What Is an Extranet? (2024)

Long before software-as-a-service and cloud computing emerged, organizations used extranetsto provide external partners and other trusted third parties with secure and controlledaccess to their internal applications, information and processes. In today’s digitalage of expanded corporate ecosystems, these private networks continue to serve as animportant vehicle for knowledge-sharing and collaboration with suppliers, vendors andcustomers.

What Is an Extranet?

An extranet is a controlled private network, defined by Gartner as “a collaborative,internet-based network that facilitates intercompany relationships by linking an enterprisewith its suppliers, customers or other external business partners.” Employinginternet-derived applications and technology, organizations create extranets to securelyextend their internal business data and processes to partners outside their four walls.

From a networking perspective, an IT team creates an extranet when they take an applicationbuilt for internal users, often on their intranet, and extend it to select business partnersor customers. The extranet can be used only by individuals who are granted secure accesscredentials.

Key Takeaways

Extranets provide an organization’s partners and customers with controlled accessto information or applications otherwise available only to internal employees.
Like intranets, extranets can foster improved engagement and efficiency.
Modern extranets offer robust capabilities, such as multiple communication options,project management tools, document storage and application integration.
Organizations must consider cost, security and training before investing in an extranet.

Extranets Explained

At its most basic level, an extranet is a website or platform that gives trusted thirdparties, such as an organization’s vendors, suppliers and clients, access toinformation or applications typically reserved for employees on the organization’s ownnetwork. In some cases, the extranet exists as a secure extension of an organization’sinternal network.

The term “extranet” first appeared in the late 1990s as organizations sought totakeadvantage of internet technologies to foster collaboration and knowledge-sharing withexternal parties. While extranets are less commonly used today, companies that need them cantake advantage of modern internet capabilities and impose tight control via advanced accessmanagement technologies.

Extranet vs. Intranet: What’s the Difference?

Intranets and extranets are two sides of the same internet-powered coin. Both serve animportant purpose: Enable greater productivity, collaboration and knowledge-sharing for keydecision-makers. In the same way intranets foster employee engagement and communication,extranets engage stakeholders outside of the organization.

An intranet is a private network created by an organization to provide its own employees withaccess to internal applications, information and services. An extranet is essentially anintranet that organizations create for select partners or customers, granting access tospecific applications, information and services. Although intranets and extranets both relyon internet technologies, they are sequestered from the public internet by firewalls andaccess controls.

INTRANET	EXTRANET
Controlled private network that provides secure application andinformation access to employees only	Controlled private network that provides secure application andinformation access to third parties, such as suppliers or customers
Used for business intelligence, knowledge-sharing, content management,employee collaboration and document management	Used for partner collaboration and knowledge-sharing, customdevelopment, corporate social media and partner or customer websites andportals
Owned by a single organization	May be owned by a single organization or multiple organizations
Regulated by single organization	May be regulated by contractual agreements between organizations ororganizations and individuals

Why Are Extranets Important to Businesses?

Although collaborative platforms have emerged that enable dispersed teams to communicate andcollaborate remotely in real time, they are not well suited for more complex projects andtasks, such as supply-chain coordination, financial transactions, project management andcustomer interactions. Extranets let businesses take data and digital services, typicallyonly available on their internal networks, and share them with important third parties.Extranets offer organizations a way to invite those outside of the company into theirinformation systems to conduct business.

Today’s extranet platforms are far more capable and versatile than the extranets ofyore, offering multiple communication options, project management tools, document storageand application integrations. In cases where businesses must collaborate with partners andcustomers to succeed, they are often a necessity.

How Are Extranets Used?

Extranets enable the wider distribution of and access to information and transactionalcapabilities more efficiently and securely than, for example, email or even a real-timecollaboration network. They are particularly effective in cases where an organization needsto share large volumes of data, or data that is subject to compliance or security scrutiny.For example, accounting firms may use extranets to access important facts and figures fromtheir clients during tax season, and manufacturers may use extranets to exchange informationwith suppliers.

