This spring, as market declines spilled from technology stocks into blue chips, businesses announced new layoffs, and some even faced a painful second round of cost cutting. The business climate has reached the point where it's difficult to justify any new expenditures. Yet modest investments in the right technologies can lower business costs as surely as paring head counts can. And unlike personnel reductions, acquiring better technology improves efficiency throughout an organization.
We examined the latest products and technologies to pinpoint those most capable of lowering costs. After talking with dozens of consultants and managers, we focused on five strong candidates, ranging from the obvious (an operating system upgrade) to the unusual (Internet-based phone exchanges).
Our first recommendation is the most straightforward: Add Windows 2000 across your business. Second, and more challenging, invest in an Internet protocol private branch exchange (IP PBX) for voice calls. Third, adopt wireless solutions available today, rather than waiting for more advanced ones down the road. Fourth, for businesses distributing digital data or content, outsource data distribution to companies that speed access via caching. Finally, implement electronic bill presentment and payment (EBPP) services to save money and shorten customer-payment time.
These technologies won't all pay for themselves at the same rate, and some may not suit your business. But they all offer clear long-term savings, as well as improvements in productivity.
Phenomenal improvements in PC performance over the years have been followed by
ever-more-complex operating systems and applications--culminating in operating
systems that double as browsers, media players, and network environments.
Windows 2000 handles these diverse challenges better than its competitors--Linux,
Unix, and Apple's new OS X. And Windows 2000's stability and security are certainly
better than those of any previous Microsoft OS. Its remote-administration capabilities
let support people reconfigure and update users' system and software settings
from a central location. The combination of improved stability and better administration
reduces support and maintenance costs.
Today's users want to plug an amazing array of devices into their PCs: PDAs,
CD-RWs, Zip drives, business card readers, photo printers, and all manner of
application software. Windows 2000 accommodates such additions in part because
it was released more than a year ago. Early OS releases often contain bugs and
may not recognize the latest peripherals. By now, most of Windows 2000's bugs
have been eliminated, and manufacturers have posted a full complement of device
drivers on their Web sites.
Windows 2000 can also accommodate heavy multimedia traffic--the streams of
graphics, video, and audio that are a big part of today's network traffic.
According to Brian Livingston, co-author of Windows 2000 Secrets,using Windows
2000 on servers has advantages in administration, stability, security, and fault-tolerance.
Another big plus, he says, is clustering: Windows 2000 lets servers work in
tandem, boosting overall performance and enabling one server to pick up the
load if another fails.
These advantages can make an upgrade to Windows 2000 a cost-saving move. Although
the initial outlay is an issue--licensing fees run from US$189 per workstation
on up--its better stability and remote-administration features should lower
support costs more than enough to deliver a net gain.
Even the prospect of Microsoft's upcoming XP operating system shouldn't deter
you from installing Windows 2000. As promising as it looks, XP will have its
own challenges for months after the rollout, including the usual collection
of bugs and the likelihood that some peripherals won't install properly.
XP could ship as late as the first quarter of 2002, according to Livingston,
who says that "people usually wait three to six months after an operating-system
release before purchasing it," so that any initial quirks can be fixed.
That puts the time of purchase 12 to 15 months out. Instead of waiting, you
can get the benefits of Windows 2000 today.
Minneapolis law firm Dorsey & Whitney L.L.P. decided that the advantages
of Windows 2000 were worth the investment, though the firm had migrated from
Macintoshes to Windows 95 on PCs just two years earlier. After that conversion,
managers still felt a need for improvement.
"Stability and flexibility were lacking," notes chief information
officer Curt Meltzer. "We also needed a stronger platform to innovate from,
to enhance service to our clients."
But with 1,800 desktops and laptops, upgrading had to proceed in stages. First,
the firm installed Windows 2000 on its newest computers. Then, as older PCs
were phased out, new systems preloaded with Windows 2000 replaced them. All
told, the process took about nine months.
Meltzer believes Windows 2000 offers enhanced security. He says Windows 95/98
and Windows NT 4.0 are fairly easy to hack into, while Windows 2000 deters intruders.
Meltzer did find incompatibilities with the firm's scanning software, so he
set up a few Windows 98-based "scanning stations" to handle that function.
No other compatibility issues arose.
The best part, according to Meltzer, was that because Windows 2000 has an interface
similar to previous Windows environments, employees felt comfortable and didn't
call the help desk very often.
Internet Protocol Private Branch Exchange (IP PBX)
Using computer networks to handle voice traffic provides greater flexibility than
traditional PBX solutions, at a lower cost. In effect, you replace your company's
phone system with one that runs on a voice-capable data network, in the process
getting rid of expensive PBX hardware.
In the past, such so-called voice-over-IP solutions had poor sound quality
and inconsistent call reliability, but today several companies offer capable,
reliable IP PBX systems.
