Special Technology Report

The Internet promised to drastically change your business. Now state-of-the-art small-company intranets are actually delivering on that promise.

Instant word-association test: What comes to mind when you hear the terms intranet and extranet? Chances are, it's something like this:

Big-company stuff. Internal Web sites with multimillion-dollar price tags at places like Hewlett-Packard and GE and Charles Schwab. Hotshot technology that my small business wouldn't use and doesn't need. And even if we did need it, we couldn't afford it. Right?

Guess again.

True, intranets come to the party with a big-company, big-bucks reputation -- and deservedly so. The earliest private Web-based networks began at Fortune 500 giants like Ford Motor Co. and Sun Microsystems. The best, in some cases, save more money than many small businesses make in a year. And true, they've typically involved large-scale initiatives, such as linking thousands of workers worldwide or putting millions of documents online.

But here's some news that is just as true: private Web sites are changing small business, big time. Small and midsize companies are turning to intranets (and their external cousins, extranets) in much the same way they turned to the public Web a few years ago. And in some cases, they're getting far more favorable results with the private sites. Many are using them to fundamentally change some aspect of their business. A pioneering few are using the sites to drive their company's entire strategy. And they're doing it using technology once viewed as strictly a big-company tool.

We're not talking about companies' using internal networks as electronic filing cabinets for human-resources forms or bulletin boards where Joe in accounting can advertise a used Jeep for sale. We're talking about entrepreneurs' strategically using a broad range of intranet-extranet efforts to gain a competitive foothold in a tight economy, typically by nurturing existing relationships or creating conduits for new ones.

On one end of that spectrum are the rare companies run primarily, or entirely, on private Web sites that let them easily connect with employees, partners, or customers. One of those companies is 1-800-GOT-JUNK, a Vancouver, B.C., trash-removal business whose intranet for its franchisees, called JunkNet, helped to fuel the company's growth from $2 million in revenues in 1999 to $10 million last year. Another is Boston-based SeniorLink, a fledgling company that will launch an extranet later this year to help baby-boomer customers nationwide find care-management services for their aging parents.

On the opposite end are traditional companies that are using intranets to transform one practice, with effects that ripple through the rest of their culture. A sterling example: Extreme Logic Inc., an Atlanta-based technology consulting firm. Like many growing companies, Extreme Logic handles job-performance reviews online. What's unusual is that the company encourages its corporate clients to log on and evaluate the employees who serve them. As a result, company officials say, Extreme Logic has deepened relationships with customers by letting them know they're trusted partners whose opinions count.

In the middle of the spectrum are companies with the most intriguing stories: those whose private sites create unprecedented opportunities. At TemPositions Group, a New York City-based staffing company, an intranet instantly matches customers' requests for temporary employees with contractors who best fit the bill, allowing the 125-employee business to successfully bid against giant national staffing companies for major contracts. Eckert Seamans Cherin & Mellott, a Pittsburgh-based law firm, now coordinates hundreds of product-liability claims filed nationwide against one of its major clients, thanks to sophisticated technology that makes it possible for the firm's lawyers to share court documents with other lawyers in 50 states, Puerto Rico, and the U.S. Virgin Islands. And Eminent Research Systems, in Minneapolis, uses an intranet to dramatically speed up its ability to coordinate protocol documents for medical-device tests, thereby helping the company to increase its business capacity tenfold.

It's impossible to find hard numbers on how many companies are jumping onto the private Web. The few studies done to date confirm only that a growing number of small companies have either launched a private network or expect to do so soon. Most, it appears, still use the technology for pedestrian purposes: storing documents, sharing files, ordering supplies. But we've found a handful of cutting-edge entrepreneurs who are using intranets and extranets to transform their business strategies, in most cases by helping their companies forge new relationships.

OPEN BOOK: Dennis L. Veraldi says that his law firm's extranet improves services for clients.

What's propelling this small-business intranet revolution? Experts tick off a number of drivers: the migration of big-business practices to small-business scale, recession-driven pressure to find new ways to get new customers or better serve existing ones, and increased comfort with doing business online. "All the things that the major corporations were doing two or three years ago are trickling down to the small-business realm," says Ryan Bernard, president of Wordmark Associates Inc., a Houston consulting firm, and author of The Corporate Intranet. "The larger corporations were the proving ground."

