(FORTUNE Magazine) – THE INTERNET probably deserves its abysmal reputation among business executives. They're barraged daily with hype about the World Wide Web, the Net's flashy multimedia strip, with its glitzy movie clips and virtual shopping malls that are even less appealing than the real thing. At worst, the Web is an expensive way to promote your company to an anonymous audience without getting measurable results--as well as an invitation to employees to goof off.

But a growing number of companies are discovering that the Web isn't entirely useless. By applying its technology for sharing information in their own corporate networks, they're creating internal webs that finally let computers work the way they are supposed to.

Consider this scenario: You've got two hours to put the finishing touches on your lunchtime presentation to the board of directors. You turn to your PC and open a piece of software called a web browser. Within minutes you've downloaded the bios of all the board members, to help tailor your pitch. Then you retrieve up-to-date sales numbers for every department in every office from Toledo to Tokyo. Remembering some pithy remark your boss made at the morning meeting, you call up the minutes, which are posted electronically as soon as the meeting adjourns. The quote fits nicely on the cover page, just above a photograph of him that you copied earlier from the digitized annual report.

This is not some futuristic fantasy, or a pitch for Microsoft Windows 96. It is one example of how work gets done on an internal corporate web, or "intranet." Once found only at techie outfits like Sun Microsystems and Digital Equipment, intranets are catching on at places like Chevron, Goodyear, Levi Strauss, and Pfizer.

The external Web gets all the press, but the intranets are what's driving sales of web software. In October, Netscape Communications, the leading provider, announced record third-quarter revenues of $20.8 million--more than half of which came from sales to corporations setting up internal webs.

Simply put, companies want the technology of the web because it makes it easier for computers to finally start doing what we've wanted them to do all along. Surfing an internal corporate web, employees use hypertext links to search for and access text, graphics, audio, or video, all organized into colorful documents called home pages. At the most basic level, this means being able to easily find and read online internal documents such as policy manuals and phone books. Webs also allow employees to call up internal data such as customer profiles and product inventory, information once hidden in databases that could be tapped only by technicians. The most advanced internal webs are even getting linked to the proprietary systems that govern a company's business functions. The web at US West, for example, will soon make it easy for sales reps to quickly provide a customer with call waiting.

Best of all, intranets connect the different types of computers on your network, be they PCs, Macs, or workstations. The Internet technology on which these webs are based makes it possible for any computer to display a document, no matter what kind of computer created it. Furthermore, employees don't have to worry about where the information is actually stored. Updating a spreadsheet that resides on a workstation in Hong Kong is almost as easy as working on one in your desktop PC.

The sensitive corporate data that reside on intranets are protected from the outside world by security software called firewalls. When anyone on the Internet tries to get into the internal web, the firewall requests a password and other forms of identification. While hardly impregnable, firewalls are providing better and better protection.

Like a well-regulated border between nations, greater security facilitates commerce between internal and external nets. Most intranets make it easy for employees to venture onto the World Wide Web to seek information. Companies are also looking at ways to open parts of their internal networks to customers and suppliers who have Internet connections. Federal Express customers, for example, can already track their packages by logging onto FedEx's home page on the World Wide Web, which is linked to the company's internal databases.

Intranets are so appealing that they are forcing the granddaddy of work-group software, IBM's newly acquired Lotus Development subsidiary, to adjust. Its flagship product, Lotus Notes, is far more sophisticated than any internal web. (Notes automatically keeps track of different versions of a document, for example, so all users work from the latest edition; such changes must be tracked manually on an internal web.) But Lotus knows that its edge over intranets could diminish as the newer technology spreads. So the company is offering a product called Internotes that lets companies convert documents created in Notes to the format used by the web.

One of the biggest advantages intranets have over Notes is cost. Because Notes relies on proprietary databases and customized applications, it is expensive to maintain. According to the Gartner Group, a research firm in Stamford, Connecticut, adding Lotus Notes to your corporate network can increase the cost per user by 20% a year over five years.

Intranets are cheaper. They require two key types of software: "browser" programs, which allow people to scan the network, and "server" programs, which store and organize the information. While there is no such thing as a typical internal web, one heavy user, Eli Lilly, plans to spend about $450,000 by the time it finishes connecting 15,000 employees; US West has spent around $250,000 to connect the same number.

"Within a year," predicts Eric Schmidt, chief technology officer at Sun Microsystems, "people who use computers at work will spend the majority of their time with a web browser in front of them." Some companies aren't willing to wait that long.

THE PYRAMID SCHEME

A year and a half ago, Margaret Tumey, a top financial executive at US West, was looking for a way to show employees how fast-changing technologies would affect the services the company offers. She asked Sherman Woo, the company's director of information tools and technologies, to help her. Little did she realize that her request would result in the Global Village, an internal web that now connects 15,000 people at US West and has transformed the way the company operates.