The first extranets were repurposed intranets shared between two organizations. In somecases, they still are. However, the use of extranets has matured to support the creation ofpartner portals, collaborative team workspaces and customer websites.

Types of Extranets

Because modern extranets can deliver a range of capabilities — sharing large files,enablingreal-time conversations and syncing calendars and timelines, for example — thesedigital,interactive platforms can take a number of forms. They continue to be widely used in themanufacturing settings in which they first emerged, enabling suppliers, distributors,logistics partners, product development teams and others to work more seamlessly increating, building, selling and transporting goods.

But there is a wide variety of uses for extranets that span organizational functions:

Project extranets can be used to centralize and coordinate projectmanagement tasks, providing a common workspace with access to shared documents andapplications. Architects and builders, for example, use project extranets to bettermanage schedules, materials and other details.
Integration extranets allow companies to integrate internal enterprisesoftware and applications into a single extranet platform, often in real time, forcollaboration among multiple parties. The automotive industry, for one, has a number ofintegration extranets connecting organizations in the car manufacturing ecosystem.
Logistics extranets are collaborative platforms that let organizationsmanage logistics processes across multiple stages. They may incorporate manufacturingspreadsheets, vendor catalogs and financial reconciliation capabilities. Retailers,shippers and customers often use a single logistics extranet to track a product fromsale to delivery.
Financial extranets allow companies to exchange confidential financialdata and perform transactions securely and quickly. For example, accounting firms mayuse a financial extranet to access important facts and figures from their clients duringtax season.
Customer extranets often take the form of platforms or portals thatenable customers to perform some self-service functions, or report and share informationin a more automated fashion. A client portal, for example, lets attorneys and law firmssecurely share information online with their clients.
Employee information extranets can be used to disseminate importantinformation and tools like timesheets or employee suggestions. These extranets areespecially useful for organizations with large, dispersed front staff who don’thave network access, such as restaurants or hospitality, or in the case of franchises.

Extranet Advantages and Disadvantages

Extranets can offer significant benefits for companies, their employees, partners andcustomers. These secure connections can cut costs; improve efficiency; and bolsterrelationships and engagement with and among customers, partners and even internal employees.However, there are drawbacks and limitations to consider. In some scenarios, for example, anextranet may be an overly expensive solution for an organization’s requirements.

Advantages:

Among an extranet’s advantages:

Improved engagement and communication: Extranets can be a commonplatform for company updates, announcements and information to boost engagement bothinternally and among partners.
Increased productivity: By bringing together key information andcapabilities in a centralized location, extranets can enhance organizations’efficiency when collaborating with external partners or working with customers,particularly with complex tasks, projects and workflows.
Streamlined collaboration and knowledge-sharing: An extranet can enableseamless document- and data-sharing, real-time updates and collaboration with partiesoutside the organization.
Better security: When organizations invest in appropriate dataprotection, security and access controls, extranets provide a much more controlledenvironment for collaboration than email.
Process integration and simplification: An extranet can helporganizations consolidate processes, such as online sales, order tracking and inventorymanagement, and simplify interfaces for partners or customers.
Improved partner or customer relations: By fostering a morecollaborative and integrated environment, extranets can improve customer and partnerexperiences and create closer relationships with key stakeholders.
Greater flexibility: Extranets allow remote and mobile partners andcustomers to access core business information and applications anytime and anywhere.

Disadvantages:

Among an extranet’s disadvantages:

Cost: In the age of cloud computing, some leaders may balk at the steepcapital investment required to create and maintain extranets internally.
Security requirements: While an extranet is a more controlled andprotected environment for working with third parties than, say, email, any networkaccess provided to outsiders carries risk. Organizations must invest in robust securityto protect proprietary or confidential data as well as train staff to keep informationsafe.
Training and change management: The company providing the extranet willneed to offer training and onboarding for new users.
Fewer face-to-face interactions: Extranets may reduce that“personaltouch” that results when customers and business partners meet in person.

