< Day Day Up > 

Since the invention of the first computer in the mid-1940s, the computing technology has been continuously evolved in response to the changing business and technological environments. There are several forces in the environment to which a business organization must respond (business drivers). A significant force is the globalization of businesses and markets. Global business activities have been intensified by the fundamental economics of comparative advantage and the realization that the large global market share of a firm can eventually increase the firm’s profit over the long run. The globalization of business and market, in turn, triggered intensified global competition in all functional areas of business organizations, including price, advertising, quality, manufacturing, etc. To effectively cope with the global level of competition, business organizations have been under constant pressure to produce better products and services, on time, in response to changing customer demands. Consequently, business organizations have to concentrate on the several critical objectives that must be achieved to survive in the new era of global competition. They include increasing productivity, maintaining superior quality, improving responsiveness, and focusing on core business activities. In an effort to further rationalize their operations, some organizations are shifting their strategies from product innovation to scale economies through merger and acquisition, from optimizing the value chain in each firm to optimizing the value chain of the entire organization and industry (Laudon & Laudon, 2004). Furthermore, industrial organizations have begun to realize that information systems are an indispensable means that enable a firm to improve the efficiency and effectiveness of their organizational activities.

To support global business activities, an increasing number of companies built enterprise networks through interconnecting local area networks (LANs) and wide area networks (WANs). This network links the company’s headquarters to the branch offices and subsidiaries around the globe and encompasses a range of platforms, operating systems, protocols, and network architectures. Global networking of business organizations and the networked environment are partly attributed to several technology drivers, such as expanded public network infrastructure, development of the Internet and World Wide Web technologies, rapid development of client/server computing technology, and evolution of relational database technology.


An extranet is a Web-based private network that interconnects a company’s network to the networks of business partners. The extranet is an extended corporate intranet using the Internet technology operating over the Internet for a wide range of applications in the areas of sales, marketing, manufacturing, online publishing, design and development of new product, communications via videoconferencing and real-time voice conversations, business transactions, decision making, etc. The term “business-to-business networks” is often used interchangeably with extranets.

The term “extranet” has been used and defined in many different ways. For example:

An extranet is an intranet that is open to selective access by outside parties. (Baker, 1997, p. xi)

An extranet is an intranet that allows controlled access by authenticated outside parties. Typically an extranet will link the intranets of distributed organizations for the purpose of conducting business. This secure electronic consortium usually consists of an enterprise and its key trading partners, customers, dealers, distributors, supplies, and contractors. (Bayles, 1998, p. 3)

In its basic form, an extranet is the interconnection of the two previously separate LANs or WANs with origins from different business entities. (Maier, 2000, p. 33)

The objective of borderless Internet/intranet networking is to integrate internal corporate networks with the Internet, in a seamless manner, creating a new network facility, known as an extranet. …many user organizations with mature intranets are connected to the Internet and operated the two networks as if the components were a single network. (Sharp, 1998, p. 31)

The first definition by Baker provides a partial picture of a broad definition of extranets given by Bayles, Sharp, and Maiers. In this chapter, an extranet is defined as a Web-based WAN that links a company’s employees, suppliers, customers, and other business partners in a secure, electronic online environment for the purpose of conducting business (see Figures 1 to 3). An extranet is created if more than two companies open parts of their intranets to each other. The extranet is an extended corporate intranet using Internet technology operating over the Internet for a wide rage of applications in the areas of sales, marketing, manufacturing, online publishing, design and development of new product, communications via videoconferencing and real-time voice conversations, business transactions, decision making, etc. Secured extranets allow trading partners to gain limited (controlled) access to companies’ intranets, thereby increasing profitability and competitive advantage through managing important organizational activities in the most timely and cost effective manner.

click to expand
Figure 1: The secured intranet access model Source: Bort and Felix (1997, p. 10).

click to expand
Figure 2: The specialized application model Source: Bort and Felix (1997, p. 11).

click to expand
Figure 3: The e-commerce model Source: Bort and Felix (1997, p. 11).

An extranet is created if more than two companies open parts of their intranets to each other and create an inter-intra-net to improve coordination with trading partners in virtually all functional areas of sales, marketing, manufacturing, human resources, information systems, etc. The trading partners include a client that represents a substantial portion of the company’s revenue, companies working on a joint development project, distributors, contractors, suppliers of raw materials, vendors, dealers, consultants, etc. A secured extranet is part of a company’s intranet. It allows trading partners, including customers, to gain limited (controlled) access or provides a collaborative network linking trading partners to increase profitability and competitive advantages through managing important organizational activities in the most timely and cost-effective manner (Riggins & Rhee, 1998).