Unlike most technology investments, IP phones yield immediate savings, because
of the lower cost of equipment. In the long term, IP-based exchanges require
reduced support and maintenance costs. In fact, moving, adding, or changing
IP phone extensions or handsets is so easy there's no need to call a technician
when a change is made.
"PBX digital phones cost US$500 to US$800 per phone because they are part
of a proprietary system," says Brian Strachman, analyst with Scottsdale,
Arizona, research firm Cahners In-Stat Group. In contrast, complete IP-based
exchange systems start at US$5,000. The huge cost savings are making IP PBXs popular
with businesses. Strachman predicts that by 2004, IP-based telephony installations
will exceed those of digital PBXs.
IP-based phone systems are easy to maintain and service, lowering the total
cost of ownership. "If you want to move your office, you unplug the phone,
walk down the hall, and plug it into an outlet in your new office," Strachman
says. "You don't have to pay a technician to come and tear apart a box
Vane Line Bunkering (VLB), a marine oil-handling company in Baltimore, recently
added IP-based telephony. VLB's 350 employees manage a fleet of 30 barges and
13 tugboats that ferry oil products between tankers, refineries, and customers
along the Mid-Atlantic coast. To link its headquarters and operations building
in Baltimore with facilities in Philadelphia and Norfolk, Virginia, the company
installed a Fast Ethernet-switched IP LAN-WAN, using three 3Com NBX 100 data-telephony
units, powering 60 NBX handsets throughout its network.
VLB is also testing a more advanced NBX product that allows unified messaging-the
ability for users to access e-mail, voice messages, and fax in a single in-box-plus
additional features. The new product can also be integrated with Lotus Notes
5.0 to let employees at home use laptop PCs as phones, with the help of a software
package called pcXset. Users place voice calls over the Internet, using a microphone
and a headset plugged into the laptop. However, sound quality and call reliability
are lower, since the calls pass over the public Internet, rather than over the
company's private IP-capable network.
Hochman, Cohen, L.L.P. is also implementing IP-based phones. The 20-person
San Diego accounting firm upgraded from a Meridian PBX to a software-based product
called Internet PBX.
"My partner had the Meridian system before we merged, but we wanted to
add features such as voice mail," says partner David Cohen, who discovered
that converting to an IP system saved thousands of dollars.
With Internet PBX, the company retains traditional PBX features, such as voice
mail and auto attendant, while adding advanced ones, such as follow-me call
routing, speech recognition, text-to-speech, and interactive voice response.
The result is a true unified-messaging system.
"We're on the road a lot and must be able to get in touch with clients
at a moment's notice," Cohen says. The new system lets managers retrieve,
listen to, and respond to e-mails from a car, without taking their hands off
the steering wheel.
Moreover, when integrated with Microsoft Outlook, Internet PBX can function
as a basic customer relationship management (CRM) solution, handling customers'
names and phone numbers.
Reduced cost and increased flexibility are solid reasons to upgrade or replace
an aging PBX system. Most employees won't see any difference in performance,
though they will notice the extra features.
Deployments of third-generation (3G) high-speed wireless services are progressing
slowly. But rather than waiting for much-touted 3G capabilities, many companies
are adding wireless solutions based on current 2G standards. Despite today's limited
bandwidth, content formatted and delivered to wireless devices can increase efficiency
and reduce costs, especially for businesses whose salespeople need on-the-road
access to corporate data.
"Companies see wireless access to data as a big time saver," says
Rebecca Dierks, director of wireless research for Cahners In-Stat Group. The
wireless data link reduces the need for salespeople to return to the office
before recording information.
Extensible Mark-Up Language (XML) is the standard of choice for formatting
wireless data. Using XML or its parent, Standard Generalized Mark-Up Language
(SGML), ensures that information will be correctly displayed on small wireless
devices. Applications such as IBM's Websphere Everyplace Suite contain software
capable of converting existing data to XML.
One company reaping the benefits of wireless data access is Facts & Comparisons,
a drug-information publisher in St. Louis. The publisher recently partnered
with ePhysician, which delivers clinical information to physicians via Palm
devices. This partnership lets physicians use a wireless Palm to prescribe electronically
and to access information on more than 3,000 drugs.
Making such information available in a wireless format should reduce phone
calls to pharmacists. This saves time and avoids the errors that can occur when
a pharmacist is interrupted while preparing a prescription.
Wireless services provide the clearest benefits when there's need for constant
contact. That's when real-time contact trumps the very slow pace at which wireless
data normally moves.
"The most frustrating thing for customers is to try to contact a salesperson
in the morning via e-mail only to learn that the person must return to a hotel
that evening before even receiving the e-mail," notes Bill Nguyen, founder
and vice president of wireless provider Seven.
Nguyen says businesses will soon expect wireless data support from all of their
partners. "If you were to ask a salesperson, 'What's your cell phone number?'
you'd be amazed if he or she didn't have one," says Nguyen. "That's
how it will be with wireless content."
