Extending the corporate network through an extranet enhances interactions with clients, suppliers, partners and other businesses, but the challenge is determining how to balance the cost with the security needed.

Creating a secure network to communicate with your partners and customers facilitates communications by providing around-the-clock access to business data such as order processing information, inventory availability, and pricing. However, while extranets originally were limited to expensive virtual private networks, new industry standard security protocols and software services have greatly reduced the cost of maintaining an extranet.

Sharing program and marketing information through en extranet can increase sales while reducing customer service requests, according to Elay Cohen, senior director of product management at Salesforce.com. Extranets can be easily updated to always provide current information, and the user interface can be customized to appeal to each customer and to restrict access to only the relevant areas of the corporate database. Storing communications with partners within an extranet instead of sending information through email also reduces the likelihood that the data would be forwarded outside of the organization or accessed via an unsecured laptop.

Drive customer satisfaction

Allowing customers to check order status and product availability through an extranet increases satisfaction while eliminating unnecessary phone calls. Cohen says giving resellers or sales representatives access to customer data can increase sales as some of his client's top partners have seen business double only six months after developing an extranet.

Extranet technology varies by level of security offered, according to Tim Bajarin, the principle analyst at Creative Strategies. The simplest implementation is an area of a public website that is secured by a password. For example, Second Life, a virtual world where companies interact with customers through secured chat and email, fits the expanded definition of an extranet, Bajarin says.

Extranets are now offered as "software as a service" by companies such as Salesforce.com and usually do not require additional hardware. These off-the-shelf applications extend the corporate sales, inventory and lead generation data to partners and include some customization features. Extranets hosted remotely by third-party companies are a good match for businesses with less than 50 employees that may not have an IT department, and the per-seat pricing can be more affordable than an internally hosted extranet, according to Bajarin.

Securing business data

Corporate data such as customer lists and wholesale pricing require greater security than is provided by a public website because of the potential for being compromised and exploited. Extranets that are extensions of virtual private networks, which protect data through stronger encryption such as the secure sockets layer (SSL) and feature more robust user authentication than typical Internet password schemes.

Small businesses that need to limit the risk of exposing sensitive personal data, such as in the financial, medical, and insurance industries, should consider maintaining their extranets internally. Extranets configured by information technology professionals can provide the greatest control over data and flexibility in tailoring the interface to meet customer needs, but they are the most expensive to implement and maintain as they may require additional hardware and integration with existing applications.

While customers and partners will appreciate being able to access all of their necessary data, small businesses should be careful not to eliminate talking to clients directly. "You should never automate the relationship side of business," says Salesforce.com's Cohen. Customers occasionally need human contact, so be careful to incorporate some personal communications into the business process.