The term "extended enterprise" represents a new concept that a company is made up not just of its employees, its board members, and executives, but also its business partners, its suppliers, and its customers. The notion of extended enterprise includes many different arrangements such as virtual integration, outsourcing, distribution agreements, collaborative marketing, R&D program partnerships, alliances, joint ventures, preferred suppliers, and customer partnership.
Previously organizations have been thought of as linear entities, each with a linear value chain that consisted of all the activities required to design, market, sell, produce, deliver and support products and services. Suppliers and customers were thought to be "outside" the organization's domain. And the organization was depicted as a hierarchy of reporting relationships, primarily functionally aligned.
The new economy, with high-tech companies rapidly evolving and "old economy" enterprises embracing new ideas, brought tangible reality and urgency to new organizational forms. With globalization of markets, productivity pressures, scarce resources, intensifying competition, blurred industry boundaries and rapid technology change, new relationships and structures have emerged in all sectors of the economy. Modern organizations create new ways of delivering value to customers, new approaches to collaborating with suppliers along with critical thinking about organizational structure and purpose.
Technology plays a strategic role in the extended enterprise - in some cases driving the opportunity for change and in others facilitating collaborative relationships and inter-organizational operation. IT enables the openness, immediacy, information sharing, flexibility and adaptability that the extended enterprise demands. Information technology also enables customer responsiveness, speedy decision making, superb inventory control and greater visibility across the extended organization for demand planning. (Source: IDC)