Private corporate nets and the public Internet

It is beginning to look as if the Internet is here to stay. With such developments as electronic commerce, B2B and B2C, Yahoo, Amazon, e-Bay, and all the rest of it, technology is again revolutionizing our culture, Those of us who were kids in the 1960s would probably think that 13213 means "born-to-boogie," but it actually refers to a category of increasingly significant economic activity - activity that amazingly enough did not even exist ten years ago. It actually means "business-to-business" trading over the Internet.

INTERNET IMPERATIVES

Jupiter Communicatins (a premier Internet research firm) says that the number of Americans who buy online (that is, business-to-consumer or B2C) will rise from 18.8 million in 1998 to 85 million by 2003, reaching $78 billion in U.S. sales that year. On the other hand, the Gartner Group (a high-tech consulting firm) estimates that the total worldwide B2B sales, after topping out at $145 billion last year, will reach $7.3 trillion in 2004. Actually, these kinds of forecasts vary considerably depending upon the source, but all the pundits agree on one thing: the market potential here is huge! These figures illustrate that while excellent potential for growth exists in the business-to-consumer area, today it is business-to-business that is dramatically leading the way to the e-commerce Valhalla. For example, Forrester Research notes that the B2B segment of the e-commerce marketplace is at least five times as large as the corresponding B2C segment, and some analysts are saying the difference is even as much as a factor of ten.

No business can afford to ignore what is going on here. The realities of conducting more and more business electronically mandate internal structural change. Companies must seamlessly integrate their own private corporate networks (the ones that they use to conduct their internal business operations) with public networks to afford their customers ease of access to a variety of online corporate services. Companies also must establish seamless integration of their internal private networks with critical external organizations (such as their suppliers, distributors, business partners, and maybe even some government agencies - sometimes called business-to-government, or B2G) to allow for smooth business operations. So, a revolution is underway that promises to change the internal architectures of corporate networks. As a result, the technical structure of the Internet is finding a home inside corporations.

NET PROTOCOLS

Corporate computer and network infrastructures are generally made up of many hundreds to many thousands of leased telephone lines knitted together with computers, switches, routers, and so on that move data around inside a private corporate network. When a communications link is established, a communications "protocol" is used to automatically initialize the link and control the flow of information through the appropriate parts of the network. Using a protocol is actually a familiar process. Take, for example, an ordinary phone call. When answering the telephone, one generally says, "Hello," and the person on the other end responds with "Hello," as well. This is a kind of verbal protocol that establishes that the persons exchanging information in this way are ready to begin talking. Along with dialing the phone number at the beginning, this verbal exchange in a sense initializes the link.

Another part of this commonly understood verbal protocol is, of course, that both persons should not speak at the same time, a rudimentary form of flow control. A telecommunications protocol works similarly, exchanging the equivalent of an electronic "hello" between communicating machines. A protocol specifies the exact procedures to be followed to establish and control a communications link. Think of a protocol as "electronic handshaking." Each machine in a link sends control signals to establish how information will be transmitted and interpreted, both from switch to switch within the network and between the machines from one end to the other. Control signals are sent at the beginning and end of communications sessions and intermingled with the data throughout the sessions. As long as each machine is following the same protocol, machines can communicate.

"LOOK WHAT I FOUND!"

In the 1970s and 1980s, only a handful of companies provided most corporate networking protocols, equipment, and facilities. For example, IBM's System Network Architecture (SNA) and Digital Equipment's DECNET were important players, along with products from AT&T and others. These protocols today are often integrated with TCP/IP (defined below) to create hybrid corporate nets that marry older networks and applications with the Internet. Back then, it was safe to say that all the important network vendors knew what the ultimate structure and potential of networking architecture could be, but they had too much invested in their older proprietary protocols and networking products to make any significant change.

Then businesses began to notice the existence of a family of esoteric, academic net protocols that had been quietly developed and refined over several decades under the auspices of the U.S. Department of Defense. These already-existing protocols had real promise; they were operationally well tested, and they had even been in the public sector, meaning not under the control of any one company as the earlier proprietary protocols had been. That family was, of course, TCP/IP, and it was the protocol suite of the fledgling Internet. TCP/IP stands for Transmission Control Protocol/Internet Protocol. It includes a group of related protocols that were first developed for the pioneering ARPANET network in the late 1960s, which itself was developed by the U.S. Department of Defense's Advanced Research Projects Agency (or ARPA) to interconnect those working on U.S. Defense research projects, many of whom were at U.S. universities. Supplemented with Internet browsers and the protocols (and programming languages) of the World Wide Web (HTTP, HTML, XML, and others), TCP/IP was the basis of a powerful networking architecture.

ADOPTION OF INTERNET PROTOCOLS WITHIN CORPORATE NETWORKS

Once TCP/IP made it into the realm of corporate awareness, all bets were off. The old protocols used formerly by business did not measure up, and the astounding growth of Internet use in the early 1990s fueled corporate interest in the "new" protocols that supported it. The key driving force was the quest for protocol compatibility among business networking infrastructures. Pressure to standardize protocols as much as possible to simplify network operations, maintenance, and support has always been there; and using standard Internet protocols within a company, as well as outside, just makes good business sense. Hence, the movement by corporations toward adopting the protocols of the Internet internally was a natural outcome of the growth of the Internet itself. This refers to Wide Area Networks (WANs) only and not Local Area Networks (LANs) such as Ethernet. TCP/IP is a WAN protocol. Ethernet controls communications between groups of desktops that are interconnected by an Ethernet LAN; it is often used in conjunction with the TCP/IP protocols and can be fully integrated.

