Commentary: Dell likely to gain little from online exchange

By Carl Lenz and Kevin Knox, Gartner Analysts

Dell Computer was a pioneer in Web-based sales and has built a strong reputation and large following on its direct sales approach. But the success Dell has found selling computer hardware over the Internet channel will not necessarily continue with its new online exchange.

The Dell Marketplace differs significantly

	See news story: Dell to cut ribbon for new Net exchange

from the Dell.com direct sales site. In the e-market, based on Ariba's platform, Dell Marketplace targets small and midsize businesses. The e-market will facilitate the procurement of electronic equipment, office supplies and other goods from vendors such as 3M, Motorola and Pitney-Bowes, along with Dell itself. Dell Marketplace will handle collaboration between buyers and suppliers and provide for e-payment.

Gartner believes Dell Marketplace faces some major challenges. E-markets have proliferated, so Dell will have to give businesses a strong reason to invest and participate. Gartner believes Dell Marketplace will likely not drive significant new sales of Dell hardware.

Although Dell Marketplace should enjoy some success with selling office supplies, it will likely not undermine the sales of better-established online markets in that sector. Pitney-Bowes' equipment seems a natural addition to Dell's hardware, but in Gartner's opinion, Dell Marketplace does not offer a particular advantage to customers of 3M and Motorola. The businesses that will buy products from the Dell Marketplace partners will likely be limited to those wanting to buy Dell hardware first.

Smaller risks for Dell include diverting capital from Dell's other initiatives (such as its new storage unit) and diluting the Dell brand. Dell's sterling reputation may suffer if businesses do not receive the same service from other sellers on Dell Marketplace as they have come to expect from Dell.com. Gartner expects most enterprises to approach Dell Marketplace cautiously.

Entire contents, Copyright © 2000 Gartner Group, Inc. All rights reserved. The information contained herein represents Gartner's initial commentary and analysis and has been obtained from sources believed to be reliable. Positions taken are subject to change as more information becomes available and further analysis is undertaken. Gartner disclaims all warranties as to the accuracy, completeness or adequacy of the information. Gartner shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof.