An Explanation of the Internet, Intranet, and Extranet, and their Business Value

Target Audience: Business persons wishing to leverage Internet
technologies to add, extract, and uncover new sources of value.


This document provides a simple explanation of the Internet, Intranets and Extranets, and explains how these technologies can be of benefit to modern businesses.

What is the Internet?

The Internet is a public network offering a variety of facilities including:

  • The World Wide Web (WWW): Used to display hypertext documents and interactive hypermedia, allow input into forms, and deliver distributed database applications.
  • e-mail: Useful for inter- and intra- organisational communication, and
  • FTP (File Transfer Protocol): for exchanging files.

Business Value...

The Internet can be of business value through:

  • marketing: development and promotion of products and services,
  • sales: processing of business transactions, and
  • service: provision of information.
Marketing Sales Service
  • Internet advertising / brand development / corporate image.
  • Product Differentiation: Use of the Internet to offer unique features and electronic services and to create institutional distinctiveness.
  • Product Innovation and Growth: Creation of new products and services, and new markets; Mass customisation of products; Global expansion.
  • Delivering attractive value-laden content at a reasonable price. This entails the provision of easily accessible, regularly updated, diverse and elegant content.
  • Dynamic adaption to customer behaviour
  • Quicker time to market.
  • Online, instantaneous quoting.
  • Faster transaction speeds
  • Secure transactions and order processing
  • Automatic integration and communication with back-office workflow system.
  • Improved user interfaces that are intuitive and hide the complexity of the underlying technology
  • Automated reminders and re-ordering
    • Faster customer service
    • Customers engage in self-service thereby reducing administrative and processing overheads. For example, customers can check their own account information, track parcels, and perform interactive needs analyses, without needing human assistance.
    • Provision of ‘any time of day or night’ services and facilities to customers and employees around the globe transcends the limitations of time and place.
    • Availability of real-time, up-to-date information.
    • Reduced lead times
    • Reduced consumer search and selection cost
    • Feedback from clients
    Business Advantages
    • Cost Advantages. The Internet can decreased the marginal costs of marketing, sales, and service.
    • Improving the information metabolism of firms. New Internet information technologies, such as e-mail filtering, can help reduce co-ordination costs and mitigate the information overload, thereby speeding up the "information metabolism" of firms - that is, the ability of firms to take in, move, digest, and respond to data. The Internet provides a useful and low-cost mechanism for information storage, transport, and processing. The Internet thus becomes an avenue for improving communication and co-ordination and streamlining business processes.
    • Improving the effectiveness, and thus profitability, of management decisions and actions. The Internet can add value by providing managers (including human managers and software agents) with relevant and reliable information, in the right format, anywhere, and in real-time. For example, managers can do market research through transaction analysis and can view up-to-the-minute management reports.


    What is an Intranet?

    The Intranet is a private network that uses Internet software and standards to connect internal employees. The Intranet is effectively an in-house version of the Internet. The Intranet is fast becoming the network platform of the future. It is also becoming the dominant environment for developing corporate applications.

    Business Value...

    Process Re-engineering Enterprise Applications
    The Intranet can be of business value as a means for connecting staff and improving internal communication and co-ordination. The Intranet provides a means of connecting business units across multiple computing platforms. The Intranet thus facilitates effective re-engineering by allowing business processes to be built across organisational barriers. Effective re-engineering streamlines the internal value chain and can drastically reduce costs and lead times, and improve flexibility and customer service. The Intranet is well-suited to a variety of enterprise applications including:
    • workflow applications
    • human resource applications

    Examples of human resource applications include use of the Intranet for performance management and benefit scheme administration. For instance, staff could tailor their own benefits package without creating additional paperwork for the Human Resources department. The Intranet can also be an effective training and information dissemination tool, providing employees with access to up-to-date information and tutorials.

    Replacing Traditional Client/Server Applications

    The Intranet is an ideal mechanism for replacing traditional, platform-specific client/server applications. Traditional client/server applications promote 'islands of automation' within companies, by restricting inter-departmental communication and causing rework, duplicate data capture, and errors as data is passed between different applications and operating systems. Intranets, which are platform independent, promote cross-functional co-operation, electronic integration, and business synergy.


    What is an Extranet?

