Forget this is an article about e-business. Forget terms like “extranet” and “intranet” and “business to business” (B2B). Instead, imagine for moment your customers, suppliers and business partners have anytime access to the internal computer system of your company. You control which parts of the network they access, and the exchange of information, documents or even financial transactions between you and your “external business community” is private and secure. Project this forward and consider what you might be able to do with such connection. Have you got vision? Can you see which administrative, supply and oher business processes could be made simpler, faster, and less resource intensive? If so, welcome to the world of the extranet.
Extranet development and use is still in its early days in New Zealand. Consequently, many business managers are unsure exactly what the term “extranet” means.
Put simply, an extranet is an extension of an intranet – an internal network that uses internet technologies (those based on the internet protocol) to give internal employees access to important company information and applications. An extranet extends that by providing intranet access to authorised external users – whether they are employees, business partners or customers. So an extranet is gateway through which external users access company’s private intranet.
Some companies set up extranet access through their general (public) website, letting authorised extranet users log in to the intranet and be authenticated via the site. However, extranets set up to serve mainly business partners or mobile employees tend be accessed via dedicated website (also known as portal).
Once an authorised user gains entry to an extranet they can access internal applications and information made available by the business they have accessed.
Special software tools called “middleware” help these applications communicate with the applications and network systems of the authorised user. For example, company may want to exchange online payments with an extranet member, but find the member runs different financial software. Middleware ensures the different financial packages complete the transactions and exchange any other information.
There is an ever-expanding list of applications and business processes that are suited to an extranet environment. For example, extranets can be used to receive proposals, submit bids, provide documents and collect payments. Also suited are groupware applications (which let parties collaborate on project or product through document exchange and messaging), customer relationship management (CRM) programmes, newsgroups, sales and training programmes, order tracking, online purchasing and payment (known as e-procurement) and applications that let companies automate product supply chain to include manufacturers, suppliers, dealers, off-site contractors and customers.
Is it worth it?
Extranet projects are usually more intensive than intranet projects. This is because they directly impact important business contacts or customers and create security risk by doing so. Although excellent technologies exist to combat the risks involved with providing an external gateway to an internal business network, there is no absolute guarantee security breach will not occur. And security technologies themselves need to be carefully monitored and maintained to remain effective.
Extranet development requires careful planning, time, patience, external consultations and internal meetings, and reasonably significant financial investment. What’s more, business which doesn’t have an intranet to start with, will need guidance in order to develop an intranet and extranet together.
Scott Wilson, director of web services company Netbyte, says organisations that have only recently started using email and have yet to run website are not ideal extranet candidates.
Given these potential barriers, why are more businesses pushing ahead with extranet implementations? Simply because an extranet has the potential to create significant internal and external business benefit. And often, these benefits outweigh the costs and security risks.
In 2001, local telecommunications supplier Clear Communications (now TelstraClear) saved $2.7 million after placing an Oracle online purchasing and payment (e-procurement) program on its extranet. Peter Davies, then manager supply group for Clear, said the company was processing 3000 purchase orders month at cost of $100.11 per order. That was reduced to $64 per purchase order using e-procurement and the extranet and the number of orders was cut by two thirds to 1000 per month. The new system also consolidated orders so that in September 2001, while Clear received 1254 supply requests, it distributed only 1100 purchase orders. The company also saved $200,000 that month through bulk buying.
On the global scene, McDonnell Douglas uses an extranet to accommodate document distribution tasks. The company reports faster delivery times and reduced document duplication and errors. And as an example of the customer power of properly harnessed extranet, the global catalogue sales company Charles Schwab has an extranet called eSchwab that gives some 400,000 customers access to personalised account information. eSchwab users also conduct trades, and access interactive financial tools.
Extranets can provide customers with more intimate contact and familiarity with company, and speed up annoying administrative processes. They can also be used to gently extract information from customers, and attract new customers and business partners as well as cementing relationships with existing ones. So extranets are often used in conjunction with customer loyalty schemes and customer relationship management (CRM) programmes.
Extranets can also improve internal processes. “If company is geographically dispersed or has large number of road warriors an extranet offers gateway through which workers can dial in securely and access company information or applications,” says Wilson. Extranets also help head offices exchange information and transactions with widely dispersed branch offices.
Another example is the manufacturer that connects via extranet with major supplier’s system. When the manufacturer is running low on parts or materials (or volume of materials), request is automatically generated via the extranet to the supplier. The supplier receives the request and generates an automatic order which is sent to dispatch. At the same time, the supplier automatically generates an invoice, which is sent back across the extranet to the manufacturer. The manufacturer sends an electronic payment to the supplier, and the supplier generates receipt which is returned to the manufacturer. Finally, the manufacturer’s system reconciles the receipt with the invoice.
All these transactions occur over secure private extranet network (which is often virtual private network or VPN) as opposed to the very public and insecure internet.
Finally, extranets may offer competitive advantage. IT provider and web developer IBM recently installed (and is now hosting) an extranet for major professional services firm.
Steve Gordon, IBM’s Lotus product specialist, says the client wanted to use an extranet to increase the speed at which documents could be processed externally. “While the company could use its intranet to speed up the movement of documents internally and increase collaboration, it wanted to reach its customers with the same speed and offer them the same efficiencies,” says Gordon.
Once the extranet was established the company found client interaction speeded up and consultation time and hassles were cut. “This gave the company significant competitive advantage,” he says.
A properly planned extranet can deliver business benefits. But how can you tell if your business is ready for an extranet or can provide content valuable enough to open up