Networks in Business

Networks are widely used in business today. Although many businesses use the Internet to market goods and services, an increasing number of businesses use an intranet, a smaller version of the Internet that is used by company employees to communicate with one another and to share data. Intranets are typically protected by firewalls that prevent unauthorized access and keep company propriety or sensitive data or information confidential. Businesses can also share information with partners, customers, or other parties through an extranet, a part of an intranet that is available to authorized parties. By using networks, businesses can communicate more quickly, update information more accurately, and coordinate all members of a supply chain in order to work more efficiently and bring products or services to the customer more expeditiously than is possible using traditional communications media.

Keywords: Business Model; Communications Network; Data Communications; E-Commerce; Enterprise; Extranet; Firewall; Information Technology; Intranet; Local Area Network (LAN); Network; Outsourcing; Supply Chain; Virtual Team

Overview

In many ways, the use of networks has changed our lives. For example, in many situations, e-mail has obviated the need for surface mail, fax transmissions, or even phone calls, and provides us with almost instant access to friends, family, and colleagues. Similarly, data — including documents, photos, and videos — can be easily shared as attachments to e-mails. Social networking allows us to keep track of friends and family. The World Wide Web allows us to easily find or share information, purchase or sell items, or perform a host of other tasks more quickly and easily than was possible before. Just as the Internet has transformed our lives, so, too, network technology has transformed the way that many organizations — large and small — do business.

Communications Networks

Most organizations today have become "netcentric," relying heavily on the use of computers, databases, and telecommunications to conduct their day-to-day business activities (Lucas, 2005). At its most basic, a network is a set of computers that are electronically linked together through communications lines (e.g., telephone lines, fiber optic cables) or wireless technology (i.e., radio signals over the air or through space). Businesses use networks to share data, documents, and programs or to allow employees to communicate with one another or with providers or customers.

One common use of network technology is e-mail communication. Employees are able to send e-mails with or without attachments, just as they would have picked up the phone or used inter-office mail a few decades ago. Network technology allows organizations to take this a step further and actually set up virtual teams in which team members do not always meet face to face but conduct their activities over a distance. In virtual teams, the members are geographically or organizationally dispersed and interact primarily through communication technology. For example, large engineering programs can use experts from around the country — or around the world — who communicate via e-mail or secure networks, sharing documents, giving briefings, discussing problems, and making decisions all using network technology.

Similarly, individuals in different parts of the supply chain can communicate over networks without having to deal with the other members directly. For example, a retail clerk in a point of sale location can use a network to check supply quantity at a warehouse without ever talking directly to warehouse personnel. If the item he needs is available, he can place an order directly from his terminal. The warehouse manager, in turn, can order more stock over a network from her supplier who, in turn, arranges for transportation for the stock through a network.

The use of networks has changed the business model used by many organizations. Because network technology can speed or ease communications between individuals, departments, or business partners, it can be possible for management to eliminate functions from the organization and outsource them to other organizations that can do the task more cost-effectively. For example, a retailer may sell products directly to customers at a brick-and-mortar store, but may also sell to customers over the Internet. The retailer may also outsource the manufacturing of the products that it sells to other firms, and communicate with them over the Internet or other network. The retailer may outsource billing to yet another company and communicate with its bank through another network.

Types of Networks

LAN, MAN & WAN

In general, a network is a set of locations (or nodes) with concomitant hardware, software, and information that are linked together to form a system that transmits and receives information and data. There are three types of communications networks. Local area networks (LANs) connect multiple computers that are located near one another and linked into a network that allows the users to share files and peripheral devices such as printers, fax machines, and storage devices. LAN technology was developed after the utility of personal computers for business became recognized and organizations wanted to be able to share information and access data for the organization. For example, a LAN may be used to link multiple workstations within a department as well as control a common printer.

Another type of network used by businesses is the metropolitan area network (MAN). These networks are larger than LANs and transmit data and information citywide (typically around 30 miles) and at greater speeds than a LAN. In addition, MANs are capable of transmitting voice, data, image, and video data, although they are typically optimized for voice-data transmission. Rather than using telephone lines, MANs typically use fiber optic cables. Another type of network used by businesses is the wide area network (WAN). These comprise multiple computers that are widely dispersed and that are linked into a network. WANs typically use high speed, long distance communications networks or satellites to connect the computers within the network.

