Pity the vendors of online collaboration software. Companies such as eRoom, Intraspect, WebEx (WEBX), and even Microsoft (MSFT) (with its SharePoint products) have been trying for years to overcome the barriers of physical distance and eliminate business travel, with software that lets people in different locations work together without leaving their desks. But corporate America just hasn’t taken the bait. Business travelers continue to while away the hours in airport waiting lounges, nattering on their cell phones and running up T&E budgets.

But collaboration software does work well, particularly in niche markets like manufacturing, supply-chain management, and product development. Those may not be the most glamorous business sectors, but they add up — research firm IDC estimates that the “collaborative applications” market (that’s the technical term) will post $4.5 billion in worldwide revenue this year, even though many companies still face IT budget constraints and few are making big purchases right now. The fact is that online collaboration works best in situations where relatively small teams of people work together on well-defined tasks and need to solve problems quickly — often under such intense time or budget pressure that physical travel is impossible or impractical.

Take, for instance, a big merger. Hewlett-Packard (HPQ) and Compaq executives logged more than 500,000 hours in virtual work spaces during the months leading up to their merger. They used collaboration software from eRoom (www.eroom.com) to hammer out the details of bringing the two companies together — sharing things like legal documents, organizational charts, time lines, and budgets. The co-chief of HP’s postmerger integration team, Webb McKinney, called this work space the “nerve center” of the merger. The software costs $16,995 per server, plus $249 per user.

Hewlett-Packard had been using eRoom’s products prior to the merger, to manage its increasingly real-time supply chain and to communicate with overseas manufacturers. Like many Fortune 500 companies, HP has spent the past several years making its purchasing process leaner and quicker, in an effort to cut costs and respond more quickly to market changes. But the new supply chain demands lightning-fast response time. If a purchasing manager for the PC line notices a shortage of memory chips or disc drives, she needs to get more of them right away — or else the whole finely tuned manufacturing system could come grinding to a halt.

To prevent that, HP uses an online collaboration system that’s tied to its SAP enterprise resource planning system. When someone at HP decides to increase the standing monthly order for, say, hard drives, she draws up a purchase order in SAP and then clicks a button that pushes this information out into the eRoom work space used by the relevant supplier. The supplier picks up the purchase order, fulfills it, and sends an invoice back to HP — also via eRoom. Suppliers use the same work space to track HP’s stock of their products, monitor how efficiently orders are being filled, and communicate with HP purchasers in real time.

By increasing the responsiveness of the supply chain, HP was able to cut down on the number of purchase orders it processes each month and, more important, reduce the amount of parts inventory it has to carry, saving the company about $1 million every month.

Collaboration software won’t work in every business application. It’s just too hard to get people to change the way they work when you can offer them only vague promises of increased efficiency. But in certain niches, where the advantages of real-time online collaboration are clear, the technology already delivers some real bang for the buck.

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