An extranet is a private network that only authorized users can access. These authorized users may include business partners, suppliers, and even some customers. They can use the extranet to exchange information with each other without having to enter the host company’s main network.

An extranet is like a secure file room located somewhere off the company premises. Only those issued a key can enter and browse through the filing cabinets.

Other interesting terms…

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What are the Benefits of Using an Extranet?

Extranets offer various benefits to users, especially companies, regardless of size, which include:

1. Increased efficiency

Businesses, small and large alike, typically work with multiple external vendors and partners to produce outputs or complete tasks. An extranet can help them manage the task workflow effectively, allowing them to ensure the prompt completion of deliverables.

2. Improved collaboration and knowledge sharing

Sharing documents and real-time updates seamlessly is possible among all company stakeholders through extranets. They also offer a safe place to do so without worrying about external security risks or the leakage of confidential data. The improved collaboration results in innovation and improvements in overall processes.

3. Enhanced communication and engagement

Extranets serve as an avenue for the management to communicate updates, make announcements, and share news to all stakeholders. That leads to increased engagement and active participation from all of an organization’s members.

Like any technology, however, extranets also suffer from some setbacks.

What are the Disadvantages of Using an Extranet?

1. Costs

One of the downsides of extranet use is that it is expensive to set up and maintain. The costs include payment for hardware and software and IT staff training and salaries who may need to build it from the ground up. 

Maintenance costs can also rack up. Companies that don’t have enough financial capacity to establish dedicated extranets can opt for third-party-managed or -hosted extranets. Smaller companies can subscribe to cloud-based extranet services, which often come with plug-and-play features. An example of such a service is Microsoft Sharepoint. Note, though, that while users don’t need to hire people to build their extranets from scratch, they’d still require servers to run applications and staff to keep these running.

2. Security

Another drawback of using third-party extranets has to do with security. Unauthorized users can gain access to these if their providers have lax security measures in place. That could lead to the loss of proprietary and other confidential information. That is why in-house staff typically manage extranets—doing so limits access to authorized users, alleviating risks of data loss.

Extranets offer a lot of potential benefits for businesses who wish to expand their operations and enhance stakeholder management. And so long as they are adequately secured, wherever they may be hosted (in-house or cloud-based) doesn’t matter.