Avoid extranets, analyst warns

Businesses have been advised to avoid implementing extranets because by doing so they risk becoming isolated from competition.

Extranets do not promote free trade between suppliers, according to IDC analyst Rick Villars. Instead, he advises businesses to look at open digital marketplaces that bring competing buyers and sellers together.

IDC predicts that these digital trading communities will account for 56 per cent of the $2.2tn business-to-business ecommerce market by 2004.

"No extranet, product or vendor is an island. Customers want integrated and packaged solutions," Villars said at the company's Directions 2000 in San Jose, California, this week.

Unlike extranets, trading communities enable small and medium sized suppliers to offer members the flexibility to sell or source excess inventory, according to Villars.

Even e-procurement sites such as Ford's AutoeXchange, which are developed by third parties for individual companies, do not support the need to buy and sell goods on unpredictable occasions, he argued.

Different suppliers of all sizes are encouraged to sell goods that organisations can use in their supply chains or to help run their businesses such as computers and office furniture. They can also handle unpredictable buying patterns.

Villars said that the ideal digital marketplace developer will have solid partnerships with hosting, outsourcing and infrastructure suppliers that can share the risks and rewards inherent in running such networks.

Possible marketplace developers include application software vendors with vertical sector expertise and distributors with strong relationships to suppliers and buyers.