Internet preacher leading business past e-commerce

By MICHAEL FOREMAN

MELBOURNE - As the "chief evangelist" of internet infrastructure company Cisco Systems, Howard Charney is an enthusiastic and convincing preacher. When he says that the internet will change the way we work, live and learn more than any other technology people should listen.

For Mr Charney is a senior vice president of a company that has become a benchmark in the internet economy.

Cisco leads or holds the second position in every market segment it competes in and, at some stage of its travel, over 80 per cent of all internet traffic passes through a router, switch or other equipment with Cisco's badge on it.

The company is one of the world's most highly valued corporations worth $US488 billion ($1.16 trillion), yet its turnover in 1999 was just US$12.2 billion.

That someone buying $1000 worth of Cisco stock at its float in 1990 now finds their stake worth $1.1 million today has not gone unnoticed by investors. When Cisco's name appears on a company's share register its price will soar.

So when Mr Charney says companies in Australia and New Zealand are still at the early stages of internet development and many organisations here "haven't quite got it," alarm bells should ring.

While they realise the internet is "the main game - not a sideshow," companies in this region are mistakenly focusing on stock market gains.

"It's very sexy to say we've got a dot com company ... it's less sexy to say we've got a really effective supply chain management system in place, but that is where the real gains are going to be made."

Mr Charney said dot com companies - jargon for business to consumer operations - were "somewhat of a red-herring" as three times their revenue would flow from business to business sales.

He cites Forrester Research's most conservative figures which predict the value of e-commerce would reach at least $US1.8 trillion by 2003, with $US1.3 trillion of that figure represented by business-to-business transactions.

Australia and New Zealand managing director Terry Walsh said in the last nine months delegations from companies in Australia and New Zealand have beaten a path to Cisco's door asking for directions to the new economy.

More than one Australian listed company has sent its entire board to Cisco's California headquarters, but fact-finding by New Zealand companies was conducted at a lower level.

While some of these missions arrived with an awareness that they must act with "quite some sense of urgency" they were not clear what it is they should do.

Mr Charney says that the full benefits of the internet for business lie beyond e-commerce. "It's an even more powerful means of reducing costs."

One of Cisco's philosophies is that the company should "not just cook it but eat it too," and Mr Charney illustrates his points with the company's own experience.

"Look out for the parts of your operation that are the most frustrating for your customers, suppliers or employees and tackle them first. You should concentrate on the things that give you the biggest headaches," he advises.

"For us it was technical support, employee communications and then e-commerce."

Mr Charney says that over 80 per cent of Cisco's customer support questions are now answered on the web rather than by telephone.

This has saved more than US$75 million annually since the system was installed in 1996, and while sales have doubled over that period the number of customer support employees increased by only 10 per cent.

A further $US270 million a year has been saved by downloading 50,000 software updates that were previously shipped on CDs.

The internet has also been used to speed up expenses claims for Cisco's 20,000 staff. All told, Cisco is saving US$55 million from its employee self-service applications.

While e-commerce now accounts for 84 per cent of Cisco sales, Mr Charney says it is important to continue to refine a system once it is in place.

For example, Cisco components were previously sent for final configuration to its distributors and dealers before being shipped to customers. Dealers and distributors now upload configuration details to Cisco, and orders are sent directly to the customer.

Cisco estimates that all these web related initiatives have increased its employee productivity by 20 per cent, customer satisfaction by 25 per cent, and has saved $US800 million a year.

Mr Charney is convinced that similar changes implemented by companies in all sectors worldwide will save $US1.25 trillion by the year 2002.

In the world according to Cisco, the real rewards of the internet economy will come through changes in unglamorous business processes rather than by short term capital gains.

* Michael Foreman attended the Networkers 2000 conference in Melbourne as a guest of Cisco Systems.