Web-usability consultant Jakob Nielsen, whose Nielsen Norman Group, in Fremont, Calif., annually honors 10 outstanding intranets, has recently noticed that more small companies are making the list. Says Nielsen, "That proves it's possible to get good effect out of an intranet without being a huge corporation."

Other experts call the trend evolutionary, saying that it is picking up speed as companies conduct more and more business online. Nearly everyone can use a Web browser, which means that nearly everyone can adapt almost instantly to a Web-based network. And small companies can now choose from a broad range of intranet options, from cut-rate do-it-yourself models to cutting-edge, custom-designed systems. Admittedly, the trend's leaders tend to spend freely to launch, staff, and maintain their private Web sites. Initial five- or six-figure investments aren't unusual, and some ambitious companies may well spend more. But there are plenty of less pricey options, ranging from having a savvy staffer do the job in-house to renting the service. (See " Spin Your Own," below.)

Perhaps the most remarkable cultural change is how many entrepreneurs are overcoming their natural reticence to share information, inside the company or out. Brian Chavis, CEO of ARGroup, a Web and intranet developer based in Leesburg, Va., says that he used to have to pitch the idea of private networks to his customers. "I don't have to do that anymore," he says. "Our clients are telling me that they want this."

What they want, as the leading examples show, are new and better ways to connect with customers, employees, and partners. Rather than blindly following the late-1990s mantra to endlessly hurl money at their public Web sites in hopes of expanding their reach, many companies now look inward for ways to better serve customers they've already got. "Companies are saying, 'Let's really strengthen those relationships as much as possible," says Ray Boggs, vice-president of small-business and home-office research at IDC, in Framingham, Mass.

Randy J. Hinrichs couldn't agree more. Hinrichs, group research manager in learning sciences and technology for Microsoft Research and author of Intranets: What's the Bottom Line?, says intranets and extranets provide the perfect environment for small companies to create and nurture the partnerships they need to thrive. He makes the goal sound almost romantic. "You make long-term, meaningful relationships by saying, 'We can share each other's data,' and knowing that it's going to be consistent and trustworthy," he says.

Executives at Atlanta IT-consulting firm Extreme Logic consider it critical to forge long-term commitments with both employees and customers. So the company sends both to its combo intranet-extranet for performance reviews. The system hasn't directly affected Extreme Logic's revenues, which topped $30 million last year. But it's improved the company's own showing in two top-priority areas: retaining star performers and nurturing all employees. When workers leave -- whether they're hired away by competitors or fired for poor performance -- the company spends as much as three times an employee's annual salary to find and train a replacement. Getting quick online feedback directly from customers lets Extreme Logic reward its stars and provide specific improvement goals for everyone else.

The approach seems to work. Mike Williams, who oversees human resources, says the company's turnover rate is 5% to 10% lower than the IT industry standard. And since the company added the performance-evaluation feature to its intranet, 18 months ago, about 80% of its employees and managers feel that they're working toward the same goals, compared with 52% before, according to an internal study.

For TemPositions, making connections quickly is what counts. The company, one of 350 temporary-staffing agencies in New York City, has begun bidding against the big boys -- including $4.1-billion Kelly Services -- for major contracts. To compete against the industry giants, TemPositions focuses on what CEO and president James Essey calls its core strength: delivering the perfect worker faster. And to do that, TemPositions relies on an intranet that, much like a dating service, instantly matches customer requests with the best available contract employees.

If, for instance, a client company needs a registered nurse with pediatric experience, the TemPositions intranet automatically E-mails the job offer to the best-qualified candidates. The system excludes temps who are already on assignments or unavailable because of vacation or illness. When contractors accept gigs, the intranet automatically E-mails them a link to their own personal job bank sites, where they find assignment sheets with dates, prices, a map, and supervisor contact information. When temps reject offers or don't respond, the intranet solicits the next person in line. Corporate customers can even make their own temp requests online. Essey says the do-it-yourself convenience "cements us to the customer in a big way because once they get into the system and see all the information there, they're less likely to go to a competitor."

