IBM to unveil component marketplace on Net

Big Blue and approximately nine other electronics giants are in the process of setting up an Internet-based component market that will effectively allow participants to transfer purchasing and inventory management functions to the Web, said Steve Ward, general manager of the industrial sector at IBM.

The purpose of the exchange is to eliminate inefficiencies in the purchasing process. The companies participating in the development of the marketplace each buy approximately $10 billion worth of components a year, he said. Currently, suppliers largely have to notify buyers individually about the current availability of products while buyers have to shop around.

With an electronic exchange, the seller only needs, ideally, to list products once. Although general price and product supply information will be listed publicly, the exact terms of a sale remain confidential.

"The real advantage here is that you can simplify the rudimentary work," Ward said. "This allows us to migrate everyone to a common procedure for data exchange."

Conducting these transactions via the Web costs less than using phones or fax machines. Last year, IBM, for instance, spent $13 billion on the web for parts, saving $250 million, the company said.

Ward would not identify the other companies participating on the project or the exact number of companies that will list products on the exchange. Nonetheless, he said that the software for the marketplace would likely come from IBM, Ariba or I2. These two companies have worked on other IBM exchanges.

Earlier today, a consortium that includes HP, Compaq, Gateway, AMD and Infineon announced it was creating an electronic marketplace for exchanging components. Each of the participating companies will donate $100 million to the effort.

Although the two groups are working separately, it is likely customers will be able to bounce between electronic marketplaces fairly easily.

"In general, these exchanges will have to interoperate," Ward said.