CFO IT - Winter 2004 Issue

Six Degrees of Cooperation

If it's who you know that counts, social-networking software will make sure your colleagues know them, too.

Yasmin Ghahremani
CFO IT

November 15, 2004

Andra Marx knows the value of a good connection. Marx is a senior account executive at IntraLinks, a New York company that provides online meeting rooms in which employees of financial institutions, law firms, private-equity firms, and corporations hash out mergers, acquisitions, and other financial transactions. Earlier this year, she was chasing a lead at a firm that was undertaking a private-equity fund-raising. Using software from Visible Path, she was able to discover, within seconds, that a colleague knew a key decision-maker at the target firm. Sending a quick E-mail that stated her need, Marx secured a reference that eventually led to a sale. In a business in which deals can run to millions of dollars, uncovering those kinds of contacts is like striking gold. "The deal involved some fortuitous timing, but it certainly wouldn't have transpired if I hadn't been able to connect the dots," she says.

Marx is not alone. The corporate world is waking up to social networking, a concept already familiar to huge numbers of adolescents and lonely hearts. The aim is to electronically bridge the gap between you and the person who can bring you love, companionship, or, in this case, money. Popularized by Friendster and similar consumer-oriented sites, social networks acquired a business focus through public sites including LinkedIn and Ryze. Now Visible Path and such competitors as Spoke, Contact Network, Tacit, and Interface Software are installing systems behind corporate firewalls on the theory that employees of a given company are likely to have much more closely aligned interests than users of public sites.

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The value proposition is simple: a company with thousands of workers could have millions of contacts. But making them commercially useful requires being able to dig up the right one at the right time. "It's like finding a needle in a haystack," says Colin Mathews, vice president of business development at Contact Network. "And we're a needle-in-a-haystack-finding machine."

In this case, the haystack is relevant data spread across E-mail servers, contact books, and customer relationship management (CRM) or sales-force automation systems. By crawling through these systems, enterprise-grade social-networking software fills holes left by traditional CRM. "Many CRM systems run into problems because salespeople keep the best contacts out of them," says Scott Allen, coauthor of The Virtual Handshake: Opening Doors and Closing Deals Using Online Social Networks, which is due out next year. These systems dig deeper, he says, so "it's harder to hide who you know."

"Every system I've seen still puts the owner of the contact in control. If it didn't, it would be difficult to get participation," says Allen. "What is different is that the owner of the contact is allowed to control access, sometimes anonymously — that is, they can view requests and assess them without having to indicate that they are the owner."

How well they know a contact also counts: most social-networking software includes information about the strength of relationships. Visible Path takes into account everything from the number of E-mails two people exchange to how often they appear in the "cc:" instead of the "to:" line. If there are several relationship paths connecting a user to a contact, each is ranked by strength.

Making Connections
Applications for this kind of information are as varied as the reasons people swap business cards at cocktail parties — recruiting, business development, even credit checks. But sales is the most obvious: warm introductions beat cold calls any day. "It's just like calling a friend of a friend," says Marx. "You don't have to establish credibility with the person." In fact, in a survey of senior executives by the University of North Carolina, 84 percent of respondents said they would always or usually take a sales call from someone a colleague referred, whereas only 8 percent said they would usually take a call from a total stranger, and none said they always would.

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