725Proc. 10th Australasian Conferenceon Information Systems, 1999

Extranet, Extranet: Changing Publishing ParadigmsA Case Study of Extranets in Advertising

Christopher PayneElaine Lawrence*

John Fairfax Holdings Ltd.email: cpayne@mail.fairfax.com.au

*University of Technology, SydneyBroadway, NSW, 2007, Australia

email: elaine@ socs.uts.ed.au

Abstract

The Internet, Intranets and Extranets are completely changing the way corporations andgovernments are working and doing business. This paper defines Extranets, Intronets andSupranets and examines the electronic commerce domain matrix. The research concerns therelationship between inter-organizational systems in an existing cooperative supply chain andthe Internet, using an Extranet. A Case Study of the AdOnline Project of the large publishingcompany, John Fairfax Holdings Ltd, illustrates how the Internet has been incorporated intothe existing framework of the company and why it has been done this way. This Extranetenables favoured business associates to gain access to the core-business systems of theFairfax publishing departments.

Keywords

Inter-organizational systems, electronic markets, electronic commerce, supply chain management,Extranets

INTRODUCTION

It has been said that 1995 was the year of the Internet, 1996 the year of the Intranet and 1997 theyear of the Extranet (Tjhai, 1997). Extranet is a lesser known term that has emerged since theInternet phenomenon began earlier this decade. This paper defines extranets, outlines someinnovative uses of extranets and discusses the theoretical framework of extranets. It concludes with acase study of an extranet that has been set up by the large Australian publishing company, JohnFairfax Holdings Ltd.

DEFINITIONS

The glossary (whatis.com) defines an Extranet as 'a collaborative network that uses Internettechnology to link businesses with their suppliers, customers or other businesses that sharecommon goals....An extranet can be viewed as part of a company's intranet that is madeaccessible to other companies or that is a collaboration with other companies'. Our case studyillustrates an Extranet that has direct access to core business systems and not a separate intranet. The

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definition of ‘Extranet’ by Phin Tjhai (1997) is concise but omits references to ‘up-stream’ or ‘side-stream’ company interests. An Extranet [is] a specialized and customized on-line informationservice provided by a company to its valued clients (either individuals or organisations). Ituses Internet connectivity and the Web technology as its platform. The differences [betweenInternet and Extranet] are that Extranet has a specific audience and therefore is designed tosatisfy the information needs of that audience. This definition would be more accurate if it alsoreferred to the organization's suppliers (up-stream) and other business partners (e.g. legal advisors,side-stream) rather than just the customers (down-stream).

Riggins & Rhee (1998) put forward the idea of the Extranet to bridge the gap between an intranetand Internet applications. In order to allow untrusted sources safely into a network, companies needto be able to identify individual users and tie those identities to varying levels of network access. Thedefined access privileges can be used with e-mail, datawarehouses, custom applications, legacysystems, webified information, product distribution systems, and any other service or application tiedto the network. Manufacturing companies have used extranet Virtual Private Networks (VPNs) forsupplying delivery and production schedules and account information. Financial institutions have usedextranet VPNs for loan syndication, providing clients with account information and performancereports. Health institutions have used VPNs to provide access to medical records and to offerconfidential research information (Aventail, 1998).

In this paper we examine an Extranet developed by the John Fairfax Holdings Ltd organisation. ThisExtranet, known as ‘AdOnline’ enables favoured business associates to gain access to the core-business systems of the Fairfax publishing departments. The ability to construct and participate inExtranets is evidence that an organisation is flexible and agile. These are some of the key attributesof a successful corporation leading into the new millennium. Most industries have now refined theproduction of their product or service to be as efficient as possible given the current engineering andtechnological limitations. The Internet presents unknown potential for business but it will be at theexpense of some businesses. The disappearing role of an intermediary, such as a dealer or broker, iscalled 'disintermediation' however 'reintermediation' is possible - for example 'info-mediaries' whoprovide value in the new virtual business model (Lawrence et al, 1998). In fact Kelly (1998) believesthat in a network economy, intermediaries have tremendous value as by definition every node on anetwork is a node between other nodes. The more connections there are between members in a net,the more intermediary nodes there can be. However Fairfax's major shareholder and Australianmedia mogul, Kerry Packer has been attributed to the statement that the Internet will “kill the middleman”(Crowe, 1999). Extranets will have an equally severe impact on the middlemen.

