Tech Industry

The Net middleman who won't go away

While Dell has become the classic case study of how the Internet will make middlemen unnecessary, Ingram Micro is using the Net to rescue its fellow middlemen, the supposedly doomed computer resellers, and boost its own business. It's a tale with implications far beyond the computer industry.

Dell Computer, now selling $5 million in PCs and add-ons a day from its Web site, has become the classic case study of how the Internet will make middlemen unnecessary.

But not so fast--Ingram Micro, the largest computer distributor on the planet, is using the Net to rescue its fellow middlemen, the supposedly doomed computer resellers, and boost its own business. It's a tale with implications far beyond the computer industry.

As NEWS.COM reported last week, Ingram this fall will launch a program to run Internet storefronts for about 200 of its resellers. Ingram will handle all the logistics and back-office functions, while each dealer puts its own brand on the Web stores. Customers never need know that Ingram is in the background.

With its PrimeAccess program, Ingram is becoming what e-commerce jargon calls a commerce service provider or CSP. Basically it's a hosting service that handles ordering, payment processing, fulfillment, and logistics for Internet stores. PrimeAccess will quickly become a top-tier player, joining the telcos worldwide that are rushing into the CSP space.

Ingram is perhaps the first real-world distributor to add commerce hosting, but don't be surprised if distributors in other industries make similar moves.

"The information technology industry is a bit of a harbinger of things to come in other industries," said Roy Satterthwaite, who follows e-commerce and extranets for Gartner Group. Nor is Ingram the only IT outfit with a similar program.

General Electric's GE Vendor Financial and PC Order, which markets software for configuring PCs, will offer GE Tech Buyer, Satterthwaite said. It's an outsourced e-commerce service that offers configuration, ordering, and leasing programs for smaller companies.

"The larger idea is what companies are doing with their dealers for stronger loyalty--that is the larger goal," said Varda Lief, an e-commerce analyst at Forrester Research.

But PrimeAccess isn't Ingram's only play in e-commerce. Indeed, the $16 billion company is moving faster than any other middleman to turn the Net to its advantage.

Even "channel assembly"--Ingram's four new build-to-order factories for customizing PCs for IBM, Hewlett-Packard, and Compaq--is inextricably tied to the Net.

"You have to have e-commerce for channel assembly to be as effective as it should be, because you have to have that information flow," said Jeffrey Rodek, Ingram's worldwide president and chief operating officer. That means knowing precisely what users want, building it, then shipping it for the reseller.

Ingram's e-commerce activity has evolved in stages that reflect the broader cycles of the Net.

In its first phase, Ingram let resellers handle, via an extranet, critical but routine functions like product availability or placing and tracking orders, thus reducing phone calls, fax traffic, and costs by making that data self-service.

Earlier this year, Ingram launched an auction site on its extranet, letting its resellers bid on excess inventory that Ingram wanted to unload and couldn't return to manufacturers. Ingram's dealers get below-market prices and Ingram collects more than a liquidator would pay.