Many different families of protocols have been promoted by different companies over the years. As noted earlier, the one used in the Internet is TCP/IP. An internal corporate network using TCP/IP protocols, and featuring the usual WWW logic and browsers, is called an Intranet. By definition, an Intranet is fully compatible with the Internet because it uses the same protocols. That means that groups can easily access a company's internal network from outside via the Internet with full compatibility. This compatibility is both good and bad. It is good because it means that a company does not have to support numerous incompatible network protocols internally or across its supply and distribution channels or among its corporate partners. It is bad because unauthorized individuals will find it easier, if they succeed in getting through a corporation's network security systems, to cause mischief throughout the internal network.

An Intranet can be extended in a controlled way to give external organizations permission for limited internal access, resulting in a network called an Extranet. Extranets are used to aid the transmission of intercompany business transactions and information by directly linking corporate networks. Generally, a firm's suppliers, distributors, and/or partners enjoy limited, authorized access to the firm's computer applications and facilities from outside the firm by connecting to its Intranet, as needed, to conduct business operations. Of course, this process is greatly simplified if all the groups involved use the same network protocols. Extranets, by definition, use Internet protocols. Thus, the entire complex of Intranets, Extranets, and Internet protocols are fully technically compatible with one another among companies and even industries.

MAJOR PARADIGM SHIFT

The year 2000 appears to be the year of the Intranet. According to IDC Research, about 4 percent of corporate employees worldwide had access to Intranets in 1998. By the end of 2000, nearly two-thirds, or 64 percent will be on Intranets. Concurrently, 13213 trade sites are evolving into large-scale industry-specific trade centers called e-Marketplaces. With the Internet already well established around the world and Intranets coming into the forefront this year, it is a relatively small step technologically to extend the Intranets to create Extranets as required for given business situations. It is a matter of superimposing the appropriate external Internet-gateway structure and security mechanisms onto the architecture of the corporate Intranet to provide for controlled external access. Such security systems include hierarchies of passwords, encryption schemes, firewalls, proxy servers, bastion hosts, and the like.

The next step is a full complement of web-enabled corporate systems software. In addition to more conventional applications, these will increasingly include multimedia and groupware technologies as well. A multimedia application incorporates video, voice, and data segments simultaneously in one user application, usually at least partially online. Groupware allows groups of coworkers to work on the same project at the same time from remote locations on the network. The robustness, flexibility, mobility, and ubiquity of the Internet/Intranet/Extranet corporate network architecture will help motivate corporations to jettison their old-fashioned systems (so-called "legacy systems") in favor of a computer-applications portfolio that can take advantage of the web-based network technologies.

Concomitant with this will be the development of enterprise-based, rolespecific "employee portals" to enable employees to access the sets of information-systems applications that they need to do their jobs. Portals would be achieved by establishing customized web-browser startup pages for employees based on the work that each employee normally does. For example, it would include windows and buttons for accessing applications and databases that the employee needs to do a specific job. The web portal becomes an important part of each employee's individual view of the work environment.

In this scenario, there is no rest for the weary. Gathering momentum on the horizon is a new, oncoming tidal wave of business-to-consumer ecommerce. As people around the world move online and begin to purchase goods and services, the effect on corporate networks again will be dramatic. Consumers naturally will need to be linked directly with the manufacturers and other providers of goods and services in a way that has never been contemplated before. Furthermore, Geoffrey Moore, author of Crossing the Chasm, says interconnecting individual consumers electronically is truly a revolutionary undertaking. Fortunately, adapting corporate networks to Internet protocols will simplify the whole process by ensuring the protocol compatibilities needed to function in the 132C networking environment.

Furthermore, from a retailing perspective, it is clear that the incentives will be there to replace many traditional bricks and mortar storefronts with electronic storefronts. Just considering the economics of warehousing and distribution and the conveniences of shopping at home is enough to make this point. As experience with (and especially trust in) consumer-oriented e-commerce develops, the network infrastructure developed to handle 13213 will prove invaluable by enabling corporations to deal with future expansion of B2C. Thanks to 13213, the core of the network infrastructure will already be in place, and it will provide the basis for B2C linkages with the public Internet that will be essential. Jupiter Communications estimates that the infrastructure build outs by firms to support online business operations over the next three years will approach $350 billion.

CLOSING AND SUMMARY

As the eminent management theorist Peter Drucker has pointed out,

"Efficiency is doing things right, and effectiveness is doing the right things." Both are obviously critical aspects of managing information technology successfully. The Internet/Intranet/Extranet communications triad makes it feasible for organizations to use their internal corporate networks as never before possible, thus achieving greater efficiency and effectiveness and improving their chances in the brave new world of electronic commerce. Companies can better organize and use their internal network architectures. They can interlink appropriate portions of their private networks to increase competitive advantage in the marketplace by streamlining supply and distribution channels. Companies can also knit together their business endeavors with those of their various business partners to achieve synergies not possible with previous generations of equipment and protocols. In other words, corporations can more efficiently and more effectively implement B2B and B2C trade strategies into the foreseeable future using Internet protocols internally in Intranets and across organizational boundaries in Extranets.

Charles K. Davis is an Associate Professor in the Cameron School of Business at the University of St. Thomas in Houston, TX, and is a past Chapter President of Phi Kappa Phi. He has taught previously at the University of Houston and held information technology analyst and management positions with IBM, Chase Manhattan Bank, Occidental Petroleum, Pullman Incorporated, and Deloitte & Touche.

Copyright National Forum: Phi Kappa Phi Journal Summer 2000
Provided by ProQuest Information and Learning Company. All rights Reserved