EXTRANET TYPES

The Electronic Commerce Domain matrix, developed by Riggins & Rhee (1998), is shown in Table1.1. It combines two dimensions of Internet technology applications; namely:

§ Location of application user relative to system firewall, for example using internalintranets to post information for employees inside the firewall, such as project schedulesand updates, employee points of contact and company benefits information;

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§ Type of relationship: for example, using the network to promote new decentralisedvirtual work teams both within and outside the company.

Table 1 Electronic Commerce Domain Matrix

External: location ofApplication User relative toSystem Firewall

Improving coordination withexisting trading partners

Cell 3

Market creation to reach new customers

Cell 4Internal: location ofApplication User relative toSystem Firewall

Improve coordination withinternal business unitsCell 1

Information exchange to work with new team membersCell 2

Technology Enhanced

Type of Relationship

Technology Facilitated

Type of RelationshipSource: Riggins, F.J & Rhee, H (1998) Towards a Unified view of Electronic Commerce, October1998, Volume 41, No 10 Communications of the ACM. Page 91.

An extranet can be part of a propriety system where trading partners receive controlled access tocertain portions of the firm's intranet or a collaborative network linking trading partners together toengage in cross-application information. Thus extranets, using the Electronic Commerce DomainMatrix, as shown in Table 1.1 may be classified as either 'Intronets' (Cell 3 applications) or'Supranets' (Cell 2 applications). (See Table 2)

Table 2 - Two types of extranets

Type Intronet SupranetSponsorship Owner sponsored Consortium sponsoredGateway access Propriety network Semi open networkRelationships One to Many Many to ManyService Offered Information product Communication mediumPrimary justification Provide unique resource Efficiency/timelinessPrimary beneficiary Initiator with Information All Consortium membersLong term objective Lock in partners Consortium competitivenessNature of application Pull application Push application

Source: Riggins, F.J & Rhee, H (1998) Towards a Unified view of Electronic Commerce, October1998, Volume 41, No 10 Communications of the ACM. Page 92.

These Intronets are inter-organizational decision support systems, where external entities use astandard web browser to drill down and pull the desired information into the client application. If theinitiator is able to provide up-to-date, valuable information then partners in the extranet will be morelikely to be locked into the Intronet and become dependent on it.

In an Extranet that develops into a Supranet there may be multiple hosts as each partner may ‘own’data or a function that is not available from the other partners. An example of a Supranet is that of

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the electronic alliance between Ford, General Motors and Chrysler, who used to considerthemselves competitors, but are now working on a common Extranet with their suppliers so they canmove faster to compete with the Japanese in this environment (Chambers, 1998). An ideal Extranetscenario calls for seamless deployment across intranet, Internet and Extranet environments. In thisway a group of selected linked organizations can collaborate using standard Internet technologieswhile enjoying the privacy and autonomy of an intranet environment (Bayles, 1998).

THE RESEARCH PROBLEM

The focus of our research concerns the relationship between inter-organizational systems in anexisting cooperative supply chain and the Internet, using an Extranet. Pfaffenberger (1998) describesa new business model that has been allowed to develop thanks to Extranet technology. It is knownas ‘The Value Constellation’. In this model a business looks upon its suppliers and customers asallies and consolidates the relationship with them. This relationship, then, enables the business to bebetter able to compete with the opposition businesses in the same market area. As Pfaffenberger(1998) says of the Value Constellation:- 'With a variety of potential allies all working in a singledirection, they can provide the highest-quality products and the best service'.

The Case Study illustrates how the Internet has been incorporated into the existing framework of thecompany and why it has been done this way. In order to understand the impact of the Extranet onthe organisation, in-depth interviews with staff of John Fairfax Holdings Ltd and clients wereconducted. Thus the case study attempts to answer how the Extranet has been incorporated into theexisting cooperative supply chain and why it has been managed in this fashion. Key drivers thatneeded to be researched included the technologies that were utilised, the business strategies andrationale for using an Extranet and the impact on supplier relationships and finally the question ofcompetition. What effect has it had on competitors and what are the likely trends?

