Intel Sets Commerce Record
Mitch Wagner
Talk about speed to market. Intel last week disclosed that sales on its e-commerce site had gone from zero to $1 billion per month-all in the first month of operation.
The site, a self-service procurement extranet that gives buyers custom catalogs and feedback on product availability, is an anomaly when compared with other industrial trading sites. Even the most influential suppliers tend to start small and slowly push for adoption up and down their value chains.
But when Intel launched the site in July, the chip giant was determined to move business online instantly.
"If we wanted to learn a new way of doing business, we had to start something big," said Sandra Morris, Intel's director of Internet marketing and e-commerce. "If we started small, people would say, 'That's nice, but does it have any application in the long term?' "
The extranet, called E-Business Program, is focused on procurement and customer support for a range of products, including microprocessors, motherboards, embedded chips, chipsets and flash memory. It reaches 200 small and midsize business customers worldwide, who enter orders manually using browsers.
Intel specifically targeted those customers because they had communicated with Intel largely via phone and fax, whereas larger companies typically are connected to Intel on EDI networks.
The site does not offer an automated way to funnel data into customers' business applications, although it is integrated with Intel's own back office.
Eleven of Intel's larger customers also are piloting a system called Supply Line Management that lets Intel link to customer plants across the Internet to track parts consumption.
The extranet is designed to support existing accounts rather than attract new business. Intel officials said they would begin measuring cost savings next year, and noted that the company has been able to eliminate 45,000 faxes per quarter to Taiwan alone.
Middlemen who distribute Intel components said they are not threatened by Intel's e-commerce push. Earle Zucht, senior vice president for semiconductor marketing at Wyle Electronics, said his company still offers value in selling smaller quantities.
"I don't think Intel's strategy is to touch 100,000 customers a day," Zucht said. "Someone has to stock and sell by ones and twos; someone has to pull them and pack them the way the customer asks for them."
Since July, Intel has sustained an average of $1 billion in monthly revenue. That rate instantly propelled Intel to the top spot among IT e-commerce sites, with Cisco recording about $400 million per month and Dell Computer $300 million per month. But it may be misleading to compare the sites, because the vendors offer different functionality and, therefore, different benefits.
Morris said Intel feared that a gradual approach to e-commerce would drag out the process of integrating the site with the company's back-end ordering and fulfillment systems. A rapid ramp-up also forced Intel to engage customers about their needs sooner than might have happened with a more drawn-out implementation, she said.
Intel's bold e-commerce launch is contrary to the advice most e-commerce experts give clients.
"My recommendation is always to prototype your e-commerce efforts, pilot your efforts, before going full-bore into it," said Greg Cline, an analyst at Cahners In-Stat Group, a consultancy. "The pilot phase is critical. You've got to restructure your business processes. The purpose of the pilot phase is to work out the kinks and re-engineer processes so they work better on the Internet."
Placing orders is only part of what Intel offers. The site also features self-service order tracking and a library of product documentation and road maps that replaces the work of customer service representatives who previously sent information manually to customers.
Intel said it hopes to expand the Web site with additional products and partners in the future.
"One of the things we have to do is deploy more broadly," Morris said, adding that having to support manual and Web-based systems simultaneously drains resources.
Customers will not be forced to use the system, but Intel claims to have encountered no resistance.
"We would not be allowed to turn this off now," Morris said. "The customers are using it on a consistent basis, and they are really liking it."
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