Extranets - A New Computing Paradigm
Author: Don Hunter
This document pertains to the current state of extranet technology and
applications. Click here for related websites.
This paper analyzes what types of extranets are currently being
deployed by U.S. corporations. It also offers a very brief examination of
who the software and hardware providers are, and what the products and
services are that they offer. The definition of "extranet" is broad and
varied. Previously, they were known as Virtual Private Networks (VPN's)
and were promoted by firewall and router vendors; however, they encountered
logistical and security problems (14). Early examples of companies linking
up with their external contacts included combinations of private and
point-to-point networks, electronic bulletin boards, and advanced client-
server groupware. However, these systems often brought as many problems as
solutions, since they were difficult to use, costly to implement, and users
were often reluctant to share knowledge (11). At present, I think that the
most useful definition of an extranet is as follows: an external network that
reaches out to people who may physically work outside the firewall but who
are an important part of the business strategy, product-delivery system, or
customer-support apparatus. For additional ways that extranets have been
defined in the literature, see Exhibit 1 . However
one defines them, extranets represent an important trend. Zona Research
reports that companies will spend $41.9 billion on Internet and intranet
hardware, software, services, and connectivity in 1999, which represents a
nearly four-fold increase from 1996 spending (3). John Englund, vice
president of the Information Technology
Association of America (ITAA),located in Arlington, VA, says that in
1997 we should "[l]ook for more companies to increase connections with their
partners' intranets to improve communications" (1). However, the date 2000
problem, with the resultant need to modify existing applications, is one
factor that is slowing down intranet/extranet investments by corporations(3).
One of the most important organizational design issues managers will face
during the next decade is that of using extranets and software to augment
or reduce the need for enterprise intermediaries (17). A major question
remains: do IS executives have the business and political savvy to become
effective players in this new value-creation paradigm (17)? As to cost or
revenue benefits of extranets, I did not get a precise, quantitative sense of
how companies were benefiting from this technology. They were positive
about what their extranets allowed them to do, in terms of reducing product
delivery times and improving coordination among their external contacts.
However, they were reluctant to disclose specific details regarding actual
revenue increases or cost savings. It seems to me that they were holding
back because they viewed the advantages of these extranets as proprietary
competitive information. For a general list of the benefits provided by
extranets, see Exhibit 2. Although in the past it
has been unusual for such technologies to provide immediate payoffs,
extranets appear to be an exception to the rule (11).
First, I will describe specific examples of what companies are doing
with extranet technology. These applications can be used to solve problems
and streamline processes in areas such as marketing, human resources, sales
and distribution, finance, engineering, and customer service (6). CoreStates
Bank is currently designing an online bank customer services system; it has
engaged World Star Holdings, Ltd. to implement its VPAGE (tm) technology to
provide client-level security for this system. This represents a part of the
bank's general plan to provide online access to a wide array of value-added
services to its business and individual customers. This system will be
capable of identifying, authenticating, and distinguishing between different
types of customers. This will allow them to safely access user-specific
content provided by the bank and thereby take advantage of secure,
customized, fully-transactional services adapted to their unique
requirements (2).
Netscape is an example of a
company that practices what it preaches. Because Netscape's product is easily
distributed over the Internet, it can market, sell, distribute, and collect
for its products within the same medium. By putting its software on the
Internet, and letting customers download it and provide feedback, Netscape is
able to debug and improve its products (5).