METHODOLOGY

The case study research methodology was utilised to answer the 'how' and 'why' type of questionsthat need to be satisfied when investigating contemporary events, particularly in such a fast movingarea of electronic commerce. This case study approach is also suitable for attaining qualitative typedata and is well suited to studying information systems in organisations (Smart, 1997). An extensiveliterature review was undertaken in late 1998 and early 1999 and information was found in threemain areas. The first was the electronic archives of the major Australian metropolitan newspapers,representing 15 years of published articles; the second was the Internet itself and the third wastextbooks that have been referenced in this paper. However, as the topic is relatively new, therewere few books which focussed on Extranets. Some white papers (Aventail, 1998) have beenpublished on the topic and these proved valuable for our research.

Exploratory research investigates or explores problems or issues that are not yet well defined and isable to provide qualitative data as it utilizes a variety of approaches that rely on in-depthobservations and analysis (Bauer & Chong, 1999). The exploratory research techniques usedincluded individual interviews in 1998 with four strategically significant individuals associated with theAdOnline project from its inception as well as interviews with two current AdOnline users in 1999.

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OVERVIEW OF JOHN FAIRFAX HOLDINGS LTD

The cities of Sydney and Melbourne are unusual in the world in that they are two of only a fewremaining major western cities where there exists strong, healthy competition in the newsprintpublishing area. Most European and U.S. cities now have a single major publisher or the newsprintmarket has diversified to such an extent that the products have quite distinct markets. The end resultis that there is little competition in those areas. As the domestic market is very competitive there isalways a push for the combatants to achieve or construct an advantage over the competition. This iscertainly the case in Sydney and Melbourne where the two main players are the Murdoch controlledNews Ltd. organization and the Fairfax publishing organization.

John Fairfax Holdings Ltd is a publishing house that produces high quality broadsheet newspapers inSydney and Melbourne, including the Sydney Morning Herald, The Age in Melbourne and thenational tabloid, Australian Financial Review. The company employs approximately 5000 peopleand has six main production sites in New South Wales and Victoria. It began online publishing of theSydney Morning Herald in 1996. The John Fairfax Holdings' Internet site has been valued at $A223million although some believe it could be as high as $A800 million (Ferguson, 1999). The ClassifiedCall Centre of the Sydney Morning Herald handles about 13,000 calls per week, with the greatestnumber being received on Thursdays (Payne et al, 1998). The company has been in the forefront ofelectronic commerce in that it has offered its online publications for free but has attracted high profileadvertisers to its site. It established the "Trading Room" and a subscription model for researcherswho wish to search the online archives of the publications. Researchers are able submit credit carddetails, for amounts up to $50 and as articles are found for downloading, $A2 amounts aresubtracted from the $50 stake. This model enables the use of credit cards for small transactionamounts.

CASE STUDY: AdOnline

A project by Fairfax called AdOnline has made various impacts on some of the key areas oftraditional newspaper operations and illustrates some emerging trends relevant to new ways of doingbusiness due to the presence of the Internet.

• it is a true example of e-commerce;• it is a real example of an Extranet;

Background

AdOnline is a suite of software modules developed by internal Information Technology staff andsome contracted third party developers. AdOnLine allows selected and favoured clients, who areregular advertisers in either The Sydney Morning Herald or The AGE in Melbourne, to placeadvertisements into these publications directly from their own back-end systems via the Internet.AdOnline was conceived almost two years ago so that Fairfax could increase its efficiency, could beseen as a ‘leading edge’ force in the electronic media and e-commerce as well as maintaining thereputation as a dominant player in the print media. AdOnline fits in the Electronic CommerceDomain Matrix framework as a Cell 2 and Cell 3 but has elements of Cell 1 in that it has improved

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coordination with the internal business units. It has the potential to bring in new clients so will fit in theframework of Cell 4 in the future.Extranet Business Strategy

