When Ford Motor Co. started offering employees a home computer, printer and Internet access for $5 a month, many workers suspected a ploy to get them to work at home as well as at the office.
Instead, more than a year after the program was introduced, employees at Ford’s South Side Chicago plant use their company-subsidized computers to swap jokes via e-mail. One worker with a CD-burner linked to his PC collects CDs from other plant employees to make music mixes.
“We have our own Napster going at work now,” joked plant employee Doug Matlock, referring to the online music trading service.
Ford, Delta Airlines and about a dozen other companies that started computer subsidy programs last year believe having employees play around with their home computers will result in a more technologically literate workforce, boost employee loyalty and eventually drive down costs by shifting paper-heavy processes like benefits enrollment online.
The programs have been extremely popular among eligible workers, particularly those at Ford.
But the benefit has not been widely adopted at other companies, amid growing skepticism about whether it represents a costly frill. Many firms question whether the feel-good subsidy would ever enhance bottom-line results, especially since the number of households with Internet access continues to grow without a nudge from employers.
“It’s like a lot of the e-business and Internet craze,” said Mike Christie, a human resources consultant with Hewitt Associates in Lincolnshire. “There was an initial splash … [but now] we’re back to reality.”
This is not to say that companies’ interest in a wired workforce has disappeared as quickly as dot-com start-ups.
Instead of paying for a portion of a worker’s home computer, more companies are now lining up other deals for employees. Many firms work out arrangements with PC-makers to extend corporate discounts to employees’ home computer purchases.
Others pay for home computers and then deduct the expense from paychecks over the next two to three years. The employee gets what amounts to an interest-free loan, while the employer doesn’t take a bottom-line hit.
General Motors and DaimlerChrysler responded to Ford’s program by offering employees $3-a-month Internet access through America Online, but the automakers declined to say if they are subsidizing the arrangement.
“It seems like a lot of companies still want to do [computer subsidies], but there’s a lot of pressure from the boards about `Is this a good use of our money?'” said Eileen Block, a business development manager at Dell Computer Corp.
Corporate coffers weren’t sealed so tightly when Ford and Delta announced their programs in February 2000, before the Internet bubble burst and the economy soured.
Under the three-year programs, Ford workers pay $5 a month and Delta employees $12 a month for a basic desktop model that they keep when the payments are completed. Internet access is included and workers have the option to pay more for faster computers, laptops and other upgrades.
Employees have snapped up the machines. At Ford, 165,000 of 188,000 eligible workers in the U.S. and Philippines–or 88 percent–bought computers through the program. Delta, which offered a lower subsidy, saw a corresponding drop in participation–72 percent of 76,400 eligible employees got computers.
Rolling out the programs has proven more difficult than the companies anticipated, particularly outside the United States, because of delivery, income tax and Internet connection issues in individual countries.
Ford, which initially hoped to ship computers to all participating employees by February, recently suspended the program until it can work out a distribution plan for its 150,000 employees abroad who haven’t been able to buy a computer yet. The company expects to resume the program later this year.
“It has been a complex rollout,” said Ron Iori, Ford’s director of global operations. “We’ve run into a lot of hurdles.”
What Ford and other companies have gotten out of the subsidy programs is unclear. Neither Ford nor Delta has studied the economic benefits of the program, though both say anecdotal evidence points to a better informed workforce that is more comfortable with computers.
An incident Matlock witnessed last year at the Ford plant at 126th Street and Torrence Avenue underscored why companies want their employees more comfortable with computers.
The plant’s medical center had recently replaced its sign-in sheet with a computer, but the machine baffled a worker. When instructed to use the mouse to enter his name and Social Security number, he picked up the mouse and held it against the monitor.
Matlock and others had to fight off their laughter.
“I don’t think he’d ever used [a computer] before,” said Matlock, a general utility worker who fills in at various posts in the plant.
Lunchroom PC discussions
After Ford introduced its computer subsidy program, new software applications and Internet experiences became regular topics of discussion among Matlock’s lunch group. Employees now preview Ford’s new vehicles online, read car buyer’s comments on chat boards and get e-mail updates from Ford executives about the Firestone tire recall.
“There are more and more people that seem to be getting good use of it,” Matlock said.
Ford and Delta declined to say how much they have spent on the programs, although American Airlines, which offered employees a basic computer for $12 a month, said it expects the three-year program will cost the company $15 million annually.
These companies hope having their workers tooling around online and trying various software packages will eventually pay off.
Many firms are starting to push employees to make benefits changes and file expense reports online. They are also making various forms available on the company’s in-house network to cut down on distribution and printing costs.
Delta currently lets employees, who can fly for free, check online how many seats are still available on particular flights instead of calling in for updates. The company also expects to move its schedule bidding process online.
“The economics are still pretty promising,” said Roger Kay, a personal computer analyst at research firm IDC. “You can get employees to do certain functions in a much lower cost way.”
Bottom-line woes
Yet the idea of companies digging into their own budgets to get employees online isn’t gaining momentum. This is clear in the current troubles at PeoplePC Inc., a San Francisco start-up that won contracts to get Ford and Delta employees online.
PeoplePC initially thought it would make money after it sold computers, steering the buyers to a group of online retailers, which would share profits from those sales. Now PeoplePC is trying to also make money with the initial computer sale.
Although the company is among the few survivors pushing a business model for free or near-free computers, PeoplePC has yet to turn a profit. The company posted a $36.2 million loss during the first quarter and its stock, which is in danger of being delisted, closed at 21 cents Friday, down from its 52-week high of $10.37.
While PeoplePC sells computers from a variety of manufacturers, it must now contend with a price war under way between Dell, Gateway and other computer-makers.
The company also must convince employers that they need to create incentives to get workers online, although people with home Internet access continues rising without such assistance.
According to the U.S. Department of Commerce, the number of American households with Internet access jumped 58 percent between December 1998 and August 2000, from 26.2 percent to 41.5 percent.
PeoplePC said it works with 15 clients worldwide, but about half of those companies just negotiate discounts for their employees and market the deals internally.
Without a subsidy, the number of workers who take offers declines significantly.
Last fall, Pittsburgh-based health insurer Highmark Blue Cross Blue Shield started offering employees a basic computer and Internet service for $21.95 a month. About 10 percent of the company’s 8,000 employees took advantage of the offer, which Highmark did not subsidize.
Moving beyond employee-only computer programs, PeoplePC is trying to persuade long-distance companies, health insurers, credit card issuers and other firms to pitch computer deals to their customers in hopes of building stronger ties with them.
Highmark extended its employee deal to the insurer’s nearly 3 million members, but only 1,400 people–less than 1 in 2,000 members–took the offer.
