Compaq inks deal with PCOrder.com

The agreement extends worldwide a year-old arrangement where Compaq had been using PCOrder to facilitate extranet sites for its dealer channel and customers in North America.

PCOrder will provide a broad range of e-commerce services to Compaq, from online configuring and ordering its entire product line to managing content services, as well as Compaq products, for third-parties.

The timing of the announcement is crucial for Compaq as it continues to face supply chain issues, particularly with its dealers. The company introduced in November a "customer choice" model--offering direct sales via the Internet and indirect sales--that drew the ire of some traditional computer dealers.

The plan has also been criticized for being ornate. This complicated supply chain model, driven by sales through dealers and direct to the customer and complicated by the integration of Digital Equipment and Tandem Computers put a drag on the once thriving PC company. In April, after a profit warning, Compaq booted chief executive Eckhard Pfeiffer, which was followed by the resignation of some of his top lieutenants.

Today's announcement, in part, addresses the integration issue.

"This is very critical for Compaq and its global e-commerce backbone, because it's really the culmination of the integration of the companies as well," said Tammy Willet, vice president of Worldwide E-Commerce for Compaq.

Compaq will conclude its North America e-commerce changes by the fourth quarter, and Europe and Asia Pacific will follow by the end of the year. "It represents the consolidation of several e-commerce activities that were going on with the joining of the companies, and it's going to be able to drive our e-commerce platform on one set of engines," Willet said.

The agreement is also designed to streamline Compaq's complicated supply chain of dealers and direct sales under one Web-based strategy. After August 1, Compaq expects 75 percent of North American sales, direct and indirect, will occur through the Web. North America accounts for more than 45 percent of Compaq's worldwide sales.

Compaq had been increasingly leveraging call centers and the Web for both direct and indirect sales, and the PCOrder agreement plays to those strengths by offering an integrated order network, Compaq officials said.

Christina Jones, PCOrder president and founder, emphasized the agreement's importance to unifying Compaq's direct and indirect sales model. "PCOrder's technology really provides a robust infrastructure capable of supporting all of Compaq's e-commerce initiatives worldwide. It is also an open-ended infrastructure that will enable Compaq to seamlessly integrate its entire supply chain."

Dell's distribution model is more streamlined than Compaq's and offers tighter control over inventory, particularly components. Dell typically has less than a week's inventory on hand versus three or more weeks for Compaq, giving it better control over costs and pricing.

PCOrder, which also provides e-commerce services to Compaq's four distributors, Inacom, Miersel, Ingram Micro, and TechData, promised better inventory management and intelligent order routing. The latter feature means tighter control over third-party components and those coming from both Compaq and through its dealers.

But this may not be enough to fend of Dell's direct advantage. "PCOrder will be helpful trying to link everything together, but it's unclear how Compaq is going to manage direct and indirect," said Lindy Lesperance with Technology Business Research. "Managing multiple partners will never be as good as direct in terms of efficiency."

Compaq also plans to accelerate its customer extranet program, an area where analysts said it lags behind rival Dell.