What is an extranet?
An extranet is a private network designed by an organization to provide third parties with controlled access to protected business information or operations. These third parties may be suppliers, partners, customers, or other businesses.
According to Gartner, an extranet is “a collaborative, Internet-based network that facilitates intercompany relationships by linking an enterprise with its suppliers, customers, or other business partners.”
Initially created for organizations to share their internal networks, extranets continue to improve business efficiency by allowing easy, secure knowledge-sharing and collaboration on joint projects, employee training, similar interests, etc.
Extranets also allow businesses to synchronize operations with their partners and vendors, reducing delays, mitigating the effects of disruptions, and eliminating miscommunication. Companies may also apply extranet capabilities to improve customer interactions and service delivery.
Extranets can be expensive to implement and maintain, especially if internally built, as they require dedicated technical staff. With more people granted access, the network is more vulnerable to data breaches. Further, it may pose a governance conundrum trying to regulate the different types of stakeholders to co-exist within the network.
History
The concept of an extranet was introduced in the late 90s as companies began to explore the capabilities of the Internet. The term “extranet” was used to describe a centralized data repository for a diverse group of authorized members. Organizations would agree to set up a virtual private network (VPN) and share their internal networks so that each ended up with more knowledge and capabilities.
For instance, in 2003, a group of leading construction vendors created an extranet to promote their technologies and establish data exchange standards. Other companies in the industry may have used extranets to collaborate on large projects.
Today, extranets have a wide range of business use cases that require sharing large volumes of data or real-time updates in the supply chain, product development, and customer journey. If you want to share knowledge and collaborate with other stakeholders outside the company without compromising your internal systems, creating an extranet could be as simple as opening up select sections of your intranet to authorized personnel.
What is the difference between an intranet and extranet?
The main difference between extranet and intranet is access to various stakeholders. An intranet is a private network shared only by employees and employers. It has a range of features to support business growth and employee experience. These include a knowledge base, a collaboration platform, and a communications channel.
Beyond that, the intranet is designed to bolster company culture – from its governance to the types of content to the level of insight gathered. Designed for a wider user base, the extranet serves a narrower objective. That said, intranets and extranets support employee engagement in various ways to ensure their goals are accomplished.
Additionally, security and privacy are important in both networks, and a vulnerability in one could expose the other to risk. Before joining or creating extranets, examine the security measures to ensure your intranet is protected.
Why are extranets important to business?
Thanks to technological advances, modern extranets are much more capable and versatile, allowing users to achieve the same goals of knowledge-sharing, collaboration, and communication quickly and efficiently. In cases where businesses need to work with third parties, an extranet is often the best solution.
Here’s why:
1. Email is inadequate
In many business communications, email has been the best tool of communication as it supports different content formats, it’s formal, and it’s not intrusive. However, email often fails when companies want to collaborate with third parties. Developing a strategic plan alone turns into a jumble of back-and-forth communication threads.
An extranet combines the features of top collaboration tools to create an optimal environment for accomplishing the set goals.
2. Data-sharing at scale
One of the critical factors of success for businesses collaborating with third parties is the ability to share large volumes of data. Using the electronic data interchange (EDI) capability in the extranet, companies, partners, and even customers can access the files they need quickly through the portal as long as they have the login credentials.
Being able to store, share, and collaborate on large volumes of data decreases project timelines and saves on resources.
3. Exclusive information sharing
Extranets not only allow people to share information and collaborate in large numbers, but they can also be used to share data exclusively with select stakeholders. In addition to keeping private data safe, this also improves employee engagement as people are not distracted by irrelevant information.
4. Project management
One of the main reasons for organizations to create an extranet is to ensure project success. Large projects in Manufacturing, for instance, require a robust platform that can handle the demands of all sides with efficient communication, collaboration, and knowledge-sharing tools. Otherwise, decision-making is slow and based on inadequate intel.
5. Security and privacy
Extranets are also designed to secure company and individual data. Organizations prefer to build a well-rounded network rather than relying on a range of disconnected tools. Additionally, if a company manages the systems of many businesses, it can easily keep their affairs separated.
Types of extranets
Extranets can take different forms depending on the users and the purpose they are designed to serve. Some of the most common types are:
1. Project extranets
Created when different parties are working on a project to maximize performance. The extranet is an easy way to update everyone on their tasks and progress. They also keep confidential information about the project within the group.
2. Logistics extranets
Built to support production and distribution across the supply chain. Extranets are integral for connecting different third parties and keeping logistical pathways open. They can help improve employee and customer experience by providing real-time updates and insights.
3. Integration extranets
Allow companies to integrate their internal systems for better collaboration among different parties. Organizations can share software, applications, and data within the network to boost their total output. They can also establish and enforce quality standards, e.g., Manufacturing or Automotive organizations forming a central body.
4. Information hubs
Provide relevant, timely information to large groups of stakeholders. Extranets are effective platforms for disseminating information to large audiences across different locations while keeping it relevant to individuals. They can also create a two-way path for information and feedback exchange.
5. Finance extranets
Developed for financial purposes, including transactions and accounting. Extranets are layered with security features making them fit to process, transmit, and store sensitive financial data. They can provide a middle ground between financial experts and their clients.
6. Customer platforms
Enable self-service functions by giving customers access to information, an intuitive interface, and automated support. Organizations can use extranets to give customers more autonomy and boost their buying experience. Extranets can also provide a feedback channel on the customer experience.
Benefits and drawbacks of extranets
Benefits
- Better communication and engagement. A common platform with effective communication channels boosts the users’ morale and engagement with the current goal.
- Improved performance. Extranets improve efficiency in collaboration leading to higher levels of productivity.
- Improved relations. By creating a collaborative environment and encouraging interpersonal communication, extranets create closer relationships.
- Greater flexibility. Extranets make it easier to create a flexible work environment as workers have access to tools and information anywhere, anytime.
- Process optimization. Extranets help organizations consolidate their processes and remove the bottlenecks for smoother operations.
- Improved cyber security. Extranets provide a controlled environment that enhances data privacy and security.
Drawbacks
- High cost of implementation. Extranets can be expensive to create and maintain, especially if they are entirely custom-built. However, with less expensive buy options available, many companies can afford them.
- Security vulnerabilities. While extranets are designed to protect their users and data, access to many outsiders means a degree of exposure to cyber risk. Beyond the technical measures, users should be educated on how to keep the extranet secure.
- Change management. From resistance to a lack of skills, organizations face challenges as they try to introduce new changes. This can be overcome with effective change management strategies that include clear communication and training.
Reduced face-to-face interaction. By providing seamless communication channels, extranets may reduce the need for face-to-face interaction among users.
Examples of extranets in action
From logistics companies such as FedEx and UPS to financial services firms to educational and government institutions, extranets are a popular tool in modern organizations. Here are some of the ways they are applied:
- In manufacturing, producers can use extranets to keep their customers updated on the delivery of products without constant back-and-forth emailing. An extranet can provide information about the orders being placed, order history, and inventory to prevent supply interruptions.
- In logistics, suppliers and vendors can remain in contact with their clients to ensure materials are delivered as expected. Changes can be communicated quickly to allow for necessary adjustments. The extranet can also be used to submit invoices and receive payments.
- In healthcare, providers can collaborate on improving patient care at different levels. For instance, researchers can share outcomes of clinical studies or conduct joint studies. Individual patient data can also be shared with relevant providers to ensure they receive personalized care.
Conclusion
An extranet is an effective collaboration tool vouched for by some of the world’s largest organizations. That said, companies of all sizes could benefit from the capabilities of extranets.