(FORTUNE Magazine) – When Rick Richardson arrives at his office each morning, he gets a cup of coffee and turns on his PC. On an average day he receives 20 to 25 E-mail messages -- not surprising, since he's in charge of all the work that Price Waterhouse, the accounting and consulting firm, does with New York City banks. Then he clicks the mouse to see news articles on topics he has given the computer standing orders to track. He has already done more with his PC than most American executives, but what happens next makes him truly exceptional. Price Waterhouse maintains electronic bulletin boards on more than 1,000 different subjects, accessible to as many as 18,000 employees in 22 countries. Richardson calls up a board that holds messages about the firm's financial services business. A Washington staffer reports on an accounting regulation change; Richardson adds a comment for all to see. A manager in Miami needs Spanish-speaking consultants for an assignment in Buenos Aires; Richardson zaps him a name by E-mail. Finally, he checks a board called PW Alert, where employees post general information and queries. One message, from Dublin, asks if anyone has experience auditing a cheese plant processing 100 million gallons of milk a year. Messages are listed by title, so Richardson can skip that one and any others he's not interested in. But he reads carefully a query from Chicago soliciting CFO candidates for a client. Perhaps he'll call the sender later and suggest a name. From the moment he turned on his PC, Richardson has been using Notes, a Lotus Development software product that is helping define the future of corporate computing. Notes is the most popular entry in a fast-growing category called groupware. While most PC software has been written for people working alone, these programs make it easier for groups to work together. That couldn't be more timely. Just when the theorists of business-process reengineering are telling companies to flatten hierarchies and get people working in teams, along comes the software that -- properly used -- can help make it all happen. The new groupware tools are so powerful, in fact, that they virtually compel companies to reengineer themselves. By giving workers well below the top of the organizational pyramid access to information previously unavailable or restricted to upper levels of management, groupware spreads power far more widely than before. Many who have grown comfortable dwelling near the pyramid's apex are understandably distressed by the way groupware disrupts old-style hierarchies. Says a consultant who helps clients figure out how to use the software: ''FORTUNE 500 companies are having a hell of a time with groupware. There's a tremendous amount of what I call antibody immune response.'' Like E-mail, groupware became possible when companies started linking PCs into networks. But while E-mail works fine for sending a message to a specific person or group -- communicating one-to-one or one-to-many -- groupware allows a new kind of communication: many-to-many. Groupware can improve efficiency, because it keeps workers continually apprised of what colleagues are thinking and doing. To be sure, it also creates even more data for the already-besieged to digest. Some complain that groupware only adds to information overload. More than 300 products today carry the groupware label. The most important fit into four main categories: -- Basic groupware, which Lotus Notes has all to itself, combines a sophisticated messaging system with a giant database containing work records and memos. It changes the way information flows in an organization. It creates a kind of corporate on-line service, an Internet of the office. Unlike plain E-mail, Notes doesn't require you to figure out who needs to know a fact or hear an idea. Instead, you simply forward your memo to the appropriate bulletin board. Like Rick Richardson of Price Waterhouse, anyone who needs to know about a subject will check there and find it. Hundreds of other companies besides Price Waterhouse have logged on, including Andersen Consulting, Compaq Computer, Chase Manhattan, General Motors, Monsanto, Reebok, and Texaco. Since it unveiled Notes in 1989, Lotus has sold over 500,000 copies to more than 2,500 companies at around $300 for each PC that uses it. & -- Workflow software is designed to remake and streamline business processes, especially in paper-clogged bureaucracies. It helps workers understand the steps that make up a particular process and allows them to redesign those steps. It also routes work automatically from employee to employee. The best- established company in the field is Action Technologies of Alameda, California, whose ActionWorkflow System sells for about $16,000 for 20 users. Another major player: NCR, with ProcessIT (cost: $19,900 for 20 users). Specialized tools for routing business forms are sold by Reach Software of Sunnyvale, California; its Reach WorkMAN costs $5,980 for 20 users. -- Meeting software allows participants in face-to-face or videoconference gatherings to ''talk'' simultaneously by typing on PC keyboards. Because people read faster than they speak, and don't have to wait for others to finish talking, the software can dramatically speed progress toward consensus. It also helps ensure that everyone gets a chance to take part. The most prominent developer is Ventana Corp. of Tucson, which sells its GroupSystems V for $25,000 for 20 users. A 1991 Boeing study found that Ventana's software could shorten the time it takes groups to complete projects by as much as 90%. -- Scheduling software uses a network to coordinate colleagues' electronic datebooks and figure out when they can all get together. Several companies sell versions of it; at a recent groupware conference in San Jose, an expert panel preferred Network Scheduler 3 ($1,995 for 25 users) from Powercore of Manteno, Illinois. Now that all these pioneering companies have proved that groupware works and customers want it, virtually every major software outfit has proclaimed its intent to jump in. Both Microsoft and Oracle Systems, the big database company, say they will soon release software that rivals the organization- spanning abilities of Notes. None of this comes cheap. Companies with large Notes installations calculate that besides the software itself, hardware, programming, telephone connections, and servicing runs $200 to $500 a year per employee, in addition to the cost of the network. Dell Computer, with 1,125 people on Notes, spends $45,000 a month just in phone charges to distribute Notes to its offices worldwide. There's more: Lotus estimates that for every $1 customers pay for the software, they spend another $3 for consultants, trainers, and additional software to help them make optimal use of it. Just because it's expensive and tough to do right doesn't mean you can ignore groupware. If your company isn't using it, your competitors probably are, or soon will be. In some businesses -- information technology consulting, for example -- so many players use Notes that it has become almost a cost of entry. The battle-scarred companies that have had the gumption to go to groupware swear all the disruption is worth it. Before you try it yourself, though, consider these hard-won lessons:

