Office available,
$0 per sq. ft.
By Marius
Meland
Forbes.com ©
01.31.00
Scott Houde, a quality manager at software
company CMA Consulting Services, stumbled into a roadblock
last year when he tried to connect his colleagues in Latham,
N.Y., with the company's field workers across the country.
Houde wanted to install an out-of-the-box
intranet--an inhouse server loaded with groupware--and hook
everyone up with e-mail, message boards and shared documents,
contacts
| Free intranets at a
glance
The concept: Free intranets let
small business employees communicate and collaborate
over the Internet.
The package: Web-based e-mail,
calendars, contact lists, bulletin boards, chat rooms,
instant messaging, customized news and financial data
The players: Intranets.com,
HotOffice, Webex, eGroups, Yahoo! Connected Office
The market: There are 24 million
small businesses in the U.S., and 628,000 new
companies are established each year, according to the
Small Business Administration. They spend an estimated
$90 billion each year. |
lists and calendars. The problem: a price tag
of at least $10,000, an enormous cost for most small-to
mid-sized businesses.
So Houde looked elsewhere and found a
solution that's fast gaining popularity among small
businesses. Instead of shelling out thousands of dollars on
networking equipment and groupware, he selected a free
Internet-based solution. He signed his company up with Intranets.com,
which offers all of the basic communication and collaborative
services he needed. Best of all, the costs are fully covered
by advertising.
"It's worked very well for us,"
says Houde. "There's always some cultural resistance, but
we're trying to roll out the system throughout the
company."
Huge growth
The growth of free intranets has been
explosive, fueled by the twin trends of heavy spending on
online advertising and a healthy business environment for
small and home-based offices. Companies in the field are
signing up new users at an astounding pace and are getting
ready to take their story to Wall Street.
Intranets.com, the market leader, claims to
have signed up 85,000 offices with an average of 42 users per
entity. The company, which got help moving into the free
intranet business from Bill Gross' incubator, Idealab!,
expects to sign up as many as 500,000 offices by the end of
the year.
Some analysts and competitors think that
figure sounds suspiciously high, but Rick Faulk,
Intranet.com's vice president of marketing, insists that
demand has been overwhelming since the company pioneered free
intranets in August of last year.
"People aren't just signing up. They're
actively using our product. We estimate that about 75% of the
companies logged into their accounts over the past 30 days. We
currently log about two million minutes of usage per
week," Faulk says.
An advertiser's dream
That's exactly what advertisers like to
hear, of course, and last week Intranets.com penned a deal
with DoubleClick (nasdaq: DCLK)
to move the company to the DoubleClick Select Network. The
network is reserved for companies that can deliver vast
traffic with a high-quality audience.
The interest among advertisers isn't
surprising, says Ian Campbell, vice president of collaborative
applications at research firm International Data Corp.
"The people who sign up for these virtual offices are key
decision-makers in the company, and they're exactly the kind
of audience advertisers want to reach," he says.
Much like portals such as Yahoo! (nasdaq: YHOO),
free intranets offer features that are specifically designed
to enhance "stickiness"--the length of time people
stay on the network--and lure them to come back frequently. In
addition to groupware functions, many free intranets offer
custom-tailored news and financial information, chat rooms,
bulletin boards and instant messaging.
Not surprisingly, advertisers are willing to
pay top dollars to reach business decision-makers. Advertising
costs, measured in costs per thousand impression (CPMs), are
among the highest on the Internet. Free intranets typically
charge a CPM of more than $50, compared with average CPMs on
the Internet in the $20s, industry sources say.
Moreover, many intranets are building
additional sources of revenue by charging for premium services
such as extra storage space and e-commerce sales leads.
Increasing competition
As free intranets take off, the field has increasingly become
more crowded. In addition to Intranets.com, HotOffice
is vying for industry leadership, boosted by its strategic
partnerships with companies such as Staples (nasdaq: SPLS),
Cisco Systems (nasdaq: CSCO),
3Com (nasdaq: COMS),
Hewlett-Packard (nyse: HWP)
and International Business Machines (nyse: IBM).
Other contenders include Webex,
which specializes in online presentations and document
sharing, as well as established players such as eGroups
and Yahoo!'s Connected
Office.
"The reaction has been unbelievable
since we launched the product on Jan. 10," says Michael
Franz, HotOffice's chief executive. "We're signing up 500
new companies every day. The companies have an average of
about 10 users."
HotOffice's rapid growth notwithstanding,
Franz says that the increasing competition is putting pressure
on
| Free intranets: The
risks
Security: Free intranets require you
to hand over control of your company's information to
a third party. How sure can you be that the
information stays within your office walls?
Reliability: When your in-house
intranet breaks down, you dispatch your company's
information technology department. But what do you do
if your connection to a Web-hosted intranet is
interrupted, or worse, if the intranet itself goes
down?
Scalability: Free intranets often
put a limit on your disk storage and the number of
users who can share information. What do you do when
your organization grows beyond those limits?
Customization: Up-market groupware
works with your legacy systems as well as other
applications. Free intranets don't. Are you willing to
make the sacrifice? |
companies in the field to improve their
products. While the various competitors may look similar, they
each have distinguishing factors that users should consider
carefully, such as:
ease of setup and use
integration between modules
offline functionality
security
Vendors unfazed
Vendors of shrink-wrap collaboration
software, such as Novell (nasdaq: NOVL)
and IBM's Lotus Development, aren't worried about the
competition from these startups. They claim up-market
solutions and free intranets are targeting different kinds of
consumers.
"We're not in the business of offering
free software," says Dave Shirk, who heads product
marketing at Novell. "We believe the companies in this
space will find that it's difficult to cover their costs with
advertising if they attempt to move into more sophisticated
solutions," Shirk says.
Lotus emphasizes that the company's flagship
Notes software is more flexible than free online intranets.
Unlike Web-based systems, Notes can be fully integrated with
legacy systems and other applications.
Analysts agree that free intranets don't
represent any real threat to Lotus and Novell--yet. One of the
biggest problems for the free services is that it's very
costly--and difficult--to build more sophisticated software
than basic groupware, says Forrester Research analyst Navi
Radjou.
"To move up the value chain, these
companies need to provide more customized, industry-specific
or function-specific collaboration services. Unfortunately,
these players lack the domain expertise to provide such
services," Radjou says.
Next stop, Wall Street
Nonetheless, concerns about security and
reliability haven't deterred small companies from signing up
with free intranets in droves.
Just like Web-based e-mail, free intranets
have worked hard to persuade users that they can really get a
secure, reliable product for free. They don't expect large
enterprises to enroll, but they don't need that market anyway,
given the size and vivacity of the small-business market.
Now, free intranets are getting ready to tap
Wall Street. Both Intranets.com and HotOffice are planning to
take their companies public, possibly this year, and others
could follow.
With dot-com names, hypergrowth and a
business-to-business angle, they're hoping they can't go
wrong.