    The trend towards integrating with business partners means that Intranets are no longer strictly private networks, and companies are granting access to suppliers, vendors, customers, and other business partners. This extension of the Intranet to permit controlled access to specified third parties has been termed an ‘Extranet’.

    Extranets can fully support all transactions between business partners, as well as provide value-added information. Extranets are appropriate for infrequent, ad hoc transactions, and short-term trading relationships as well as for regular transactions and long-term trading relationships.

    Business Value...

    The Extranet can be of business value as a means of connecting buyers and sellers. The advantages to be found are:

    • Extranets promote value chain integration. Extranets, which are inter-organisational networks, permit closer integration of adjacent steps in the value-chain, and allow ‘joint, interpenetrating processes at the interface between value-added stages’. Barriers between the organisation and business partners and customers are lowered. Electronic integration leads to greater efficiency, data integrity and fewer errors as data need only be entered once, at its source. For example, the customer fills in an order form on-line, and the order details are automatically written to the database or electronically forwarded to the workflow system. Tighter coupling of business partners results in time savings and faster, more cost-effective client service. Integration can also lead to the elimination of duplicate tasks and resources. Finally, integration can result in entirely new business models through intermediation and disintermediation.
    • Extranets provide the benefits of Electronic Data Interchange (EDI). Electronic Data Interchange (EDI) is ‘the inter-process communication … of business information in standardised electronic form’. Amongst the benefits of EDI are:
      • Reduced time and expense of paperwork. EDI provides fast, inexpensive, reliable connections to suppliers and customers. Fully digital information exchange eliminates paperwork.
      • Improved speed and efficiency in filling orders (i.e. reduced cycle and order fulfillment times)
      • Quicker transfer of business documents
      • Faster customer service
      • Fewer errors
      • Automatic audit trails
      • Expanded customer/supplier base
      • Reduction of manual, labour-intensive activities
      • Automatic integration with internal business workflow systems
    • Extranets help improve customer relations and foster a better understanding of customer needs. This is achieved through transparent customer tracking and transaction analysis, personalization, direct feedback from customers, and pro-active provision of information to customers. Client and supplier services are improved and become more cost effective, especially as clients and suppliers engage in self-service. For instance clients can perform a computerised analysis of their needs, can check their own account information, or can track the status of orders and deliveries without needing human assistance.
    • Extranets can help to lock in partners and customers. Information gathered on customer needs and behaviours represents a switching barrier as "customers would need to ‘teach’ a competitor all that information".
    • Extranets reduce inventory and improve inventory turnover rates.
    • Extranets reduce procurement costs and time. Extranets reduce search, selection, and transaction costs. The purchasing process is thus quicker, more convenient, and cheaper. The use of advanced computerised search engines as part of the Extranet helps customers to quickly locate the cheapest or most appropriate products.
    • Extranets have global reach. Because the Internet is used as the platform for the Extranet, the Extranet network has global reach.
    • Extranets enhance the firm's flexibility. Because the Internet is an open, public, ubiquitous network it is easy and cheap for new trading partners to connect to the Extranet network (which has the Internet as its foundation).
    • Extranets improve management decisions through up-to-the-minute management reporting on transactions and web-site activities.[Top]

    How Can LodeStar Consulting Assist Us?

    LodeStar's mission is to provide substantial value to a local and international client base through business consulting and system development focusing on leveraging the strategic potential of the Internet, Intranet, and Extranet for competitive advantage. This is achieved by building 'fourth-generation' Internet applications tied to enterprise databases and by re-engineering business processes where necessary to exploit the opportunities offered by technology. LodeStar develops leading-edge Internet applications that link suppliers, customers, and employees to reduce transaction costs and improve co-ordination and information flows across the entire corporate and industry value chain.

    LodeStar Consulting strives to be the service company of choice for organisations seeking direction and assistance in initiatives to extract, add, and uncover new sources of value from Internet, Intranet, and Extranet technologies.[Top]

    Further Information

    Please view our Company Brief for Company Directors and Line Management, or our Company Brief for Information Technology Management for more information about LodeStar's core competencies, technology skill-set, accolades, and clients.

    Please view our document entitled Addressing Internet Security for a simple explanation of Internet security issues and the technologies available to comprehensively address these issues.[Top]

    Contact Details

    For enquiries about any of LodeStar's services please contact us[Top].

    Copyright 1998 LodeStar Consulting.
    All rights reserved.
    Revised: April 21, 1998.