Intranets & Extranets

Certainly, the Internet is one valuable network tool now widely used by businesses. Increasingly, a business needs to have a presence on the web (e.g., a homepage) in order to be competitive. However, the Internet is only one type of network that is used by businesses. In addition, some organizations set up private networks to serve their needs. An intranet is a private network similar to the Internet, and is set up for a given enterprise. Intranets are used to share information and provide computing resources within an organization. Intranets may also be used to facilitate document sharing for workgroups and virtual teams. An intranet requires the installation of servers and clients using Internet protocols (e.g., TCP/IP, http), and a web browser. As with the Internet, an intranet may comprise several networked LANs or use the leased line of a WAN.

Typically, an intranet contains proprietary information. To prevent those outside the organization from gaining unauthorized access to information that the organization does not wish to disclose to the public, information on an intranet is blocked by a firewall so that the information is only available to employees, other stakeholders, or other parties whom the organization authorizes. A firewall is a special-purpose software program or piece of computer hardware that is designed to prevent authorized access to or from a private network. Next-Generation Firewalls (NGFWs) deliver more granular control than traditional firewalls but have their own set of challenges (Erdheim, 2013). However, not all parts of an intranet need to be kept private. Intranets also provide platforms that can be used to develop and distribute applications for use by anyone with a web browser.

When part of an intranet is made accessible to outside parties (e.g., customers, suppliers, partners), it is referred to as an extranet. Extranets can be used to exchange large volumes of data, share catalogs with a select list of users (e.g., wholesalers, other members of an industry), collaborate with other companies on joint projects or ventures, provide limited access to other select companies, or share information with partner organizations.

Many organizations use intranet and extranet technology. For example, rather than merely listing names and phone numbers, intranet phone directories can also include a photograph and job description for each employee.

Applications

Business Uses for Networks

Businesses can use networks for a wide variety of purposes, including the transmission of messages, the communication of data, hosting virtual meetings, and conducting electronic commerce. The most common application of networks is electronic mail (e-mail) capabilities that allow employees to communicate with one another, customers, suppliers, or partners electronically rather than using older methods such as faxes, phone calls, interoffice mail, or surface mail. E-mail also allows messages to be broadcast to a number of recipients simultaneously. This capability is advantageous from a business standpoint because it cuts down on the time that the sender needs to transmit the message multiple times, gets information into the hands of a large number of recipients quickly and simultaneously, and facilitates the work of groups. In addition to sending text messages, e-mail also allows senders to transmit documents, video clips, photographs, drawings, and other information as attachments. Some email providers, such as Google, even have their own drives (Google Drive), on which a network of people can edit documents in real time. This reduces the need to make and distribute hard copies and also allows groups to work or comment on common documents together, reducing the need for coordination. Messages can also be transmitted via voice mail, in much the same way as one would leave a message on a telephone answering machine. Voice mail messages can be stored, replayed, or broadcast to multiple recipients.

Virtual Workgroups

Such electronic capabilities make the job of the individual employee easier and facilitate communications across the enterprise. Networks can be used to facilitate virtual meetings and virtual teams and workgroups in which the members are geographically or organizationally dispersed and members interact primarily through communication technology rather than meeting face-to-face. This use of network technology can save the enterprise money associated with travel costs as well as with costs associated with moving expenses or hiring. Virtual teams can incorporate members of the enterprise and also its partners through extranet technology. Through videoconferencing (vcon) and online collaborative tools like Skype and WebEx (Davis, 2012), employees or colleagues who are geographically dispersed can participate in a meeting without the inconvenience or expense of travel. In addition, meeting participants can share documents, images, and even product demonstrations without the need for a face-to-face meeting. Even if some of the meeting or workgroup participants do not have vcon technology, they can communicate with each other through the web or telephone and use the network to share documents and other information through an electronic bulletin board or use presentation software just as in a face-to-face meeting.

Data Communications for E-Commerce

Another common business use of networks is for data communications. The standard format for transmitting business data (e.g., price, part number) is electronic data interchange (EDI). This technology can facilitate commerce not only across the country but across the globe. EDI helps facilitate the data exchange necessary for international commerce, and reduce the cost of global commerce by reducing the cost of the associated paperwork, which can add up to 7 percent to the value of the items being traded. Similarly, electronic funds transfer can be used to move money over a communications network. Electronic funds transfer facilitates international business transactions, and also affects consumers on a local level. For example, the worldwide PLUS ATM network can be accessed by over one billion credit and debit cards. These transactions are settled electronically by the transfer of funds between the user and the issuer of the card. Electronic funds transfer can also be used to deposit payroll checks, government support checks, and other deposits without the need to physically handle the currency.

