Extranets are often used to support team collaboration in circumstances where the team members are geographically dispersed or are drawn from variety external organizations. Examples include a group of departments within a company that collaborate on a common project, or service companies that collaborate with a variety of outside clients, customers and partners.

Extranets are gaining rapid popularity because they address the most fundamental issue of ‘real-time' group communication with customers and collaborators. They work on a basic concept – the person who creates information is instantly available to the person who is using the information. Hence, a company can get instant feedback from their key customers about their new products, which is strategically important to shorten product cycles. Secondly, various departments of a company can instantly interact with its collaborators' so that information flows smoothly. Sharing of information between various departments and external clients and partners make corporate data ubiquitous, which is must for growth. Companies use extranets to:

• Exchange large volumes of data

• Support team collaboration in project development ad execution

• Share product catalogs exclusively with wholesalers

• Collaborate with other companies to develop joint development strategies and training programs

• Provide or access services provided by one company to a group of other companies. For example, the parent company manages online banking application for its affiliates

• Share news of common interest exclusively with collaborators

Implementing an extranet: It's better to outsource!

Given the complexities of creating and maintaining an extranet, it is often best to outsource the development and hosting using an Application Service Provider (ASP). An ASP supported extranet eliminates capital investment, software installation, and risk of technological obsolescence.

Another important factor leading to the development of outsourcing of extranets has been the growing complexity of software and software upgrades. Distributing huge, complex applications to the end user has become extremely expensive from a customer service standpoint, and upgrades make the problem worse. In a large company where there may be thousands of desktops, distributing software (even something as simple as a new release of Microsoft Word) can cost millions of dollars. The Application Service Provider (ASP) model eliminates most of these headaches.

In addition to all the above-mentioned quantitative savings, an ASP gives the companies several important quantitative savings that will also be of great benefits to customers of hosted software applications. A few of these quantitative savings include, flexibility, the ability to mitigate risk, the short implementation time, scalability, and the ability to focus on core competencies.