Advertisments are entered into the two Fairfax proprietary, back-end, legacy systems without havingto liaise with the call centres (known as the ‘phone room’ in the industry). AdOnline leverages theInternet substantially as the medium of transfer of information between the advertiser and thecompany’s two main publishing systems. This project has seen the potential of the World Wide Webbeing realized by Fairfax to the extent that every advertisement that appears in the printed productsnow also appear on the Fairfax web sites. The New Business Development Manager (Payne et al,1998) identified the key business drivers as:

§ To be closer to the customer;§ Flexibility in cost reductions (excess of waiting time especially on Thursday causing

people to hang-up) therefore improving service levels;§ Using AdOnline will take between 10 to 40% of the total time it currently takes to log a

call via phone;§ Provide additional material from AdOnline e.g.: multimedia

These mirrored the key business drivers identified by Kalakota and Robinson (1999) namely: fastinformation access, customized data and responsiveness. The actual budget for the project was$A100 000 for equipment plus $A250 000 for internal and external development costs. It ispredicted that this investment will amount to saving for Fairfax of $A900 000 from inaccuratetelephone logging.

Technical Specifications

The software client that is delivered to any user's personal computer was developed in both VisualBasic and Java Scripts. The two Application Program Interface (API) modules that interface with thebackend systems (Sii in Sydney and Atex and Cybergraphic in Melbourne) were developed asPERL scripts running on the Unix server. There is also software that allows the client software, whenit is off-line, to render an advertisement as if it were already in either of the two backend systems.They emulate the text composition languages from two different major publishing systems on astandard Windows 32 platforms. The following diagram provides an overview of the majorcomponents in the AdOnline project and also indicates some of the networking protocols that areused to allow this project to operate.

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Internet

clientAdvertising

Agency (NSW)

STAGINGServer (Sydney)

firewall

OpenWebSite

SMHCall

Centre

AGECall

Centre

So advertiserscan view theirads prior topublication

So thepublic can

searchacross

multipledatabases

for ads100 MGB/sec

FTPHTTP

FTPHTTP FTP

HTTP

FTPHTTP

ETHERNET

LANWAN

LANLAN

AdvertisingAgency (Vic)

client

client

client

client client

clientclient

client

SecureWebSite

TheAge

SydneyMorningHerald

Figure 1 Overview diagram of Fairfax’s AdOnline architecture- Source: Payne, Chris (1999)Extranets: the Quiet Business Communication Revolution, page 47

Impact of Extranet Strategy

These advertisements are also categorized automatically as they are being placed on the web site sothat they can be searched based on various user criteria. The big benefit here is that multipledatabases can be searched simultaneously. For instance, if a person was searching for an exoticvintage car he/she could enter the search criteria (e.g. red, less than $20k, good condition, MGB,pre 1965 etc.) and the search engine would examine the Sydney Morning Herald (SMH), the AGE,the Illawarra Mercury, Newcastle Herald etc. To do this via the printed product would be anextremely tedious task. Interesting statistics became apparent such as MGBs are cheaper inMelbourne than in Sydney! This type of statistic was not necessarily available to the public prior tosuch databases being available.

The offering of such digital products within the marketspace illustrates the Law of Digital Assets,(originally developed by two professors from the Harvard Business School) that states that digitalassets, unlike physical assess are used and not consumed (Kosiur, 1997). This means that it ispossible to create more value for your business by continually recycling your digital assets through a

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large, nearly infinite number of transactions. It is essential however to realise that businesses mustrevise, enhance, improve and even repackage such digital products.

ADVANTAGES OF AdOnline

One of the major up-sell features of the AdOnLine project is the option the advertiser now has tosupply additional multimedia information about the item they are wishing to sell. At the moment thisfeature is limited to only Real Estate vendors and is primarily designed to allow static images andvideo clips of properties for sale.

So, as well as a conventional textual description of the property for sale, along with the usualphotographic image of the property, the advertiser can, for no extra cost, supply a video clip of theproperty including an audio commentary if required. All pieces of such advertisements can bedelivered to either or both of the major publishers through the common medium of the Internet.