Electronic funds transfer has enabled another use of networks for businesses: electronic commerce (e-commerce), the conducting of business (e.g., sales, information exchange) over the Internet. For example, many businesses today have electronic storefronts supported by network technologies. These electronic storefronts may be in addition to or in place of brick-and-mortar point-of-sale locations. In electronic commerce, customers visit a business's web site on the Internet and examine the online catalog, compare products, fill an electronic shopping cart, and check out and pay for their purchases in much the same way as if they were in a physical store. Network technology also facilitates electronic markets, or a collection of individual shops that can be accessed through a single location on the Internet that are the virtual equivalent of shopping malls. Through the use of e-commerce, businesses are able reach potential customers around the globe without setting up satellite operations in other locations. In addition, e-commerce can increase the speed at which business transactions take place, thereby helping not only the business's cash flow but also saving the customer time and (potentially) money because the business does not need to have a brick-and-mortar storefront.

Example: Cisco Systems

One example of an organization that has successfully incorporated networking technology into its business model is Cisco Systems (Senn, 2004). Cisco emerged as a world leader in networking technology, designing and selling networking hardware (e.g., routers, switches) and network management software to other enterprises for use in creating intranets and connecting to Internet. In part, Cisco's success has been attributed to its catching the Internet wave in the mid-1990s. Cisco created a new form of supply chain to link customers, manufacturers, and other partners using Internet technology. This use of networking technology allowed Cisco to cultivate and leverage close relationships with other organizations in order to provide its customers with the products that they need without having to hire the full range of experts or facilities that would be required for them to provide the same range of services themselves. The members of this supply chain, in a sense, were partners, including manufacturers, assemblers, distributors, resellers, and transporters. Working in cooperation with these other enterprises, Cisco was able to integrate various supply chains by interconnecting its business systems and key information technology applications. This resulted in an automated order acceptance and fulfillment process which helped Cisco achieve its reputation in the field.

Cisco’s suppliers/partners made all of the components for Cisco, performed nearly all of the subassembly work, and performed more than half of the final assembly. Rather than using e-mail, or phone calls to coordinate their activities, Cisco and its partner-suppliers communicate electronically over the network for all phases of the operation. For example, once a product is finished and ready for shipping, the partner-supplier notifies a transportation company within the system and ships the product directly to the customer. Because communications are handled electronically, there are fewer opportunities for error along the supply chain. Cisco is able to work more efficiently because the same information is shared with all partners in the supply chain, requiring less coordination and updating. Further, information can be shared over the network in real time. As a result, changes that occur in one part of the supply chain are immediately disseminated to all parts of the supply chain. This allows the entire network of organizations to respond more expediently to changes. Cisco has moved into promising new businesses: cloud computing, unified enterprise IT systems, mobile device management, and TelePresence (Preimesberger, 2013). It has also initiated the Internet of Everything project, which seeks to connect people, data, and processes like never before, increasing the networking capabilities of devices and the diverse peoples who use them.

Conclusion

Networks are widely used in business today. They can be as simple as the posting of a home page on the World Wide Web to advertise the company's products and services or the use of the Internet to provide e-mail capabilities. Many organizations take this a step further, however, and link together their employees with an intranet, a smaller version of the Internet that is used by company employees to communicate with each other and to share data. Intranets are typically protected by firewalls that prevent unauthorized access and keep company propriety or sensitive data or information confidential. In some cases, however, the enterprise may want to share some information with other parties such as partners, customers, or industry members. In this case, they may develop an extranet, or part of the intranet that is available to these parties.

Network technology is much more than a high tech replacement for older communication methods. By using networks, businesses can communicate more quickly, update information more accurately, and coordinate all members of a supply chain in order to work more efficiently and bring products or services to the customer more expeditiously than was previously possible.

Terms & Concepts

Business Model: The paradigm under which an organization operates and does business in order to accomplish its goals. Business models include consideration of what the business offers of value to the marketplace, building and maintaining customer relationships, an infrastructure that allows the organization to produce its offering, and the income, cash flow, and cost structure of the organization.

Communications Network: Sets of locations (or nodes) with concomitant hardware, software, and information that are linked together to form a system that transmits and receives information.

Data Communications: The sending and receiving of facts, figures, details, and other information over a communications network.

E-Commerce: E-commerce (i.e., electronic commerce) is the process of buying and selling goods or services — including information products and information retrieval services — electronically rather than through conventional means. E-commerce is typically conducted over the Internet.

Enterprise: A business entity. Although this term is often applied to large organizations, the term can be applied to both small and large organizations.

