Compaq Computer Corp., Hewlett-Packard Co. and Gateway, Inc. announced plans Monday to form an alliance with nine computer parts suppliers to create an online marketplace that could cut their annual supply costs by five to seven percent.
Due to increasing consumer demand, the new venture has the potential to become the largest online marketplace established in any industry to date. In total, the partners will contribute $100 million (US$) to the exchange — an investment that will likely pay for itself in short order, as Forrester Research projects that online sales of electronic components will surpass $600 billion in the next few years.
“It will revolutionize supply chain management,” said Carly Fiorina, CEO of Hewlett-Packard. “We’re sitting on a huge opportunity that we are well-positioned to exploit.”
The suppliers committed to the new venture include chip makers Advanced Micro Devices, Inc., Samsung Electronics, Infineon Technologies and Hitachi Ltd. Also involved are disk makers Quantum Corp. and Western Digital Corp.
Circuit board makers Solectron Corp. and SCI Systems, Inc. complete the group.
At a news conference in New York Monday afternoon, the participants said they welcome other companies to join the new company, specifically naming IBM and Intel Corp.
However, IBM responded swiftly by disclosing in a statement that it is developing a similar Internet marketplace for purchasing and inventory control. The IBM exchange reportedly will include other computer makers, as well as consumer electronics and telecom suppliers.
Other Internet marketplace software and services suppliers are also invited to participate in the HP alliance. The marketplace will be active within 90 days, although it has apparently not been decided who the major software partner for the venture will be.
Speed to Market
The computer industry, already offering dramatic reductions in the price of individual units to consumers, now stands to be able to reduce manufacturers’ inventories and enable them to get products to the market more rapidly.
“We’re talking about using the Internet to drive speed and efficiency,” Fiorina said. “That’s something customers will see.”
Solid Internet Presence
Even before Monday’s announcement, the three computer makers have all aggressively moved parts of their operations online. Customers can also now browse, order and receive pricing for custom setups of Compaq’s commercial desktops, notebooks, servers and storage methods through a single site, with one interface and password.
Hewlett-Packard has been equally enthusiastic in its quest to claim its place in the new economy. Fiorina, who has been CEO since last summer, said last month, “In the old economy, restructuring and re-engineering an organization was really about an aim of wringing inefficiency out of an organization. Reinvention requires new skills, new business models and new behaviors.”