The extranets can be classified as either intronets or supranets. The widely known examples of each are shown in Table 1. Three automakers (Chrysler, General Motors, and Ford) are cooperating on an industry-wide extranet called the Automotive Network Exchange (ANX) that links them with 100 registered trading partners and more than 3500 sponsored trading partners. The industrial extranet will continue to grow. The ANX network is expected to connect the 1000 Tier 1 suppliers, 9000 Tier 2 and 3 suppliers, and 40,000 others who communicate with automakers in the near future (Liebrecht, 1999). The health- care industry has joined and started to use the ANX. Since the auto industry spends billions of dollars every year to provide health insurance for its employ- ees, it seemed like a logical step for the auto industry to bring insurance companies and hospitals onto the ANX network (Bushaus, 2000).

Table 1: Two types of extranets





Owner sponsored

Consortium sponsored

Gateway access

Proprietary network

Semiopen network




Service offered

Information product

Communication/decision tools

Primary justification

Provide unique resources


Primary beneficiary

Initiator with information

All consortium members

Long-term objective

Lock-in partner

Consortium competitiveness

Nature of application

Pull application

Push application


Federal Express’ Tracking Systems

Automotive Network eXchange (ANX)

Source: Adapted from Riggins and Rhee (1998, p. 92).

Extranets in Historical Context

In the late 1980s, many organizations began to link their PCs and other computing devices that were dispersed over a relatively confined area (e.g., a building, a building complex, a university campus, etc.) to create a LAN and the private branch exchange (PBX). The next step of networking is the creation of WANs that connect two or more LANs, which are dispersed over much longer distances (e.g., among many cities, states, and countries). WANs often include enterprise networks, a network of all LANs of a single organization in a country or more than a country (global networks). Multiple computers are being linked to work together over a network to accomplish a common task via sharing processing activities.

Client/Server Computing

The fundamental underlying principle of internetworking computers is sharing computing resources, processing activities, and information. This is also the objective of client/server computing. Client/server computing has often been described as “the perpetual revolution,” “a revolution that is forever altering how we think of and build information systems,” and “a deep paradigmatic shift in the computer and information system industry.” The monolithic mainframe applications that had dominated the 1970s and 1980s are replaced with applications split across client and server lines (Orfali, Harkey, & Edwards, 1996; Renaud, 1996). The essence of the client/server system is that two separate logical entities (clients and servers) work together over a network to accomplish a task. In doing so, it exploits the full computing power of each. Strong economics underlie client/ server computing, including relative computational costs advantages, large capital cost-saving opportunities, reduced system development costs, and improvements in productivity by moving processing power closer to the end user. [Refer to Chapter 5 of Renaud (1996) for further discussion of this topic.] In addition to cost savings, the client/server system increases the productivity of both end-users and system developers; enhances the scalability and flexibility of network and information systems (adding new components and replacing or upgrading existing ones can be done easily); and increases resource utilization, interoperability, and portability of the network and information systems. Most of these benefits are attributable to an open architecture employed by the client/ server architecture, meaning that specifications of the architecture are made public by the designers, and therefore, system enhancements and integration of other software and hardware are relatively easier than with proprietary systems (Harris, 2003).


The corporate LANs and WANs have become inseparable parts of the Internet. The emergence of the Internet has transformed the computer and information industry and the way people use computers. Using Internet technology, business organizations have implemented private (closed), proprietary networks for organizational members’ use within a corporation to distribute documents (e.g., newsletters, memos, employee handbooks, phone directories, etc.) and software, to provide access to databases, etc. The intranet usually employs applications associated with the Internet, such as Web pages, Web browsers, FTP sites, e-mail, newsgroups, mailing lists, etc. The intranet can also provide functions and services to support collaborative activities of work groups, such as information sharing, group scheduling, computer conferencing, etc. The software that provides those functions and services is known as groupware. The intranet offers an inexpensive way for communicating, disseminating information, and carrying out cooperative activities such as designing products, writing project reports, conducting electronic conferencing, making group decisions, etc., within an organization.

