business without adding to her payroll.

The network, installed in 1993, was the response to a paradox that had troubled Skolnick since the early 1990s. "I was afraid that if we grew too big, the company would choke and die," she says.

Skolnick had built the business by giving individual attention to her customers -- going "back of the house" to talk with general managers or riding shotgun with housekeepers as they scrubbed bathrooms and made beds. But as her customer and supplier lists swelled, the company began to show unmistakable signs of organizational breakdown. While she was out rounding up new accounts, her crew back at the office could barely service the ones she already had.

The source of the struggle: outdated Macintosh machines running antiquated accounting software, and a paper-based customer-information system. When frantic hotel purchasing managers would call to order cleaning supplies, shower curtains, or any of the thousands of products Elite carries, Skolnick's salespeople could hardly remember where they had put customers' file folders, much less what the customers had ordered before. Instead of cross-selling, salespeople were shuffling stacks of invoices and hurriedly paging through manufacturers' product books.

"We needed to function as one big brain," says Skolnick. Throughout 1992, instead of focusing on customers and products, she spent her days reading about customer databases and networks, and pumping salespeople at computer stores. "I was obsessed," she says. "My whole business rested on this purchasing decision, and I didn't want to make the wrong choice."

Skolnick began search- ing for help in setting up a networked database. The trail ended when she found network guru Dick Guzal, of S&E Computers, in Remus, Mich. Guzal agreed to configure a 12-PC LAN for the company.

Skolnick hadn't heard much about InvisibleLAN, the peer-to-peer network operating system Guzal was recommending. "But it was so inexpensive -- about $2,800 total -- I figured, what do I have to lose?" she recalls.

Self-sufficient to the end, Skolnick says she also opted for InvisibleLAN because of Guzal's reassurance that it would be easier to maintain than a server-based system. With her guru a thousand miles away, if the network went down, she'd be the one responsible for getting it back up and running.

Indeed, when the LAN crashed at one point, it was Skolnick who crawled around on her hands and knees, tracing wires until she found the loose T-connector that was causing the problem. Another time, lightning fried a couple of Ethernet adapters -- the cards that plug into the PCs to connect them to the network -- and she had to sweat through 72 hours without the network until she could get replacement cards. But otherwise, says Skolnick, the network has been rock solid, and its performance has made the LAN seem, well, invisible.

* * *

To Network Hell and Back
There are many potential horrors to networking, and Joe Alloway knows them all. In 1991, Alloway, owner and founder of Credit Union Marketing Inc., in Mt. Pleasant, Mich., purchased his first network, a six-node peer-to-peer LAN called Novell NetWare Lite. The idea was to link writers, graphic designers, and typesetters to more efficiently produce the 150 quarterly credit-union newsletters that are the bread and butter of Alloway's more than $4-million business.

Alloway kicks himself for not realizing when he bought the network that both he and the vendor, Computerland, a chain based in Saginaw, Mich., were out of their league. "The poorly knotted neckties on the high school-aged salesmen should have tipped me off," he says. "But what were my options? Companies our size are not going to call IBM or NCR or DEC."

At least Alloway had the smarts to ask for a written performance guarantee from Computerland. The parties agreed he would pay one-third of the $27,000 price tag on delivery and the remainder when the network was up and running. Withholding payment did little, however, to motivate Computerland to solve the slew of problems that beset the LAN.

According to Alloway, the network never stayed up more than a day or two at a time. And whenever it went down, Computerland's solution was to add a new piece of hardware or software to the network -- at Alloway's expense. For example, he found himself forking out about $2,000 for a dedicated printer server, despite the vendor's initial assurance that one was unnecessary.

Says Alloway, "It was such a disaster that the business went on hold for a year." In fact, he blames the network for an embarrassing printing error (a misplaced decimal point in an annual report) that cost him one of his most important clients, a large credit union in Ohio. "That was $40,000 a year lost right there," he says.

The situation with Computerland got downright ugly when the retailer sued Alloway's company in 1993 for back payment. The two parties settled out of court just a few months ago. Not surprisingly, Credit Union Marketing is no longer a Novell site.

After such an experience, Alloway would have been perfectly justified in running his business the old-fashioned way: with manual typewriters, light tables, and waxed paper. Instead, in the past year and a half, he has become one of the most wired businesspeople you're likely to meet.

