Techwatch

Pushing the Envelope
Adecade ago, workers who wanted computerized communication with their cohorts were likely to sign up for MCI Mail or similar offerings. Despite its heritage as an outsourced service, however, today E-mail is one function that most companies seem unwilling to leave to others. "And yet," argues Scott Chasin,

chief visionary for USA.Net, "E-mail is an application like any other, and one that is more easily outsourced because there are well-established standards."

Chasin and his competitors are working hard to drive home that message, and with some success. Companies as large and diverse as American Express Co., United Air Lines Corp., and Circuit City Stores Inc. have all signed contracts with outsourcers to provide E-mail to thousands of employees, and most analysts say the approach is even more appealing to small and midsize companies.

The benefits of outsourced E-mail are similar to those of other forms of technology outsourcing: better reliability, lower cost of ownership, and the ability to focus internal staff on more important tasks. A bevy of communications standards makes it relatively easy to provide Web- based E-mail, or to host proprietary systems off-site. And vendors are touting prices as low as $5 per mailbox per month, whereas internally supported E-mail can cost hundreds to thousands of dollars per user per year, according to The Radicati Group Inc., a Palo Alto, Calif.-based consultancy.

Therefore it's not surprising that companies that specialize in outsourced messaging services, including USA.Net, Critical Path Inc., Mail.com, and others, are experiencing triple-digit revenue growth. Traditional outsourcers such as IBM Global Services and Compaq, as well as most telcos, are also pursuing the market. Yet, despite the advantages and the competition, fewer than 5 percent of large companies currently outsource their messaging, according to David Ferris, research director at Ferris Research, in San Francisco. "It absolutely makes sense to outsource it," he says, "and five years from now it will be common."

A Top-Line Boost
For that to happen, says Ferris, vendors must do a better job of understanding the market. "Most are out there selling purely on cost savings," he says, "but customers are more focused on reliability, security, and predictability of costs."

In fact, some companies view outsourcing as a way to boost top-line potential. For instance, Circuit City recently gave thousands of its sales associates access to Web-based E-mail from Critical Path (www.cp.net), in an effort to improve training and communicate details about sales promotions more effectively. The Richmond, Va.-based electronic- products retailer hopes that more information will result in more sales.

Using an E-mail outsourcer on a limited basis appears to be the method of choice for many companies, and is "a great way to get comfortable with the idea," says Maurene Kaplan Grey, senior research analyst at Gartner Group Inc. And companies do seem to be getting more comfortable. A Gartner survey conducted in late 1998 found that 73 percent of respondents wouldn't outsource any component of their messaging systems. Eighteen months later that figure had dropped to 56 percent. One major inhibitor, Grey says, is security. "There is so much intellectual property in e-mail," she says, "that companies are hesitant to outsource."

But security was the motivation for Bloomington, Ill.- based insurance company Country Cos. Hundreds of its employees relied on an antiquated, modem-based system that was vulnerable to hackers, so it gave some employees access to outsourced Internet E-mail. "We're still using the old system," says Steve Heisler, the company's senior analyst for Web services, "but we'll likely phase it out." To an outsourcer? Heisler says that's unlikely.

IT PRIORITIES

E- commerce Tops the Charts

Financial executives are unanimous in proclaiming E-commerce a critical priority, even as they admit it can be hard to decide how much to invest in technology and harder to assess its ultimate value. These are some of the key findings in the third annual "Technology Issues for Financial Executives" survey conducted by the Financial Executives Institute (www.fei.org ) in conjunction with Computer Sciences Corp.

Nearly 60 percent of the 345 executives polled said that developing an E-commerce strategy is a "very critical" issue for their company. That's a big jump from last year, when only 26 percent ranked E-commerce strategy as a very critical issue. And it's clear that executives see big things ahead for E-commerce: asked how the Web will affect business other than facilitating transactions, half the respondents predicted that channel structures will change, 49 percent said it will create new channels, 45 percent said it will create new businesses, and 39 percent said it will make possible new products or services.

This isn't lip service. The number of respondents who indicated that their firms are now piloting E- commerce applications jumped from 32 percent to 52 percent, while those who said they have no involvement in E-commerce and no plans for it fell to a mere 5 percent. "E- commerce clearly dwarfs all other concerns," says Dewey Norton, vice president of finance at the Ricon Corp., in Panorama City, Calif., and vice chairman of the FEI's Committee on Finance and Information Technology.

• 1
• 2
• 3
• next »