Peer-to-Peer (P2P) computing

P2P computing is different from client/server computing, even though both are considered distributed computing. In client/server computing, clients must inherently rely on their servers to receive services. In P2P computing, nodes can have total autonomy from their servers. Based on the degree of autonomy of clients, P2P computing is divided into two types: pure P2P and hybrid P2P. Nodes under pure P2P architecture (e.g., Limewire) search distributed catalogs in order to locate another client that holds information or files, whereas nodes under hybrid P2P architecture (e.g., Napster) have centralized servers that hold a catalog of IP addresses. Because P2P computing allows end users to directly communicate to each other, companies can utilize the full capacity of desktop computers and thereby reduce the cost of computer systems, including central servers and bandwidth. Intel eliminated the need to buy new mainframes by connecting more than 10,000 computers that are globally distributed to develop its new chip (McDougall, 2000).

The Architecture of Public Network Extranets

There are three different types of extranets: private, public network, and virtual private network (VPN) extranets. Private extranets link the intranets of more than two companies using a private, leased line. The most significant advantage of this type of network is its high security level. On the other hand, the high cost of private phone lines is a significant drawback. Three essential objectives of any information system are communication, information, and decision making. Due to the high cost of private phone lines, public network extranets and VPN extranets seem to be popular choices for many organizations.

The business-to-business network (B2B) is built on the client/server architecture. Understanding the architecture of extranets requires some foundational concepts, including the technology of client/server systems and architectures. The client/server computing system consists of clients, servers, and networks. The client hardware is a complete, stand-alone personal computer (PC). The user requests services via client software that formulates the user’s requests and passes them to the network software, which in turn sends the requests to the server and receives the results from the server and passes the results back to the client software. The server hardware component can be any type of computer (a PC, a minicomputer, a mainframe computer). The server software contains database management software, operating systems, and part of the network management software.

Extranets are designed in many different ways using many different hardware, software, and network technologies. According to Bort and Felix (1997), there are three models of public network extranets that are based on the use of a public network including the Internet to link an organization’s intranet to its trading partners:

  1. The secured intranet access model (Figure 1)

  2. The specialized application model (Figure 2)

  3. The electronic commerce model (Figure 3)

The secured intranet access model allows the business partner to log directly onto a company’s intranet to access most of it. The highest level of network security planning is necessary to implement this network architecture, as is a high level of trust in the partners. The specialized application model allows the partners to gain limited access to the intranet from the extranet site. A wide

variety of extranet applications, both packaged and custom developed, is available over an extranet, including order processing, database access, customer service and support, e-mail, and other communication tools. The electronic commerce model is well-suited to deal with a large number of partners (more than several hundreds of companies) using e-commerce security and transaction-processing techniques.

Architecture/components of virtual private network extranets

A VPN extranet is a type of extranet that overcomes the drawbacks of a private extranet (high costs) and achieves confidentiality of information using encryption technology. This way, messages are safe from being intercepted and understood by unauthorized users, as if the nodes were connected by private lines. According to Brown (Brown, 1999, p. 5), a VPN:

  1. Is a set of nodes on a public network on a short-term nonpermanent basis among cooperating companies

  2. Utilizes an encrypted or encapsulated communication process that transfers data from one point to another point securely; the security of that data is assured by robust encryption technology, and the data that flows passes through open, unsecured, routed networks

  3. Is a technology that simulates a private network

A VPN uses encryption and IP tunneling to provide secure point-to-point network connections across the public Internet. Some VPNs are set up with a network architecture similar to an extranet using a leased line in a DMZ-type arrangement. Generally, there is an addition of a VPN gateway in front of the firewall. A gateway is a device that connects two networks with different protocols. A gateway converts the data from a sending network to a format compatible with the protocols used by a receiving network. A VPN can be built with or without the firewall. This is illustrated in Figure 4 using the PERMIT enterprise product solution of TimeSterp Corporation, a leading provider of secure VPN solutions for corporate intranets, extranets, and Internet remote access. Refer to Chapters 8 and 9 of Brown (1999) for further discussions of different network configurations, architectures, and security for VPNs as well as leading vendors of VPN products.

click to expand
Figure 4: The architecture of a virtual private network extranet

Applications of VPN technology include (1) secure extranet connectivity with business partners (channel AD), (2) secure intranet connectivity with branch office (channel AC), and (3) secure Internet remote LAN access. A VPN gives telecommuters and mobile workers a way to get back to a corporate network over the Internet or a service provider’s backbone. A user dials into a service provider’s point of presence, establishes a tunnel (channel AB) back to headquarters over that provider’s network or the Internet, and authenticates him- or herself to gain access to the corporate network.

 < Day Day Up > 

Inter-Organizational Information Systems in the Internet Age
Inter-Organizational Information Systems in the Internet Age
ISBN: 1591403189
EAN: 2147483647
Year: 2006
Pages: 148

flylib.com © 2008-2017.
If you may any questions please contact us: flylib@qtcs.net