Rapid Tool Inc. had a problem that every small business dreams of: In 1998, its annual revenues grew 80%, to more than $1.2 million. The company, which makes custom vacuum plates that anchor circuit boards during soldering, suddenly found it needed a high-powered local-area network connected to the Internet for its electronic ordering and production. Rapid Tool's customers transmit the specs for each vacuum plate to the company. Then, its team collectively creates blueprints, sharing files as they work.

Like many small businesses, Rapid Tool had jury-rigged a solution: four Pentium computers strung together. One functioned as the server, and the company designed chucks on the others. But the system was a nightmare -- it crashed as often as three times a day.

So in early December, the Dallas-based company bought a new network from Dell Computer Corp. The system was expensive: It included a $13,000 server and a $6,000 workstation, and installation cost several thousands of dollars. But now Rapid Tool runs without a hitch. The server is "two to three times faster than what we had," says Kelley Spinks, manager of the plate-making process. And the company's productivity is up 5%.

WHEN FLOPPIES DON'T FLY. As more small-business owners flock to the Internet to seek such growth as Rapid Tool's, they're finding that one computer and a stack of floppy disks don't cut it. That's where networks come in. PC makers are naturally eager to tap this market, and they've focused on making networks affordable. Budget servers are now as low as $1,700. And they've been well received by entrepreneurs: International Data Corp. in Framingham, Mass., says the number of small companies with networks is growing from 15% to 20% a year.

Does that mean your business needs one, too? If so, what should you buy? And how do you learn to use it? You'll find plenty of options: You can cobble together a system yourself or buy a turnkey installation -- Rapid Tool's was costly, but the price included phone support for the system's life (an additional fee bought three years of on-site service). Or you can rent space -- and maintenance -- on another company's network.

What exactly is a network? Basically, it's a series of PCs linked to a powerful central computer called a server. The server lets PCs talk to each other, share files, and use a single printer or another peripheral. Common sense rules when deciding to buy a network. If your company has more than 25 people with dozens of PCs or if it depends on continuous Web connection, a network is probably in order. But if you're a five-person shop with a Web page that takes E-mail and orders occasionally, you may not yet need a network. Several Internet server provider accounts, for example, will do the trick.

Computer makers call systems such as Rapid Tool's "low-end server networks." They are suitable for companies with less than 100 employees -- "below the threshold of having an IT [information technology] person," says Frank Muehlman, vice-president and general manager of Dell's small-business unit. Call to place an order with Dell, and you'll hear from Wang Global in Billerica, Mass., formerly Wang Laboratories Inc., to whom Dell has delegated its small-business network installation.

SERVER SPECS. We asked Dell to describe an average network. Here's what it might include: A server with 1 gigabyte of memory and 54 Gb of disk storage, six PCs, a laser-jet printer, internal wiring, and routing gear -- all installed for $11,000. For $149 more, you'll get three years of on-site hardware support from Wang. For an additional $500, you'll get software support that covers on-site service for five problems. One major question you'll need to answer is: Who keeps the network running? If you don't already have an employee who's adept at technology, you may need to hire a network manager -- whose full-time annual salary could be $50,000 or more.

If that sounds too daunting, your next best bet is to find a hosting company. There are thousands, some more reputable than others. One of the best known, Concentric Network Corp., will rent space on its servers for $300 to $500 a month, excluding communications charges. That basic service buys 10 Gb of monthly data transfer, five Internet addresses, multiple fiber-optic T3 connections, and 24-hour-a-day tech support and network monitoring. You can use the server space for your Web site, E-mail, customer lists, employee records, and other databases -- all the information and software you need. The host becomes your de facto IT department. Even better, Concentric has servers in multiple locations. So if there's an earthquake in San Jose, Calif., you can still sell collectibles on your Web site from its servers in Texas.

One suggestion when outsourcing your network: Buy your server and have someone else run it. Connie DeWitt, director of marketing for Concentric's network applications services unit, says the company can sell you a server for $2,000 to $4,000 and maintain it for about $250 a month. This is no bargain. Still, says DeWitt, there are advantages. "It is very efficient," she says, noting that if you buy and manage your own server, the dedicated communications line to your ISP can run from $150 to $200 a month. Other estimates are as high as $1,800 a month.

Despite the advantages of outsourcing network maintenance, some entrepreneurs, once their businesses reach a certain heft, are leery of letting another company handle their internal functions. "If you are the guy running the small business and you own it -- and your lifeblood and sweat is in it -- you think two or three times before letting someone take all the data and host it outside your operation," says Tim Bajarin, president of Creative Strategies Inc., a technology consultancy in San Jose, Calif.

"CROWN JEWELS." Consider James Whitcomb. His New Watch Co. has annual revenues of less than $10 million and is a purely virtual venture: He sells 5,000 watch models on his Web site. Whitcomb, a former computer network consultant, owns 15 Compaq servers in his Houston offices and has four permanent network specialists to maintain the system. "We are an E-commerce company," he says. "If the servers go down, we are out of business. Our livelihood is dependent on those servers being up all the time. They are the crown jewels."

Whitcomb's network and Web site are integrated. He takes orders via his Web servers, then he uses his internal servers to manage intra-office E-mail and to share text documents, spreadsheets, company presentations, and inventory. Whitcomb says he budgets $300,000 a year for network expenses. That's a lot more than renting server space, but Whitcomb insists that the added speed and control he has are worth the extra price.

As Whitcomb's example shows, internal networks and Web functions are fast becoming integrated. For some small companies, a basic Web-hosting service may be enough. These services guarantee security and a site that works nearly 100% of the time. That can cost as little as $25 a month, though sophisticated E-commerce services can run about $300 a month.

Angie McIntosh has chosen the Web-hosting path for now. She's the owner and sole employee of Crystal Exchange America, which last year sold $500,000 worth of crystal glassware on the Internet. McIntosh, a former software developer, has just one Pentium computer -- bought last year for $2,700. She rents Web-hosting services from Concentric. For $40 a month, she gets E-mail, 300 megabytes of so-called traffic space -- which people use while downloading her pages -- and 10 Mb of disk space to store the Web site. The site serves as her catalog, generating phone and fax orders only. "It is enough for this business," she says. "I don't want the task of maintaining the servers or having someone [at my company] doing this for me."

Clearly, choosing a network solution takes effort. But the good news is that small businesses finally have several affordable options. Where to start? Learn from your friends', associates', and fellow entrepreneurs' mistakes. That will save you false economies -- such as the crash-prone setup Rapid Tool improvised before it found the right approach.

By Jeremy Quittner in New York
jeremy_quittner@businessweek.com

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