Interviews were conducted with two Sydney Real Estate Agents who are using the system to gaininsights into the advantages and disadvantages of the Extranet from the client's viewpoint (Payne,1999). Company A sends in between 30 and 40 text based classified advertisements per week andthey compliment some of the ads on the web site with images taken with a digital camera (suppliedby Fairfax) of the same property. The peak time for uploading advertisements is Thursday afternoonbetween 2.00 p.m. and 5.00 p.m. Company B sends in between 5 and 10 per week on a Tuesday.

Both representatives felt that the system was a boon and that Fairfax was good at listening tofeedback. Company A felt the system was of 'great benefit' in that it allowed them to 'gang send' theads when they were ready and they were able to see the ads BEFORE they are published. A wholeweek's work can be delivered to Fairfax for the cost of a single phone call. Company B liked theease with which they could edit ads and send the ads at a time to suit them and not wait in longtelephone queues. Both Company A & B said staff training was accomplished in a few hours.

An interview with the Classified Call Centre Manager (Payne et al, 1998) identified the fact thatthere are people who see AdOnline as a threat to their jobs, as the project does require staffreduction. However, most of the staff are fully aware of the AdOnline plan and benefits and arequite excited about it. The product might generally be seen as a threat, because it requires 15%reduction in staff, but the reduction rate is the same as attrition rate and therefore it is very possible tosatisfy staff reduction request by natural attrition. The staff are fully informed about AdOnline as thereis internal marketing popularising the product. Fairfax provides staff training and information sessionsabout the product to make them familiar and comfortable with it. Staff know exactly why the productis being introduced. They are looking at it as something that may make their work day easier, toreduce typing and to make their job a little bit more relaxing than it currently is. The Classified CallCentre manager believed that those who will use the AdOnline will be monthly account customerssuch as real estate agents, personnel agents and motor vehicle dealers. The casual customer wouldcontinue to use the phone or the fax for their advertising needs.

DISADVANTAGES OF AdOnline

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The New Business Manager identified the threat of unreliable technology and the fear of denial ofservice from the Internet. As with any Extranet, the possibility of sharing information demands thatattention be paid to appropriate security measures (Lawrence et al, 1998). The Classified CallCentre manager felt that the product needed further development and promotion. The issue of trustwas a major issue in the setting up of such an Extranet - some clients would be completelytrustworthy whilst others would need to be checked all the time. There was definitely a need toensure that call centre staff be encouraged to see this technology as a benefit rather than a threat - itfact this could be a major challenge for the industrial relations staff.

FUTURE RESEARCH DIRECTIONS

Mako Matsumura (1997), described what will be the ultimate world-wide network. It is informallyknown as the Ultranet and it will exist once all of the relatively new Internet tools and methodologiesmature into their next phase. The building blocks that will combine to form the Ultranet are:

• Java,• IPv.6,• S.E.T.,• OODBMS,• XML

The prefix ‘Ultra’ is defined as ‘going beyond what is usual or ordinary’. In his JavaWorld article,Matsumura uses the term Ultranet to refer to “the mother of all networks”, just like the Ultrasauruswas the ultimate giant dinosaur. If the Ultranet lasts as long as the dinosaur it will have been an ‘ultra’success. The key to this ultimate network is the implementation of Internet Protocol Version 6(IPv6). IPv4 is already becoming limited by its addressing space. With IPv6 every device in theworld can have an identity on the Ultranet. Tanenbaum (1996) says that IPv6 practically allows anIP address to be assigned to every molecule on the surface of the earth. The researchers intend toinvestigate the implications of these developments to the publishing industry.

