The thought of someone punching a hole through your company’s firewall is enough to make most IT managers break out in a sweat. Unless, that is, you’re talking about creating an extranet.
Corporate extranets offer a window into a company’s internal network, enabling a business’s customers or trading partners to tap into select data and applications that reside behind the company’s firewall. The password-protected extranets fall somewhere between a company’s intranet – which is restricted to internal use only – and a company Web site, which is viewable by anyone.
Use of extranets has blossomed in an age when businesses increasingly are emphasizing tighter collaboration with their customers, according to Gajen Kandiah, senior vice president of operations at NerveWire Inc., a Newton, Mass.-based consulting and systems-integration firm.
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"As companies become more comfortable with the public network, or the Internet, they’re starting to move more in this direction of becoming highly integrated with their customers, suppliers and business partners," Kandiah said. "Extranets are one of the first steps to get to that level."
Atrion Networking Corp., a network integrator in Warwick, helps companies create extranets by punching that hole in a company’s firewall. Charlie Nault, Atrion’s president, said the firm provides its clients with the "backbone infrastructure" for extranets by establishing a dedicated connection between two companies’ servers.
"With the proliferation of (virtual private networks), it’s become a lot easier to set up a virtual circuit across the Internet, with all the data encrypted between the two sites," Nault said.
Nault said a large retailer might deploy an extranet to gain better control of its supply chain. When inventories fall to a predetermined level, a purchase order is automatically generated, allowing the supplier instant access to the retailer’s database to fill the order.
Another example: A company may use its corporate extranet to provide consultants or auditors access to its accounting database, negating the need to have auditors on site, Nault said.
While companies might be headed in the direction of closer integration, few have actually arrived.
A survey of 162 North American business and IT executives conducted by NerveWire last month found that just 14 percent said their operations were "highly integrated" with suppliers, business partners and customers. Companies had been asked about the depth of integration in four core functions: new product development (such as engineering and design), manufacturing/operations, customer acquisition and retention (marketing and customer service) and order fulfillment (distribution and order management).
That doesn’t mean only 14 percent of companies surveyed have extranets: Many of the companies that were found to be at low levels of collaboration with key outside parties did have some form of extranet, where select parties can view certain segments of a company’s network.
But, as Kandiah explained, there’s a big difference between simply allowing customers and suppliers access to information and enabling them to do things with that data.
"Companies that are highly integrated have the ability to transact information, not only viewing data, but changing and exchanging information," Kandiah said.
But allowing outsiders a conduit in to a business’s most critical, proprietary databases is a difficult step for companies to take. "Distrust is probably the biggest barrier to (using an extranet) – not of the technology, but of each other," Kandiah said.
Companies that are able to transcend the distrust issue, however, often find greater efficiencies and costs savings. The companies in NeveWire’s survey that were most tightly integrated with their trading partners generated, on average, 40 percent increase in revenue, 30 percent greater cost reductions and a 35 percent better customer-retention rate on initiatives involving collaboration with outside partners.
For companies considering implementation of an extranet, Kandiah offers one caveat: Get your own house in order first.
"This is not smoke and mirrors anymore, it is real and it does add value," Kandiah said. "But an extranet requires you to have internal integration first, before integrating with your partners."
