Bumpy Road For The High-Tech Industry Exchange.

In an effort to jump-start an emarketplace for high-technology manufacturing, 12 major high-tech firms recently announced they are forming an independent online exchange. While the idea has merit, 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 emarketplace - through the creation of an independent entity to make technology and service decisions," says Richard Villars, vice president of IDC's Internet and eCommerce Strategies research. "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 emarketplace 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 product 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," says Dennis Byron, program director for IDC's Enterprise Applications research.

However, IDC believes the new company may run into cultural, exceptional, and positional challenges. Additionally, IDC believes 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," says Janet Waxman, program 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. "Every professional service company with an ebusiness practice, every ecommerce software vendor, and every pre-existing emarketplace 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 be especially vicious."