By June, Ford Motor Company will deploy its FocalPt extranet network,
a system that supports the sales and servicing of automobiles. This network
will provide the more than 15,000 Ford dealers worldwide with promotional,
inventory, and financial information to facilitate closing a deal. In the
past, this kind of information has only resided in printed form, and has thus
not been readily accessible. This new system uses Web browsers to present
sales and promotional literature, including video clips to help prospective
customers obtain financing. Dealers will also be able to keep track of
repair records and customer preferences. Ford does not require that dealers
purchase this technology, which they can buy from any of three systems
integrators. One concern that I have regarding this approach is that if a
dealer is already profitable and satisfied with his/her profit margins, there
may be little motivation for him/her to invest in such a system. As far as
the specific technology used by the FocalPt network, each dealership will
receive a system designed by SoftAd, Inc. in Mill Valley, CA. This will
include a PC server running windows NT, Microsoft Corp.'s Internet
Information Server, and as many multimedia desktop PCs as they need. These
desktops will run Microsoft's Internet Explorer browser. Communication
between the dealers and Ford will be through FordStar, a satellite-based
TCP/IP network that already exists for transmitting business information
between Ford and its dealers. Information is distributed using Internet
middleware from Way-farer Communications, Inc. in Mountain View, CA (18).
GMAC Commercial Mortgage and its sister company, GMAC Mortgage Corp.,
needed to update their network because the old system, an aging 16M bit/s
shared Token Ring LAN, could not support the required load. Recently, GMAC
set up Investor Query, a service which will allow investors to log-on to
GMAC's intranet through a World Wide Web page. The entire package was leased
from 3Com Corp.; it consists of a 100M bit/s Fast Ethernet backbone connected
to 25 Fast Ethernet hubs that deliver dedicated 100M bit/s service to users'
desktops. This extranet will enable investors to use the Internet to obtain
loan-level detail on all the loans that GMAC services for them, plus
occupancy rates, inspections, and pictures of the properties. By filling out
an electronic form, which will be routed to GMAC's inspection contractors,
investors will be able to request a property inspection over the Web. After
the inspection, the contractors will log-in to GMAC's intranet and report
their findings, as well as upload digital photos. This process is expected
to reduce the time to file an inspection to investors from a week to two
days or less. Another advantage of this system is that employees will gain
access to videotaped training and television broadcasts, which will be
transmitted across the network by Star-light Networks, Inc.'s StarWorks
media server (12).
Enhanced Product Realization (EPR), is a joint undertaking between
Denver, Colorado-based InfoTest
International, an alliance of high-tech companies and organizations, and
the U.S. government (16). This project will set up a real-world system for
"virtual product design and supply chain management" that will allow
manufacturers, suppliers, and customers to work together on-line anywhere in
the world; the project will also study the costs and benefits of such a
system (4). InfoTest International is a private consortium devoted to
developing practical internet testing applications. The InfoTest members who
are participating in the EPR project include: 3M; Bay Networks; Caterpillar;
Digital Equipment Corp.; Global Commerce Link LLC; Hewlett-Packard Co.;
Hughes Electronics; IBM Corp.; the Institute for Defense Analyses; Sprint;
Texas Instruments; the US General Services Administration; and Lawrence
Livermore, Oak Ridge and Sandia National Laboratories (16). The EPR extranet
is expected to give American manufacturers an enormous competitive advantage
in the global marketplace (4, 16). This system will let participating
companies collaborate confidentially on manufacturing matters such as
customer requests for product enhancements. The goal is to distribute
decision-making while using technologies that are more interoperable and less
costly than those employed on traditional private networks. The nationwide
trial will involve Internet technologies such as the World Wide Web, as well
as computer-assisted design and manufacturing, product data management,
electronic data interchange, videoconferencing and other more traditional
technologies. EPR is expected to prove that the Internet can greatly shrink
product time to market and customer response times. Furthermore, virtual
private networks over the Internet will cost about 30% less than using
telephone company leased lines. EPR will use the Distributed Computing
Environment security standards and router-based Internet Protocol encryption
from Bay Networks, Inc. This reservation protocol will allow Internet
Service providers to offer users guaranteed bandwidth (4).