Firewall: A special-purpose software program or piece of computer hardware that is designed to prevent authorized access to or from a private network. Firewalls are often used to prevent unauthorized access to a private network from the Internet.

Information Technology: The use of computers, communications networks, and knowledge in the creation, storage, and dispersal of data and information. Information technology comprises a wide range of items and abilities for use in the creation, storage, and distribution of information.

Intranet: A private network similar to the Internet, but which is intended for use only by a single enterprise and authorized outside parties (e.g., customers, suppliers, partners). Intranets typically contain proprietary information and are protected by a firewall. The part of an intranet that is made available to outside parties is referred to as an extranet.

Network: A set of computers that are electronically linked together. A local area network (LAN) comprises multiple linked computers that are located near each other and that allow users to share files and peripheral devices such as printers, fax machines, and storage devices. A metropolitan area network (MAN) is a computer network that transmits data and information citywide and at greater speeds than a local area network. A wide area network (WAN) comprises multiple computers that are widely dispersed and that are linked into a network. Wide area networks typically use high speed, long distance communications networks or satellites to connect the computers within the network.

Outsourcing: Work that could be done by an organization that is instead performed by another company on a contract basis. Outsourcing can include support (e.g., cleaning and janitorial services), production (e.g., the manufacture of parts needed to make a product), or services (e.g., customer service provided by a contract organization).

Supply Chain: A network of organizations involved in production, delivery, and sale of a product. The supply chain may include suppliers, manufacturers, storage facilities, transporters, and retailers. Each organization in the network provides a value-added activity to the product or service. The supply chain includes the flow of tangible goods and materials, funds, and information between the organizations in the network.

Virtual Team: A team in which the members are geographically or organizationally dispersed. Virtual team members interact primarily through communication technology and may never meet face-to-face.

Bibliography

Chelariu, C., & Osmonbekov, T. (2014). Communication Technology in International Business-To-Business Relationships. Journal of Business & Industrial Marketing, 29, 24-33. Retrieved December 3, 2014, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=94622162

Davis, B. (2012). Bright picture for vcon. AV Magazine, 43. Retrieved November 20, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=70475670&site=ehost-live

Erdheim, S. (2013). Deployment and management with next-generation firewalls. Network Security, 2013, 8-12. Retrieved November 20, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=91848947&site=ehost-livehttp://search.ebscohost.com/login.aspx?direct=true&db=rst&AN=37219617Erdheim, S. (2013). Deployment and management with next-generation firewalls. Network Security, 2013, 8-12. doi:10.1016/S1353-485870113-2http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=91848947

Kumar, R. L. (2004). A framework for assessing the business value of information technology infrastructures. Journal of Management Information Systems, 21 , 11-32. Retrieved 20 October 2009 from EBSCO Online Database Business Source Premier http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=14776227&site=ehost-live

Lucas, H. C. Jr. (2005). Information technology: Strategic decision making for managers. New York: John Wiley & Sons.

Preimesberger, C. (2013). Why highly profitable Cisco Systems is cutting 4,000 jobs. Eweek, 2. Retrieved November 20, 2013, from EBSCO Online Database Business Source Complete. http://search.ebscohost.com/login.aspx?direct=true&db=bth&AN=89992382&site=ehost-live

Senn, J. A. (2004). Information technology: Principles, practices, opportunities (3rd ed.). Upper Saddle River, NJ: Pearson/Prentice Hall.

Suggested Reading

Ahuja, M. K., Galletta, D. F., & Carley, K. M. (2003). Individual centrality and performance in virtual R&D groups: An empirical study. Management Science, 49 , 21-38. Retrieved 20 October 2009 from EBSCO Online Database Business Source Premier http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=9092481&site=ehost-live

0Chen, K., Tarn, J. M. & Han, B. T. (2004). Internet dependency: Its impact on online behavioral patterns in e-commerce. Human Systems Management, 23 , 49-58. Retrieved 20 October 2009 from EBSCO Online Database Business Source Premier http://search.ebscohost.com/login.aspx?direct=true&db=buh&AN=12255143&site=ehost-live

Dekleva, S., Shim, J. P., Varshney, U., & Knoerzer, G. (2007). Evolution and emerging issues in mobile wireless networks. Communications of the ACM, 50 , 38-43. Retrieved 20 October 2009 from EBSCO Online Database Academic Search Complete http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=25301819&site=ehost-live

Flynn, S. I. (2014). Technology in Modern Organizations. Research Starters Sociology, 1-7. Retrieved December 3, 2014, from EBSCO Online Database Business Source Complete.