That's a far cry from the traditional temp-placement process, which typically requires hours of telephone tag. (Customers call the agency with a personnel request, and then agency employees dig through paper files, call candidates, and wait for return calls.) And the streamlined process, in turn, has allowed the 40-year-old company to go after huge long-term contracts it couldn't even have considered before. At press time, TemPositions was competing for a contract to supply the New York City schools with more than 1,000 temps in a variety of areas, including curriculum and course development and counseling. "We couldn't bid on it if we didn't have these tools," says Essey. "We'd need enough employees to fill a football-field-size call center."

TemPositions, which had about $30 million in revenues in 2001, spent $250,000 building its intranet in 1998 -- primarily, Essey says, on Web design and for the salaries of a chief information officer, a programmer, and a technology troubleshooter -- and it continues to spend liberally on salaries, equipment upgrades, and maintenance. "It's not free," he acknowledges. At the same time, he expects the intranet to reduce the company's head count -- eliminating, for instance, the need for data-entry staffers. Essey says those savings are well worth the investment.

GRAND SCALE: James Parks credits his firm's extranet for letting Eckert Seamans go national.

Speed was the issue at Eminent Research Systems, in Minneapolis, where clogged procedural arteries were stunting the company's growth. The $7-million, 22-employee company specializes in coordinating trials for heart and blood-vessel devices such as stents -- products that typically have a market life span of only 18 months before they're replaced by newer models. Previously, Eminent sent 150- to 500-page study-protocol documents to participating physicians and regulators, who marked them up and mailed them back. Sometimes the hefty hard copies made several round trips before everybody agreed on protocols -- a process that typically took at least two months. The lengthy procedure caused some customers to forgo putting their devices on the market altogether, which meant less work for Eminent. "Turnaround time is key," says Linda Laak, vice-president and chief operating officer. "Our competition is not necessarily another company but whether or not the client will do the study at all."

That changed in February 2001, when Eminent launched an extranet that allows doctors nationwide to collaborate on protocols electronically. The system sliced the approval process from two months to two weeks. Meanwhile, although Eminent spent $50,000 to launch its private Web site, Laak estimates that the company saves 10 times that amount by eliminating the "heavy lifting": shipping, storage, and paying the salaries of two administrative people who handled all the documents. And the company can handle 10 times as many projects at once as it could before, resulting in a 40% increase in revenues.

At Eckert Seamans Cherin & Mellott, the Pittsburgh law firm, an extranet became the key to going national without opening any additional offices. The 44-year-old firm wanted to serve as the national coordinator for thousands of product-liability claims against a major client. But the firm couldn't possibly set up shop in all the affected jurisdictions: 50 states, Puerto Rico, and the Virgin Islands. Instead, the firm's executive team decided it needed two things: a network of partners and a network connecting them.

Those partners were, and are, "local counsel" -- dozens of far-flung law firms that Eckert Seamans hired to handle claims in their own states. The network that connects them is Eckert Seamans's extranet, which contains all related documents, including briefs, transcripts, interviews, research, medical and scientific information, and correspondence.

Obviously, storing paperwork in one location helps everybody access documents faster. But Eckert Seamans argues that the extranet provides two more important benefits. First, it's an unprecedented way to provide clients with a consistent nationwide defense by making sure that all the lawyers are literally on the same page. In addition, it saves time and money by providing those far-flung partners with research to strengthen the cases in their states. And the extranet lets the firm's 215 lawyers coordinate cases in a way they couldn't have before. "There is no way we could have managed and provided oversight to claims in Texas or California," says the firm's executive director, James Parks, citing the time and cost of constant travel, telephone calls, and shipping tons of hard copies cross-country.

The system, part of a firmwide technology overhaul, didn't come cheap: Parks estimates that Eckert Seamans has invested nearly $1.3 million so far, including construction costs to create a separate technology center. But chief operating officer Dennis L. Veraldi is philosophical about the cost. "Sophisticated, larger clients just expect that you're going to be able to do those things, that you have the capability to service them," he says. The firm doesn't even worry much about tracking the system's return on investment. "It's part of the infrastructure, part of the overhead," Parks says. "You have to manage it the same way you manage supplies or telephones or receptionists or libraries or anything else." But he credits the technology with cutting legal-work costs by 6% to 7% annually and allowing the firm to take on more clients.

