Bumpy road ahead for high-tech industry exchange

High-Tech Exchange may encounter cultural, executional, and positional challenges.FRAMINGHAM, Massachusetts, 2 June 2000 - Twelve major high-tech firms recently announced they are forming an independent online exchange.

High-Tech Exchange may encounter cultural, executional, and positional challenges.

FRAMINGHAM, Massachusetts, 2 June 2000 - Twelve major high-tech firms recently announced they are forming an independent online exchange. While the idea has merit, research firm International Data Corporation (IDC) believes it will be difficult to execute.

"The High-Tech Exchange represents an effort to reduce the current level of confrontation in launching industry-specific e-marketplaces through the creation of an independent entity to make technology and service decisions," Richard Villars, vice president of IDC's Internet and e-commerce Strategies research, said in a statement.

"While the idea is worth pursuing, the competitive nature of the IT industry will create a lot of conflict and delay."

The 12 companies that have come together to form the exchange are AMD, Compaq, Gateway, Hewlett-Packard, Hitachi, Infineon, NEC, Quantum, Samsung, SCI Systems, Solectron, and Western Digital.

Their short-term goal will be to consolidate the members' numerous separate e-marketplace initiatives (i.e. Internet-based direct and indirect material purchasing mechanisms).

In the long term, they would like to provide exchange members SCA and collaboration applications, third-party and best-practices content, and even access to business services - as well as the marketplace - so that they can develop, build, and launch products more predictably, improve cycle times, and reduce inventory costs for all industry participants.

"The consortium needs to be like Switzerland - a technology/brand-neutral structure for high-technology manufacturing supply chain planning and execution," said Dennis Byron, programme director for IDC's Enterprise Applications research.

However, IDC believes that the new company may run into cultural, executional, and positional challenges. Additionally, the company also believes that the founding companies have to ensure that they are not putting themselves in competitive danger.

"In theory, the High-Tech Industry Exchange is a good idea," said Janet Waxman, programme director for IDC's Systems and Storage Distribution Channels research.

"However, the reality will lie in its execution. One potential danger is that the portal structure could dictate product designs, at some point, in its efforts to enhance supply chain efficiencies, and this could start to erode members' competitive product differentiation."

Nevertheless, if the High-Tech Exchange is successful, it will create many lucrative opportunities, IDC said.

"Every professional service company with an e-business practice, every e-commerce software vendor, and every pre-existing e-marketplace aggregator is now drooling at the prospect of capturing a part of this high-dollar, highly visible project," Villars said. "The battle will be quickly joined and will be especially vicious."

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