Finally, Turner Broadcasting Sales Inc. (TBSI), the advertising arm of
Turner Broadcasting Systems Inc., has deployed a business-to-business
intranet (i.e. an extranet) that solves the age-old problem in the
advertising community of how to give ad executives the information they need
to make buying decisions for their clients, without flooding them with
useless data. With this new technology, ad agencies no longer have to plow
through mountains of paper dealing with programming, demographics, ratings,
and promotional opportunities to find a fit. "The advantage is that it saves
unnecessary phone calls and really will save time," says Mike Mulieri, vice
president and group supervisor of the broadcasting, buying, and programming
group at Young and Rubicam Inc., a New York agency where Turner Mania is
being beta-tested. Because there is no proprietary information on the Turner
Mania Web site, and since Turner wishes to make this site as accessible as
possible, there is no firewall and the network employs only basic password
security. Both large and small companies will have the same timely
information and opportunity to best serve their clients, since all will be
given access to this extranet. The set-up of Turner Mania will allow ad
executives to obtain the specific information they need, as well as
encourage them to think of other ways they could advertise their clients'
products. Furthermore, Turner plans to gather information about these ad
executives themselves; it will track basic hit rates to assess the frequency
with which pages are accessed, as well as who is accessing them. This
information will allow TBSI to improve its services. Lastly, TBSI realized
the missing piece was a clearinghouse mechanism that would give ad agencies
access to the information they actually needed, not just what their internal
contacts thought they might require. The TBSI group selected a third-party
developer, Information and Imagination Inc. (i3). During the initial
implementation of this project, i3 will continue to house the stand-alone
Digital Equipment Corporation Prioris HX 590DP dual-Pentium server with 96
Mbytes of RAM, on which the site now resides (7).
Now that I have discussed examples of how U.S. corporations are
employing extranet technology, I will consider the technology providers who
make these systems possible. According to Earl Galleher, vice president and
general manager of Internet Server Products with Digex, an Internet carrier
and Web site management company in Beltsville, MD, extranet hosting could be
a very profitable business for integrators and ISP's (9). Microsoft Corp. and Netscape Communications Corp. are both
attempting to get as many ISP's and integrators as possible using their
respective technologies. These companies are refining their messages as they
battle for mind and market share for business-to-business communications over
the Internet. This past February, Netscape unveiled a Virtual Intranet
demonstration on its Web site, which allows users to browse selected data at
a fictitious site called Airius Aircraft (9). In addition, in order to
facilitate enterprise application development, Netscape is providing more
than 20 different reusable intranet applications, with source code, in the
AppFoundry section of its Web site
(6). According to an integrator source, Netscape is decoupling its
Transaction server from its Merchant Server so that the former may be
released as a separate product. This is an example of Netscape's increasing
focus on EDI and transaction services (9). Moreover, by the third quarter
Netscape, in partnership with Actra/General Electric, will add an EDI
component to its Transaction Server, as well as release additional gateways
to its LivePayment server (9). Netscape also recently announced a
partnership with Deutsche Telekom AG, a German distributor, under which
Telekom will help deliver extranet technologies to customers (9).
As far as Microsoft is concerned, it will soon roll out a new version
of its Commercial Internet System, code-named Normandy, that will be
thoroughly integrated with Exchange, Microsoft Transaction Server, and the
rest of the BackOffice suite. According to Russ Stockdale, group product
manager with Microsoft's Personal and Business System group, the "Internet
Information Server and Transaction Server will become the new foundation for
Merchant," Microsoft's electronic-commerce server that is part of its
Commercial Internet System (9).
Internet Service Providers (ISP's) market extranets as services,
instead of hardware or software. The ISP's install and lease the necessary
equipment, saving the customer hardware costs as well as the costs related
to leased lines or frame-relay circuits. These extranets employ encryption
and authentication for security; the vendors offer guaranteed availability
as well as integration with existing networks (14) For example, UUNET
Technologies, Inc. provides the hardware and software for other companies to
implement their extranets. This ISP recently introduced a service which
allows companies to make their intranets accessible to suppliers, customers
and remote employees. A central component of the service is a combination
firewall and router, which UUNET will install at customer sites to provide
security and let customers prioritize intranet traffic. Chris Stevens, an
analyst at Aberdeen Group, Inc. in Boston, points out that prioritizing
access to its extranet could be an important business tool for a company
trying to provide key business partners with special attention. Alan
Taffel, vice president of marketing and business development at UUNET says
that "extranet services will provide the user with the economies of the
Internet, quality of service, end-to-end security, and remote access support
that has not been available before." UUNET is the first ISP to roll out an
extranet service; judging by customer demand, others will likely follow (15).