-- Groupware changes business processes. Bankers Trust is pushing the limits of groupware as hard as any company, and its efforts show how powerful a tool groupware can be for business-process reengineering. The bank manages assets for big financial institutions, but with large amounts of money in various types of investments, clients occasionally detect errors (or think they do). When these questions arose in the past, clerks in New York City often hauled out big boxes of papers, searched through them, consulted various departments, and then faxed or mailed documents to a servicing and records center, now in Nashville, for double-checking and further research. Someone there faxed back a reply, perhaps an annotated copy of the original fax -- now sometimes too faint to be faxed on to the client with an explanation. The entire history of a case was kept in a manila file folder. Typically it took three to five days to complete an inquiry. To automate all that, Bankers turned to workflow software from Action Technologies. The bank used Lotus Notes to store electronic file folders accessible to anyone on the Bankers computer network. To get started with Action's software, a team spent two weeks analyzing the steps in resolving customer queries. It created what Action calls a workflow analysis diagram that broke out the roles of the various people involved: account administrators who receive the query and manage the process, the people who actually run the money, the Nashville staff, and supervisors who approve the final response. Five people had the system up and running within seven months for 125 users, in Nashville and at two locations in New York. Now the bank guarantees clients a maximum three-day turnaround on queries and completes many within a day. Notes organizes cases by the status of the client's query, its position in the workflow, or the person responsible. If someone is sick, others can easily pick up the work. One office of account administrators was able to reduce its staff from 13 to nine because it no longer needed the researchers who hauled out boxes and kept manila folders. It's now clear exactly who is doing what and where each query stands. Says Jeremy Keisman, a technology project manager in Bankers Trust's global assets group: ''There used to be a black hole: 'It went to Nashville.' Now people take responsibility. There are no more mysteries.''

-- More information means workers must take more responsibility. ''Groupware will change the way we evaluate people,'' says Mike Blum, who leads technology services for Coopers & Lybrand Consulting, an arm of the accounting firm. ''It's like what's been happening on the factory floor. Workers take responsibility for getting the car out the door. The same kind of thing will happen in the office.'' Few companies use groupware more ambitiously to push authority down the organization chart than CKS Partners, a 65-person advertising agency in Campbell, California, that had revenues of about $12 million in 1993. CKS does what it likes to call ''integrated marketing'' -- product design, packaging, and in-store displays as well as conventional advertising, mostly for high- tech clients like Apple Computer, National Semiconductor, Nextel Communications, and Tektronix. CKS sees technology as a key to everything it does; in 1993 the firm spent $18,000 per employee on hardware and software. Says CEO Mark Kvamme: ''You cannot do true integrated marketing without a group collaborating through the use of technology. We can call on premier experts in a variety of disciplines, whether they are in-house or not, and get them all working together onscreen.'' The agency paid a programmer $75,000 over the past three years to write a custom groupware application it dubbed ''the electronic job jacket.'' The software keeps track of each employee's exact contribution to every job. It also maintains records of budgets, contracts, purchase orders, personnel, and contacts at subcontractors and suppliers. Before work starts on a job, managers estimate the hours various employees will need to spend on it and create a time budget for each one. Workers then record the hours they put in. That might seem draconian, and Kvamme a major control freak, but for one thing: Each quarter, CKS pays between 15% and 20% of its profits to employees. The jacket allows the company to calculate exactly how much it made from each assignment and how much each person contributed. The firm pays bonuses accordingly. Says Kvamme: ''When people screw up and lose money on a job, they've got to face their co-workers and take responsibility.'' Kvamme finds this especially salutary for creative people like designers and copywriters, who he says suffer from ''creeping elegance'': The more time they have, the more incremental but often unnecessary improvements they'll think up.