On sales calls he packs an Apple Newton MessagePad 120 for taking notes. ("Clients like to see a little show biz," he says.) If he's working on a newsletter, he may pull out a QuickTake digital camera, also by Apple, and snap a shot of the credit union's employee of the month. Later, at his hotel, he'll put the Newton back to back with his IBM Thinkpad and zap the information on an infrared beam from it to the notebook. Then he'll dial in to his new LAN back in Michigan -- a 12-node peer-to-peer network that runs InvisibleLAN -- and upload everything onto the network. And if it's not too late at night, he'll send an E-mail to his wife, Katie, who shares CEO responsibilities with him.

Once scorched, Alloway vowed to do things right on his second network. He asked around and got the name of a LAN expert. And this time Alloway tried hard not to be penny wise. Each workstation on his new InvisibleLAN has a tape drive for backup and an uninterruptable power supply -- two niceties Computerland had left out, causing Alloway no end of trouble. All told he paid about $28,000 for the network, including PCs, scanners, printers, and the network software. He's already seen a handsome return on that investment. "The quality of our work has gone up hundreds of percent," he boasts.

* * *

Transforming the Company
Some people question whether it's appropriate for executive management to become entangled in networking. But not Michael Levinson, president of the Weekend Exercise Co. (WEC), a $40-million women's activewear and sports-apparel manufacturer headquartered in San Diego. "For networking to truly transform a company," he says, "someone has to be able to see the big picture and the connections the network can make in all parts of the business."

Without that kind of view from the top, technology tends to accumulate in islands of automation, as it had at WEC. Founded 13 years ago by Levinson's father, Arthur, and two other partners, the company had PCs scattered everywhere for word processing and was using a minicomputer-based order-management system when Michael Levinson joined the company, in 1991, after a stint as a Wall Street lawyer followed by several years of practicing real estate law. "We didn't see the benefit of networking," he says. "We thought we were already on the cutting edge of technology."

It's true that the company's electronic-data-interchange (EDI) capabilities, which allow the electronic transfer of invoice and purchase-order information, were comparable to those of much larger companies. And the company was doing UCC-128 carton coding before competitors in its industry. Yet Arthur Levinson was still writing all his correspondence to customers and suppliers by hand. Even today he doesn't have a PC in his office.

Still, riding on the success of its popular Marika and Baryshnikov lines, the company was growing a respectable 15% annually. Why fix what wasn't broken?

Because cracks were beginning to show. Sales at the company's high-margin specialty store, for example, were sagging. And problems with order processing were hurting the company's delivery record and driving up costs. "We were ripe for reengineering," Levinson says.

The problem, he believes, was the virtual barbed-wire fencing around the IBM RS/6000-based order-management and inventory system. The software, Paragon, simply didn't allow for flexible reporting or quick error checking. As a result, 20% of orders sent to the warehouse had mistakes of some sort. "Our shipping people were spending their time fixing problems instead of filling orders," Levinson says.

To make order information more accessible to the sales force, in 1993 Levinson hired a programmer to create a PC-based system that would mirror the Paragon database. The program he wrote (dubbed OPAL for "order processing application for laptops") allowed the company's 40 sales reps to dial in, upload their orders with on-line error checking, and download updated inventory information onto their laptops. In addition, managers could use their familiar Windows-based accounting package to generate ad hoc reports and fine-tune inventory management.

When the OPAL program was installed, in 1994, it worked well -- maybe too well. Soon people at headquarters were lining up to run reports on the lone PC running the OPAL program. Levinson says the obvious solution was to put in a network and give the dozen people who needed it simultaneous access to the system. But he dragged his feet for months. "I was afraid that instead of becoming a productivity enhancer, the network would become an expensive structure of its own," he says.

To keep costs down, Levinson toyed with the idea of using the peer networking features built into Microsoft's Windows for Workgroups, which was already installed on most of the company's PCs. But when he asked Peter Bybee, a network consultant in San Diego, for help in rigging up the system, Bybee wanted nothing to do with it. The software wasn't "robust" enough to go beyond two workstations, Levinson recalls Bybee's saying. Instead, Bybee recommended an 11-node LANtastic peer-to-peer network, from Artisoft, of Tucson, Ariz. For a license fee of $100 a user, plus the cost of adapter cards, wiring, and installation, WEC finally had its network.