But Eckert Seamans does worry about security breaches -- and not just those involving hackers. The firm must also protect itself against possible security breaches involving the very partners for whom it established the intranet: those local-counsel firms. "Yes, we're working with them, but they're still competitors," Veraldi says. So the firm relies on a combination of firewalls, multiple passwords, and encryption to make sure those faraway lawyers get access only to the appropriate cases -- and only for the length of their contracts.

For Eckert Seamans and other early adopters, the challenge now is staying ahead of the curve while not getting too far out in front. As Parks puts it: "We're going to be very judicious about what we implement. We have to ask, 'Are we letting the technology drag us? Or are we dragging the technology in a way that's beneficial to us and our clients?' "

But intranet evangelists believe the potential drawbacks -- security concerns, cost, and the constant challenge of keeping current -- pale when compared with the rewards gained from creating new partnerships and strengthening existing ones. Especially in a tough economy, the ability to forge new and stronger links offers small companies the best kind of competitive advantage.

Anne Stuart is a senior writer at Inc. Jill Hecht Maxwell is a staff writer. Send your comments to editors@inc.com.

Why not? It's getting cheaper.

The companies mentioned here got transformational results from their intranets, but they spent a bundle. You don't have to pay your way into intranet nirvana. There are less costly ways to get a little closer to the light. As more small businesses have started using private Web sites, software vendors and application service providers (ASPs) have found ways to reduce the pain of building them. Their offerings range from robust software packages to cheap, basic ones that a monkey can set up online in minutes.

So how do you decide which path to follow? James Parks, who led the intranet project at Eckert Seamans, offers a few suggestions.

BEEF UP SECURITY. Parks won't touch a system that doesn't force users to pass through three electronic checkpoints to enter. But if you don't run a law firm, you may not need security worthy of the CIA.

CREATE MULTIPLE LEVELS OF USER ACCESS. Some users need to read files; others need to edit them. Only a few should be allowed to delete them. So you should be able to determine whom you'll allow into each part of your intranet and what they can do once they get there.

DO AN INVENTORY OF YOUR EXISTING DATA. Can you easily move information from your company databases onto the intranet? When Parks started his firm's project, Eckert Seamans already had 40-plus years' worth of data living on its systems.

CONSIDER STORAGE. If you've got 40 dedicated databases on seven mammoth servers, as Eckert Seamans does, don't even consider the intranets that you can rent for a few dollars per user monthly. They won't provide anywhere near the storage space you need.

So if you need high security and have lots of users and mountains of information, you should start by looking at midpriced software packages -- and perhaps talking with a consultant who's built at least a few intranets before. For less than $6,000, you'll find software from more than a dozen vendors, like Planet Intra, in Mountain View, Calif. Planet Intra's software lets regular nontechie people create multiple levels of security access. All employees can use it to publish Web-ready content on a site, even if they don't know HTML from TCBY. Of course, if you have a decent techie on staff, you can build your own simple intranet with a program like Microsoft FrontPage. You won't need a firewall if you're not letting anyone outside your office log on.

Finally, if your needs are simple -- say, you want a group to share a calendar, swap documents, and hold online discussions -- you can set up an intranet for practically nothing. Intranets.com, the King Kong of off-the-shelf intranet ASPs, charges between $3 and $6 per user per month. Competitor InfoStreet charges $3 per user per month. Or try Microsoft's SharePoint Team Services, which comes free with Office XP Professional Special Edition.

Intranet gurus say that no matter which method you elect, there's at least one thing you should do to ensure that your intranet doesn't turn into the electronic equivalent of Euro Disney. Find out what would make your employees' lives easier. People won't use the intranet if it doesn't help them. "Think about human needs as opposed to technology," says Jakob Nielsen of the Nielsen Norman Group. --Jill Hecht Maxwell

Still want more information on building your private Web site? Visit www.inc.com/keyword/intranet.

Please E-mail your comments to editors@inc.com.