As e-business implementation in New Zealand is commonly outsourced, it’s not uncommon for business to end up owning and using extranet technologies without knowing exactly what they are.
Rod Hall, marketing director for internet technologies developer Tranzsoft, reinforces this by saying few of his clients have an overall e-business vision and he spends lot of time demystifying technological concepts.
“The whole e-business thing has been over promised and under delivered by software vendors; companies like ours tend to be the victims of that.”
Hall says New Zealand businesses lack an understanding of what is possible in the wider e-business space and so tend to approach projects in piecemeal fashion.
“We never get customers approach us and say they want to set up an extranet. Instead they say, ‘We’ve got this business problem, we need these people to be able to do business with us and have access to our internal network. How do we do that?'”
Hall says in the past Tranzsoft has only had one client with fully developed e-business vision. And he says confusion over the difference between an extranet and an electronic data exchange (EDI) connection is rampant.
For the record, EDI describes the interchange of data electronically over dedicated electronic link between two or more companies. An extranet uses internet technologies to create gateway into an internal network for external users. This means your customers, business partners and remote employees are able to get into the internet-enabled parts of your internal network to do everything from ordering goods, accessing information, exchanging files, and checking their account status, to paying you electronically and receiving an electronic receipt in return.
Of course, you get to control what these external parties can have access to and what they cannot.
The main difference between EDI and an extranet is that with an extranet, the link and access between companies is based on internet technologies and so is more flexible.
Put simply; you can exchange more things, more easily over an extranet than over an EDI connection. EDI connections, however, are arguably considered to be more secure.
Desire and difficulty
Managers are drawn to using extranets because they help deliver an automated supply chain, reduced procurement and administrative costs, and customer relationship management strategies. They are also widely used to provide gateway for core network access for employees working away from the office.
As tangible example of the business benefits of using an extranet, international risk assessor McDonnell Douglas reports its extranet has been instrumental in speeding up delivery times, and reducing document duplication costs and errors.
And, in what is perhaps still one of the best local case studies, in 2001 TelstraClear (then Clear Communications) saved whopping $2.7 million in one year after placing an Oracle
e-procurement application on its extranet.
But while the benefits of using an extranet are long and legendary, it’s getting there that’s the problem.
Hall says Tranzsoft takes on between five and seven EDI projects per month, but extranet projects are less common. And that’s because New Zealand SMEs struggle to technologically support both extranets and intranets (the internal network based on internet technologies that the extranet is used to access).
In addition, New Zealand companies face traditional e-business barriers; systems have to be technologically sound, affordable, and provide return on investment.
“That ROI is difficult to achieve if you can only get 70 percent of your suppliers using your extranet, so you have to maintain manual systems alongside for the other 30 percent,” says Hall.
So who’s running an extranet now, and how can extranet success be assured?
Express extranet
One company making money and efficiencies from having an extranet is the New Zealand arm of international stationer and office products supplier Corporate Express.
Greg Taylor, e-commerce manager for Corporate Express, says the company is using it to trade electronically with large number of organisations and has had an attached online ordering facility, NetXpress, since 1998. This feeds back into back end ordering software, which includes Corporate Express item codes, descriptions, product availability, and pricing.
Taylor says prior to using NetXpress, Corporate Express had been forced to key in client and supplier information manually.
Corporate Express initially trialled NetXpress for few months with handful of customers, and today approximately 50 percent of its customers use it.
As an interesting illustration of the rate at which e-business awareness is growing, Taylor says Corporate Express acquired the second 25 percent far more quickly than the first.
He also endorses Hall’s observation that many New Zealand companies with extranets find there is need to maintain manual and online systems together.
“There are restrictions with some organisations regarding internet access. This in turn restricts how many of our customers can use NetXpress.”
Corporate Express gives NetXpress access to approved clients that have an account with the company. While they then have access to the Corporate Express internal network, the products and information they see can be streamlined or restricted.
Taylor says while NetXpress does not allow the financial systems of Corporate Express to communicate directly with the financial systems of clients (meaning credit cards are the only method of payment on NetXpress) the company has developed electronic invoicing for clients and is trialling financial transactions with key supplier.
Electronic invoicing
“Up to now I haven’t heard too many discussions around electronic payments, but lots of discussions around electronic invoicing,” says Taylor.
He says the challenges of maintaining an extranet and online portal include need to regularly upload new graphics, maintain online catalogues and make changes.
“If you also act as virtual agent for other suppliers as we do, you have to manage their online data as well.”
And he agrees with Hall that few New Zealand SMEs are geared up to run their own extranets and advanced e-business models like e-procurement.
“E-business is significant and important to Corporate Express. We go out there and highlight the benefits to customers of internet trading via NetXpress, such as improved control. There are still more organisations that express interest in electronic trading and walk away from it than those who commit to it.”
However Taylor says Corporate Express’ foray into an extranet and e-business has been worth it.
“Orders through NetXpress come into our systems accurately, and with valid pricing and item and cost centre codes. The customer has taken some of the work away from our customer services team, which frees up our time to be more proactive and concentrate on customer relationships and management.”
He says Corporate Express has also been able to handle more business, and the average value of an order rises when it is received through NetXpress.
“NetXpress customers tend to build their orders throughout the week and can merge orders if they want to. Plus, we are presenting our products graphically; customers can see them, which boosts online ordering.”
The bigger picture
Steve Bittinger, research director for Gartner Asia Pacific, says Gartner does not spend lot of time watching the New Zealand market, but extranets and other types of e-business models are gaining ground in Australia.
“We see companies like Coles and Woolworths with big extranet projects under way and there is now lot of pressure in this region to move more towards these technologies. Some companies are driving their business partners very hard towards e-business, especially when it comes to automating the supply chain.”
Bittinger says EDI is an older type of technology which is still