Now that I have considered examples of companies who are deploying
extranets, as well as those who are providing the extranet technology, I will
move on to consider the lessons I have learned from this analysis. See
Exhibit 3 for a list of general considerations when
developing an extranet. One valuable source of information that I uncovered
while sifting through the literature was
Mainspring Communications . Mainspring's interactive service provides
decision-essential information on key topics such as security, development
tools, electronic commerce, outsourcing, and managing upgrades. It also
includes referral directories of solutions providers, plus an electronic
community for peer-to-peer communication. Individual members can subscribe
to the service for $495 a year, whereas corporations will receive volume
discounts. This puts Mainspring among the pioneers of subscription-based
business-to-business services on the Web (3).
Another lesson I learned was that since it is not possible to predict
to whom a company might wish to give access to its extranet in the future, it
is vital that these applications be built for the broadest possible
connectivity (i.e., the Internet). Important questions to ask when
developing an extranet include: "What if partners, customers, or prospects
outside the firewall could tap into this?" or "What if employees outside the
original department that built this system had access to this?" (5). As for
security, the best approach is to place firewalls on your network among
groups or segments, whichever makes sense. Then, starting with a firewall
configuration that lets nothing through, begin enabling specific protocols
and connections. This is an improvement upon the method of whittling down
connections after first allowing the broadest possible connectivity, since
it lessens the chance that one would inadvertently miss something (10).
In addition to security, there are cultural obstacles to overcome when
setting up an extranet (13). Each company that has agents and intermediaries
doing sales and support will have to grapple with the issue of what role IS
will play in either disintermediating the middlemen or adding value to them.
There is an increasing trend within IS departments towards the design of
information structures that reduce either the power or the value of various
enterprise intermediaries. Instead, IS departments are designing
information structures that directly add value to customers (17). However,
as digital technologies diffuse throughout multiple marketplaces, it is
important to consider who are the appropriate customers for IS. Internal
clients? Or the real customers? Companies will have to decide whether it
makes more sense to give software to their insurance agents or their
insurance agents' customers, their brokers or their brokers' clients, their
tech support people or the people they support (4).
Lastly, process was a major consideration cited in several of the
examples. I feel that this point is very important, because technology does
not miraculously solve business problems. Companies are still required to
seriously contemplate the changes that must first be made in their business
processes, before they can take full advantage of this new technology (4, 9).
In conclusion, it seems that I should consider whether extranets
represent new technology, or are actually just a marketing twist on the
Internet concept. According to Mark Gibbs, the term "extranet" was coined by
Netscape's Marc Andreesen, who appeared on "The Charlie Rose Show" on Oct.
16, 1996. The term is meant to denote a Web server that handles confidential
intranet content and communications that will be made accessible to business
partners and customers via the Internet. This author says that an extranet
is the same as a Web server with secure content. Gibbs also asserts that
"concocting yet another term for a completely normal function of an intranet
or any other system confuses end-user organizations. We don't need a special
name for every variation and attribute of IT systems." I somewhat agree with
Gibbs, but I think it is important to think of extranets and intranets as
separate entities. Although the author suggests that these companies are
just trying to put a marketing spin on Internet applications, the extranet
represents a set of different product offerings and services, and is thus
more than just a marketing term. I also believe the term "extranet" is
helpful conversationally when considering giving external parties access to
enterprise systems. The term should engender a deeper level of consideration
and concern regarding maintaining security and managing external
relationships. Perhaps Gibbs does not see the value of creating a term to
describe this specific phenomenon, since he is a reporter and not a
businessman or technologist (10). Finally, extranet technology seems to be
the wave of the future. This new paradigm will help companies to achieve new
levels of flatness, flexibility, networking, global reach, and diversity.