Examples of Extranets in the Enterprise

Today, organizations of all sizes, across industries and geographies, find value inincorporating extranets into their IT toolsets. Some extranets you may already be using arethose supplied by logistics providers, such as FedEx or UPS, that allow shipping customersto access tracking updates in real time. Here’s a look at how other industries areputting extranets to work:

Banks and financial services firms employ extranets to enable their customers to performtransactions.
Government agencies, like the U.S. Internal Revenue Service, use extranets to enablecitizens or businesses to submit documents online.
Suppliers use extranets to make catalogs and ordering systems available to vendors.
Design firms and architects employ extranets to give clients access to ongoing designand development.
Educational institutions have rapidly adopted extranet technology to enable onlinelearning and administration.

5 Tips for Creating an Extranet

If your organization has decided to build or buy an extranet to collaborate with partners orcustomers, there are best practices to keep in mind to ensure the system is both usable andsecure.

Begin with business outcomes in mind. An extranet can open the doorto a variety of functions and processes. It’s important to pinpoint the goalsof the extranet before investing in any technology.
Decide what tasks and functionality to enable. Once the end goalsare clear, determine what tasks and functionality you want to (and can) provide tothe extranet’s users, and align choices with those in mind. This will guideyour choices with regard to tools, design and more.
Invest in security from the start. Robust security is critical wheninviting third parties to access your internal data and systems. Involve yoursecurity team from the beginning to ensure data safety considerations are baked intothe design.
Consider user experience. Today’s extranets can be much morethan a means of information exchange; users expect a good digital experience. Thatmeans investing in tools and capabilities that enhance the partner or customerexperience.
Plan ahead for mobility. Most users now expect to be able to accesskey tasks on the go, so make sure to include the mobile experience in the design.

For organizations across a range of industries, extranets have evolved into a must-have toolfor knowledge-sharing and collaboration among their most important stakeholders. Investingin a secure, user-friendly and functional extranet can pay off not only in increasedefficiencies, but also in better relationships with partners, suppliers and customers.

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Extranet FAQs

What does extranet mean?

At its most basic level, an extranet is an internet-based platform that gives third partiesoutside of an organization access to information or applications typically available only tointernal users on the organization’s own network.

What is the purpose of an extranet?

An extranet is a controlled private network with internet connectivity that“facilitatesintercompany relationships by linking an enterprise with its suppliers, customers or otherexternal business partners,” as defined by Gartner. Employing internet-derivedapplicationsand technology, organizations create extranets to securely extend their internal businessprocesses to trusted partners.

How are extranets used?

Extranets can be used in a variety of ways to collaborate with third parties, such assuppliers, vendors, customers and distributors. Modern extranets offer robust capabilities,including multiple communication options, project management tools, document storage andapplication integration. Some common type- include financial extranets, project managementportals, logistics extranets, employee information hubs and customer portals.

What industries use extranets?

Manufacturers were some of the first enterprises to develop extranet solutions to collaborateand plan more effectively with their supply-chain partners. Today, a wide variety oforganizations, of all sizes and across industries, employ extranets, including financialservices, transportation and logistics, hospitality and restaurants, government and publicsector, consulting, technology and retail.

What is an extranet with example?

An extranet provides an organization’s external partners with access to select internalinformation and applications. They are particularly effective in cases where an organizationneeds to share large volumes of data. For example, accounting firms may use extranets toaccess important facts and figures from their clients during tax season, and manufacturersmay use extranets to exchange information with suppliers.

How do you create an optimized extranet solution?

In order to deliver an effective and secure extranet, an organization must first target thebusiness outcomes it seeks. Only then can leaders select the best tools, functionality andsecurity to provide the desired user experience.

What is the difference between an intranet and extranet?