CONCLUSION

In answer to our first question: What effect has it had on competitors? Ferguson (1998) reportedthat seeing the high valuation attached to Internet Commerce sites developed by John FairfaxHoldings Ltd, Rupert Murdoch's News Corporation will revamp its Internet site by formingelectronic commerce alliances. It also intends to list its online business on the Australian StockExchange. In answer to the second question: What are the likely trends? we refer to Ultranets andthe rise of virtual corporations. Every successful company is constantly seeking new and bettermethods of doing business. Astute companies, according to Bryan Pfaffenberger(1998), are quicklymoving away from the business model originating from the industrial revolution known as ‘The ValueChain’. This is where a company basically has an adversarial relationship with its suppliers andcustomers. The aim has been to take as much as possible from the supplier at the lowest price inorder to sell to the customer at the highest price, with minimal added value in the middle. This linearmodel and business philosophy never endear the business to either the customer or the supplier. It isoften difficult to have a co-operative or collaborative approach to business under this model. Wherecan Extranets possibly lead businesses of the future? Bryan Pfaffenberger envisages a virtual

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corporation. In this vision huge business conglomerates will no longer exists. The powerful,successful businesses of the next millennium will be relatively small concerns, with few more than 100staff. However, these staff will be highly skilled in enabling and co-ordinating other organisations tocarry out the processes and functions of a business in external locations. 'Its expertise would lie, notso much in knowledge of a particular industry, as in the intricacies of how to use I.T. to create newand highly competitive value constellations [Extranets] in very short order.' Such a futuredevelopment would indeed be a revolution in the business world. The signs of this revolution arealready visible and perhaps AdOnLine is a glimpse of this brave new future.

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Aventail (1998) Extranet VPNs: Paving the Way for E-Business -http://aventail.com/index.phtml/solutions/white_papers/ebusiness.phtml

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Bauer, C. & Chong, S. (1999) Electronic Markets Development: Using Marketing research toDetermine User Requirements, Global Networked Organizations, 12 International BledElectronic Commerce Conference, Bled, Slovenia, June 7- 9, 1999, Page 414.

Chambers, J.(1998) Direct E-Commerce expected to boom, Chambers (CEO of CISCO Ltdinterviewed by John Davidson for the Australian Financial Review, 25th March, 1998. Page33.

Crowe, D. (1999) Net gets a slice of the auction, Australian Financial Review, May 12th, 1999, Page 15.

Ferguson, Adele (1999) News Widens its net, Business Review Weekly, April 23, 1999, p 32,http://www.brw.com.au

Kalakota, R. & Robinson, M. (1999) e-Business: Roadmap for Success, Addison-WesleyLongman, Inc., Massachusetts, Page 296.

Kelly, Kevin (1998) New Rules for the New Economy: 10 Radical Strategies for a ConnectedWorld. Viking Penguin, USA.

Kosiur, D., (1997) Understanding Electronic Commerce: How online transactions can growyour business, Microsoft Press, USA. p. 229.

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Matsumura, M. (1997) Ultranet, the next network, Java World , November, 1997.http://www.javaworld.com/javaworld/jw-11-1997/jw-11-miko.html

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Payne, C. (1999) Extranet: The Quiet Business Communication Revolution, Masters Project,School of Computing Sciences, University of Technology, Sydney, p 52 - 58.

Payne, C , Savic, S, Peric A., Arora N, Kamesh V. (1998) Group Project: Business ProcessEngineering, School of Computing Sciences, University of Technology, Sydney

Pfaffenberger, B. (1998) Building a Strategic Extranet, IDG Books, p. 6.

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Smart, Belinda (1997) Electronic Commerce in the Cooperative Supply Chain: How can the Internetbe Incorporated into the Interorganisational System? A Case Study of BHP Steel Group Supply,Port Kembla , Collecter 97 Conference, October, 1997, Adelaide, SA, p. 62--63,http://www.collecter.org

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Tjhai, P., (1996) 1997 will be the year of the “Extranet”, The Australian, June 18th, 1996, p. 34,Computers Section.

COPYRIGHT

Payne C. & Lawrence E. ©(1999). The authors assign to ACIS and educational and non-profitinstitutions a non-exclusive licence to use this document for personal use and in courses of instructionprovided the article is used in full and this copyright statement is reproduced. The authors also granta non-exclusive licence to ACIS to publish this document in full in the Conference Papers andProceedings. Those documents may be published on the World Wide Web, CD-ROM, in printedform, and on mirror sites on the World Wide Web. Any other usage is prohibited without theexpress permission of the authors.