IBM Launches Online B2B Procurement Service

IBM (NYSE: IBM) announced Monday that it has launched Component Knowledge, an online business-to-business (B2B) procurement service for the electronic components industry.

The service is designed to substantially improve communications during the new product development cycle amongst components manufacturers, their independent sales representatives components and the original equipment manufacturers (OEMs) who procure the components. The service is a subscriber-based program with a monthly cost of $9.95 (US$).

Two Companies Already Utilizing the Service

Toshiba Lighting and California Micro Devices are the first two companies signed up to use Component Knowledge.

“In my mind, the single strongest aspect of the Internet is the instantaneous, many-to-many communications capability,” said Jeff Kalb, president and CEO of California Micro Devices. “IBM’s Component Knowledge system allows us to apply these capabilities to one of our most difficult management and communications challenges — the new design win process. There are more communications and more people involved in this part of the business cycle than any other.”

Like most B2B services, Component Knowledge was designed to attract subscribers by its ability to save its clients time and resources. “The best part of the need to evaluate return-on-investment is that it’s not required because there is no up-front investment required with Component Knowledge,” said Gary Rachfal, director of sales and marketing for Toshiba Lighting.

Service Designed To Empower Sales Reps

Rather than use the Internet to allow OEMs and component manufacturers to bypass independent sales representatives, the service is centered around enhancing the ability of sales reps to bring together the component manufacturers they represent and the OEMs who need components as part of designing a new product.

The service promises to function as an “online intermediary” for manufacturers, sales reps, distributors and customers. IBM says the service will use “advanced workflow and database technologies to allow for easy integration of enterprise information centered around interdependent activities and programs, from concept to customer care. A ‘roles and responsibilities’ model allows the right people to have the right information — when, where and how they need it.”

System Developed in the Field

IBM developed and tested the service in the electronic components field, matching up OEMs, sales rep firms and component manufacturers. “We have worked with more than 100 component manufacturers and independent sales rep firms in this industry over the last 20 months to make this service fit their needs,” said John Rector, global offering manager for Component Knowledge, IBM Global Services. “We’re looking forward to delivering on the promise of this service, as well as making e-business very real for this trading community.”

Old Dog Teaching New Tricks

In developing Component Knowledge, IBM takes a trick out of its own back pocket. IBM has aggressively moved billions of dollars of its own procurement to the Internet. Along with GE and GM, IBM was one of the first major corporations to develop a division dedicated to finding ways to streamline its procurement process by using the Internet.

In the process, the company claims it has developed B2B procurement systems that deliver significant savings. These major corporate buyers have also forced thousands of their vendors into the digital age with the attitude that if the vendor does not provide the service over the Internet, another vendor will.

B2B Procurement Driving Companies to the Internet

In a report released today, International Data Corporation (IDC) sees companies scrambling to incorporate Internet and e-commerce capabilities. As companies rush their functions online, opportunities for services such as IBM’s Component Knowledge grow. “The increased requirements of complex Internet projects are causing more companies to seek the assistance of outside service providers,” said Pooneh Fooladi, an analyst with IDC’s Internet Services research program.

“This trend is creating huge opportunities for service firms to offer consulting, implementation and operations services in the Internet services market.” With its Component Knowledge system, IBM has muscled in on a part of the B2B service sector.