There were growing pains in the first couple of months: some problem would bring the network down for an afternoon nearly every week. But Bybee worked the problems out, and now, says Levinson, "the network pretty much runs itself."

Already it has helped WEC cut its order-handling costs in half. And on the revenues side, Levinson says, the network enabled the company to devise a better system of monitoring its specialty-store business, which is up 20% over the last two quarters.

But that's only the beginning, says Levinson. "Once you have a network, you begin to see possibilities you couldn't have imagined before."

Including, perhaps, a network node in Arthur Levinson's office.

* * *

Brian McWilliams (bmcw@aol.com) is a freelance business writer based in Durham, N.H.


PEER-TO-PEER OR SERVER-BASED?

Choosing between a peer-to-peer and server-based operating system for your local area network (LAN) is akin to deciding whether to go Macintosh or IBM-compatible on your desktop. Although each has distinct advantages -- and loyal users willing to wage war over their favorite -- the systems increasingly resemble each other. Unless you are a technowizard, the choice is best left to your networking vendor. That said, here are some commonly held distinctions between the two:

* * *

Peer-to-Peer Systems
InvisibleLAN, LANtastic, Windows for Workgroups, Personal NetWare

Pros

Less expensive

Easier to install and maintain

Cons

Poor performance with more than 25 users

Difficult to manage with more than 25 users

May be less secure

Individually administered

* * *

Server-Based Systems
IBM LAN Server for OS/2, Novell NetWare, Digital Pathworks, Banyan Vines, Microsoft Windows NT Server

Pros

Expandable (can support hundreds of users)

Centrally administered

Powerful security

Cons

Complicated to install and maintain

More expensive


RESOURCES

The list prices for the following operating systems cover software only and unless otherwise specified are per user.

InvisibleLAN A.I. Software Starter Kit (peer-to-peer): $269; $149 for each additional node. Invisible Software, 939 Longdale Ave., Longwood, FL 32750 (800-982-2962).

LANtastic 6.0 (peer-to-peer): $119; $499 for 5 users; $899 for 10 users; $1,799 for 25 users. Artisoft, 2202 N. Forbes Blvd., Tucson, AZ 85745

(800-233-5564).

Personal NetWare 1.0 (peer-to-peer): $99; $395 for 5 users. Novell, 122 E. 1700 S., Provo, UT 84606 (800-NetWare).

Windows for Workgroups 3.11 (peer-to-peer): $149. Microsoft Corp., One Microsoft Way, Redmond, WA 98052-6399 (800-426-9400).

LAN Server 4.0 for OS/2 (server-based): entry version (for up to 80 users), $795; advanced version (for up to 1,000 users), $2,295. IBM, Personal Software Products Division, 11400 Burnet Rd., Austin, TX 78758 (800-426-2255).

NetWare 4.1 (server-based): $1,095 for 5 users; $2,495 for 10 users; $3,695 for 25 users; $4,995 for 50 users; $6,995 for 100 users; $12,495 for 250 users. Novell, 122 E. 1700 S., Provo, UT 84606 (800-NetWare).

Pathworks (server-based): $3,000 for 10 users; $5,625 for 25 users; $7,500 for 50 users; $11,250 for 100 users. Digital Equipment Corp., 111 Powdermill Rd., Maynard, MA 01754 (800-DIGITAL).

Vines 6.0 (server-based): $2,995 for 10 users; $7,995 for 50 users; $9,995 for 100 users; $14,995 for 250 users. Banyan Systems, 120 Flanders Rd., Westboro, MA 01581 (800-2-BANYAN).

Windows LAN Manager 2.2 (server-based): $1,329 for the server; $1,219 for client access (no user limit). Microsoft Corp., One Microsoft Way, Redmond, WA 98052-6399 (800-426-9400).

Windows NT Server 3.51 (server-based): $699 for the server; $39.95 access charge for each user. Microsoft Corp., One Microsoft Way, Redmond, WA 98052-6399 (800-426-9400).

Last updated: Sep 15, 1995




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