Woo believed the best way to interest employees in new technology was to have them experience it themselves. He created a rudimentary intranet in a conference room by linking a number of computers to communications lines and a videoscreen. Employees who visited the room were treated to a tour of the external Internet and a computerized demo of the kinds of products US West might develop to take advantage of the new medium.

Rather than wait for all of US West's 60,000 employees to beat a path to his demo room, Woo spread the web by devising an ingenious pyramid scheme. He gave browser software to any computer user who wanted it, and connected the machines to his budding web. In exchange, Woo demanded but one thing: New users had to show at least two colleagues how the web worked. Almost everyone who saw it wanted to be connected too.

Today employees in 14 states work together on the Global Village. Some meet in online chat rooms to exchange documents and discuss ongoing projects. Salespeople use the web to keep in touch with managers back in Denver. Soon the Global Village will function as an electronic suggestion box, when a new page called the rumor mill will allow employees to anonymously question senior executives about company scuttlebutt.

The Global Village is so easy to use that nontechies help expand and maintain it: Workers in different departments create their own home pages and keep their own documents current. Says Woo: "We have tapped the energy of all those managers and employees who know how to type but don't know how to program."

Customers may also benefit from US West's internal web. The company plans to let service representatives use the intranet to fill orders for features such as call waiting immediately, while the customer is still on the phone. The service rep will simply enter the order onto a web browser, which will send it on to the phone switching network. If all goes well, the customer's call waiting will be activated in minutes; today such service takes hours, if not days, to switch on.

A NEW GLOBAL INTERCOM

The intranet at Morgan Stanley links 37 offices around the world. "The ability to distribute data and information seamlessly on a global basis is a problem we have wrestled with for many years. The web lets us do it," says Kevin Parker, the investment bank's chief information officer.

Manhattanites in the mortgage-backed securities division, for example, used to work until midnight cutting and pasting a 100-page daily update of data, including Morgan Stanley's positions in a variety of bonds and the latest interest rates offered in Tokyo, London, and New York. When they were done, they would fax the document to more than 100 traders and brokers worldwide. The information often arrived in Tokyo long after the opening of trading. Now Morgan Stanley's techies have programmed their network so that most of the data are culled from databases and assembled on a web page without any human intervention. Tokyo traders get the data on time by logging onto the intranet when they arrive at work. Better still, the document is updated continually, so traders get the latest information.

Morgan Stanley is also using the intranet to update its global intercom, known as the hoot and holler. Traders and salespeople let colleagues know that they want to buy or sell securities by speaking into a worldwide voice-messaging system; the message is then broadcast on small desktop speakers on the trading floor for the relevant country. Salesmen who left the floor at the wrong moment used to risk missing important news.

Now Morgan Stanley has connected the hoot and holler to the internal web, so traders never miss a word. Each announcement is digitized and stored as a voice message on a web server. When traders return to the floor, they open their web browser and log onto the web to hear the announcement played over their workstation speakers.

About half of Morgan Stanley's 9,600 employees are connected to the internal net. Parker plans to add the investment banking and mergers and acquisitions departments to the web, once security software is in place to keep those units from sharing the activities of their clients with other parts of the firm. That will keep the intranet from becoming an insider-trading net.

THE ENTERTAINMENT LAB

The internal web at Turner Broadcasting is more than just a way for employees to share company information. It is also a laboratory where Turner designers and producers try to figure out how best to repackage content, such as cartoons or movies, before making it publicly available on the Internet. "The internal web lets us learn how to repackage our content and test-market things internally before we release them externally," says Daniel Paul, vice president of new media. Senior Turner execs decided last year to connect all 5,000 Turner employees who work at desks, so creative types could start tinkering right away.

Employees start out at the company's internal home page, which looks like a refrigerator door with "magnets" that represent different departments or topics. Managers can access the ratings for various Turner programs by clicking on the movie-house logo. Employees can get a customized newspaper delivered daily by E-mail. All they have to do is fill out a personal profile outlining the kinds of stories they are interested in. The profile is recorded in a web server that then draws the appropriate stories from a number of news services, including CNN.

The really fun stuff, however, are the tests in individual departments. Turner Broadcasting System is experimenting on the internal web with its "Dinner & a Movie" promotional campaign, which has been running on TBS since September. Employees preview new twists to the campaign via the intranet before it goes live on cable.

Employees who click on the Cartoon Network icon--a magnet showing a cartoon character--can view animated clips and listen to sound bites from the popular cartoon talk show Space Ghost Coast to Coast. If the employees dislike what they see and hear, they can vent their frustrations by E-mailing the animators directly. Once the animators have survived this internal focus group, they move their best tidbits onto the Cartoon Network's site on America Online. You don't subscribe to AOL? Never fear: A Cartoon Network site will be up on the World Wide Web early next year.

Reporter Associate Ruth M. Coxeter