Whether content is distributed via a wireless network, a corporate intranet, or
the Internet, it must be accessible quickly and without interruption. Gone are
the days when employees and customers would wait patiently for files to be delivered
or pages to load.
That's why companies that specialize in caching and optimizing data and content
for delivery can help your business. One such provider, Inktomi, delivers data
and content more reliably, more quickly, and with higher quality than original
providers who use their own servers can.
As a result, many companies that produce content or generate corporate data
are seeking optimizing companies to avoid network bottlenecks. Optimizers such
as Akamai, CacheFlow, Cisco Systems, and Inktomi locate multiple servers around
the country or the world and store their clients' content on each, thus assuring
fast delivery when data is requested. Each local server receives periodic updates
of the data to keep it fresh, and each server is fault-tolerant to protect against
power outages and equipment failures.
For a growing data or content provider to build a proprietary network comparable
to Akamai's or Inktomi's would be a massive undertaking. By letting such optimizers
handle data or content distribution, the content providers can grow without
huge investments in network infrastructure and support. Streaming Media Corporation,
based in Englewood Cliffs, New Jersey, followed this logic when it hired a caching
provider to handle its content distribution.
"We were looking for network distribution of live feeds in a robust, fault-tolerant
way, with automatic fail-over, plus management and monitoring capability,"
says Peter Mountanos, Streaming Media's chief technology officer and senior
Not wanting to spend a great deal of money building its own network, Streaming
Media turned to Fast Forward Technologies (acquired by Inktomi last November).
Fast Forward delivers smooth live streaming content across the Internet, using
routers that are able to distinguish among many content streams, for better
performance and reliability.
Not only has Streaming Media found content delivery to be fast and fail-safe,
it's also gained monitoring capability that lets it see exactly how much bandwidth
its customers are using. Moreover, administrators can monitor and adjust the
bandwidth allocation. But perhaps most impressive to Mountanos is Streaming
Media's improved ability to bill customers more accurately.
"Previously, we had to charge by megabytes transferred, using a bunch
of best guesses," he says. "Now we determine exactly what our costs
are, calculate our margin, and charge customers accordingly."
The improved billing changes the relationship between customer and supplier
for the better: Streaming Media charges customers more accurately, and customers
know they pay only for services received.
Electronic Bill Presentment and Payment (EBPP)
Accurately charging and billing customers is essential, whatever business you're
in. By replacing your current billing procedures with electronic bill presentment
and payment, you can save money, decrease the length of payment cycles, and improve
Electronic bill presentment, the first of the the two main parts of EBPP, refers
to the electronic posting of bills to customers. Electronic presentment saves
on postage and paper handling, and speeds bill delivery to the customer.
The second part, electronic bill payment, refers to payment by the customer.
Customers benefit by not having to handle paper checks, and under some circumstances,
payment can be slightly faster than by check.
When bills are presented directly on the biller's Website, the process is called
the "biller-direct approach." Customers go to the site to pay. The
advantage here is to the biller, who gets to control the marketing messages
and incentives that accompany the bill. Biller direct is common where there's
frequent repeat business--say in the case of ordering office supplies.
In the bill-consolidator model, a site or a service aggregates a customer's
various bills in one place. Bill-consolidator sites are convenient for customers
because they permit all payments to be made at once.
Saks, one of the first department stores to offer EBPP services, chose the
biller-direct approach. It contracted Edocs to build the site for customers
to receive and pay bills. While full results aren't in, Saks expects to cut
costs on both presentment and collection. Saks representative Michael Rodgers
says the company needs a 20 percent customer-adoption rate for the program to
succeed--and some adopters must agree to do without paper bills altogether.
"If people turn off paper billing, we save on mailing costs," Rodgers
notes. Even greater savings can be achieved if transactions are routed through
the nationwide Automated Clearinghouse (ACH) payment system, which could save
Saks up to 60 percent over traditional paper bills.
The biller-direct model is the most popular form of EBPP, thanks to early efforts
presenting the service as a free, value-added benefit to customers. About eight
million consumers use bill-payment services, and three million use bill presentment,
says Avivah Litan, vice president and research director at the Gartner Group
in Stamford, Connecticut.
The bill-consolidator model hasn't yet caught on, though Litan believes it
will ultimately drive the market by letting customers handle their bill payments
much more efficiently. Currently, too many bill consolidators are charging customers
without making their services convenient enough.
Until they do, these services won't attract a critical mass of customers, let
alone build the kind of customer loyalty and involvement that companies need,
especially phone companies. According to Mike Tempora, vice president for billing
and Internet solutions at AT&T, loyalty is a prime consideration in a high-churn
business like telephony. To keep them content, AT&T has taken a hedge approach
to EBPP, instituting a biller-direct site for customers who want to go to the
AT&T Website to pay bills, while also signing up CheckFree Corp., the largest
provider of EBPP services.
Bill payment is a chore in the best of circumstances. At least with EBPP, companies
can offer customers a better payment experience, with the potential to gain
customer loyalty, reduce mailing costs, and speed payment.