IBM embraces business-to-business devices
Big Blue will deliver Internet access devices to Fidelity Investments' customers as part of the computer maker's plan to expand its stagnating PC group.
Fidelity customers will be able to access custom services and could, if available in their area, get broadband on the devices via AT&T with Lycos-tailored content. The devices essentially look like a small flat panel with a keyboard.
The move is a bold departure from IBM's typical commercial PC business strategy of selling products directly to customers for their use. The Armonk, N.Y.-based computer maker is increasingly adopting a business-to-business, business-to-customer approach, where it delivers specialized devices to service-oriented businesses that in turn offer them to their customers.
IBM is betting investment houses, Internet portals, supermarkets and other services-oriented businesses would like to give, sell or lease their customers Net devices that do one thing: connect to their businesses and services only.
"Physical devices give stickiness in services," said Peter Hortensius, director of technology development at IBM's Personal Systems Group. "Customers that use an Internet device connected to, say, a supermarket are more likely to do all their shopping there."
The approach is similar to that used by the cellular telephone industry but goes a bit further. While cell phone makers such as Nokia and Motorola sell some wireless devices directly to consumers, companies providing the connectivity move the most units. IBM's strategy is similar to selling cell phones and supporting services to a brokerage, for instance, which would give its customers phones for getting stock and investment information.
"IBM is the general contractor here because this is just an access device. It's almost a commodity and a viewer for simplicity and ease of use," said Brian Connors, vice president of IBM's Net device alliances division.
During the initial pilot phase, which is beginning immediately, Fidelity will distribute the Internet devices to some of its customers, who then will use them to connect to the Fidelity and Powerstreet Web sites. Besides access to the full range of services offered over the Internet, Fidelity will test new offerings, such as portfolio planning, online bill paying and tax planning.
The 10-inch LCD device, which looks like a miniature version of IBM's TFT 55 flat-panel monitor, comes with a USB port, infrared keyboard and three modes of connectivity: digital subscriber line (DSL), Ethernet and 56K modem.
The device is designed to be hassle-free. IBM is increasingly emphasizing a streamlined "plug it in and works" approach, Hortensius said.
AT&T's role will be providing DSL service, which it currently offers in 50 markets at speeds ranging from 128-kbps to 784-kbps. The telecommunications firm plans to double its market coverage by the end of the year.
For its part, Lycos, which hosts and manages the MyFidelity page, will provide customized content and services.
The concept of simple-to-use Net access devices is not novel; Compaq Computer, Hewlett-Packard and Microsoft are developing or offering similar products. But selling them directly to businesses for their customers and bundled with connectivity and other services is a new approach.
"This is what I call affinity marketing, basically using Fidelity as an outlet," said International Data Corp. analyst Roger Kay. "Essentially, Fidelity gets a chance to get in front of its customers with its brand, and IBM moves out of the devices-only world and with its partners provides the pipes and portal. It's putting together the building blocks of a latter-day business model."
IBM will increasingly rely on third parties to glue the solutions together, Connors said. "We're looking at this as a foundation and a solution opportunity, where we're partnering with infrastructure providers--large telcos and equipment manufacturers--people who provide the connectivity."
The new device is an extension of IBM's "edge of the network," or EoN, strategy. IBM has been slowly changing the way it approaches designing, building and selling commercial and consumer PCs. Last week, for example, Big Blue ramped up a major direct Web sales campaign.
The computer maker plans to announce similar deals with other service providers through the third quarter and launch a new PC brand sometime in April.