-- Companies with flexible corporate cultures do best. ''Groupware is a tool that catalyzes organizational change whether you want it or not,'' says David Coleman, who edits a newsletter called GroupTalk and organizes conferences on the subject. Information is power, and groupware disperses it much more widely than before. Says Jeffrey Held, a senior technologist with Ernst & Young's consulting group: ''People acquire power in an organization by knowing things that others don't. Unstructured information- sharing runs contrary to the culture of many organizations.'' Held estimates that only about 10% of companies adopting groupware are prepared for the organizational ferment it unleashes. Teams may not behave as managers expect, especially when the teams are using groupware. For example, although Boeing conducted rigorous experiments two years ago that found meeting software could cut the time some projects take by 90%, the aircraft giant is not using it at all today. The company will not explain in detail why it dumped what seemed a successful tool. A spokesman says groupware got dropped during a cost-cutting effort, because in comparison with other technology investments it offered less payback. In addition, he says, ''some people didn't like it.'' Groupware experts outside Boeing speculate that managers may not have enjoyed finding themselves in an electronic spotlight where decisions that had once been their sole province were now fair game for comment and change by everyone. Possibly Boeing decided that if its old-style bosses were uncomfortable, it didn't matter that the decision process was dramatically faster. To encourage acceptance of groupware and give workers a stake in it, Ernst & Young advises clients with similar problems to find ways to reward teams, not individuals, for success.

-- Groupware works best to solve a specific business problem. Too many companies get into groupware without clear aims. Says GroupTalk editor Coleman: ''A lot of people go out and buy Notes and then try to find a problem to solve with it. That's bass-ackwards. Start with the problem, not the technology.'' Tom Thomas, head of information systems at Dell Computer, warns: ''If you don't define what you want to do with Notes and how you want to use it, you can get yourself into a bit of a jam.'' He should know. Almost four years ago, in Dell's heady fast-growth days, engineers designing PCs brought in Notes to help them keep track of the progress of various projects. Other departments decided to try it too. They began setting up their own Notes databases. Problem was, some of the information users began sharing was purely social. People used Notes to discuss movies, or what they would do after work. Instead of saving time, Notes was causing people to waste it. So Dell management imposed strict rules on how Notes was to be used and took it away from some employees. The company still relies on Notes extensively, but only where it can be justified for a specific task. One such assignment: keeping track of the status of all design, marketing, and manufacturing work on different kinds of products. Employees anywhere in the world can follow and comment on each other's contributions. Among the 500 users are manufacturing managers, who come on-line often to order parts, plan staffing, and learn about new products. Says Tom Holman, program manager for advanced systems: ''I don't really know how we'd run a global design and manufacturing operation without Notes.'' Before Notes, Holman's staff communicated by E-mail or conference calls, but the process sometimes broke down -- for example, when engineers in Ireland misunderstood the Texas twang of designers at Dell's Austin headquarters.

-- Groupware seldom succeeds without top-level support. Price Waterhouse was fortunate to have one of the world's great technology cheerleaders at the helm of its Notes effort. Sheldon Laube, the firm's chief technologist, has a techie's brain and a salesman's personality. He got his top-level job -- one of the company's 20 most senior -- in 1989 with explicit instructions to make the firm's technology state-of-the-art. When he found Notes, he recognized its potential for tackling one of Price Waterhouse's key challenges: capturing and storing information. Laube pushed, cajoled, joked, and lobbied for it. Richardson says Price Waterhouse would never have won one recent multimillion-dollar job if it hadn't been able to use Notes to put together a proposal quickly (see illustration). GROUPWARE challenges conventional notions of proper public presentation. Comments in databases are generally more informal than the paper memos and letters they replace. For a company to use groupware successfully, employees must feel they won't be judged by how they write or how well they have thought through what they say. Says Clint Alston, who heads Ernst & Young's technology services: ''It takes pretty confident people to put information that may be half-baked, or just the best they have at a given moment, into a fishbowl where anybody else can react to it.'' Says one disgruntled manager of a large national media company that recently started using Notes: ''People are putting in poorly thought out stream-of-consciousness stuff, and it takes hours to wade through.''

This manager finds Notes contributes mightily to his feeling of information overload: ''People say if I'd just turn on Notes I'd know what's going on. And I say 'Yeah, and I'd also know about 400,000 other irrelevant things that simply waste my time.' Ideally I'd take half an hour to peruse Notes each day. But I never have a half hour of uninterrupted time.'' His solution: Keep Notes switched off and have his secretary occasionally print out new comments that seem germane. Groupware may prompt business people to start developing new ways of dealing with information, says Tom Malone. He directs a research center at MIT's Sloan School of Management that studies groupware and networked computing. Malone recalls a time not long ago when people read every letter and returned every phone call that came to their offices. ''But in a world where hundreds and thousands of communications enter the office every day,'' he says, ''our expectation that we should carefully digest it all can make us feel overwhelmed and terribly inadequate.'' Malone believes people should accept that they can't deal with every last bit of data. Some new software applications (but not yet Notes) already include so-called electronic agents to help workers filter and sort through information and find exactly what they need. Price Waterhouse deals with this potential problem by assigning people to keep Notes databases well organized and clear of confusing or irrelevant material. Dell, on the other hand, leaves maintenance up to the users of each database, and some end up looking ''like garbage dumps,'' in the words of one senior Dell techie. Lotus says it will put electronic agents into the next version of Notes, available by the end of & 1994. They will alert you if, say, your boss adds a comment to something in a database, so you'll know to look for it. There's no turning back. Networking is making computers more and more interpersonal, but most American workers and managers still don't think electronically. Groupware can not only help bridge their conceptual gap but also give them power they never had before.