Deutsche Telekom Debuts Procurement Marketplace

The marketplace for electronic components, equipment, software, and services is getting crowded and attracting some quite unconventional players. Only a few weeks after Amazon.com Inc. (Nasdaq: AMZN) debuted a procurement service for equipment marketers, German communications giant Deutsche Telekom AG (NYSE: DT) rolled out a somewhat similar offering opened to companies in nine economic segments.

The worldwide service, described as a global distribution network for hardware and software vendors, seeks to leverage the company's vast resources to generate revenue outside of its core telecommunication and networking services market.(See: Five Sources of Risk in 2011.)

Deutsche Telekom's machine-to-machine (M2M) marketplace "is a platform for manufacturers and dealers from around the world to offer their hardware, software, apps, and full-package solutions relating to M2M communication," the company said in a statement. The site provides an avenue for companies in the automotive, consumer electronics, energy, healthcare, industrial automation, public sector, retail, security, transport, and logistics to sell their equipment, software, and services directly to other businesses. Unlike Amazon Supply, Deutsche Telekom's M2M "does not deliver directly to end users," the company said.

In the statement, Thomas Kiessling, chief product and innovation officer at Deutsche Telekom said:

Our M2M Marketplace makes it easy for our partners to market their offers around the world. Anyone looking for an M2M solution to optimize their business will find what they need on our Marketplace. The Marketplace brings together global supply and demand for M2M solutions in a straightforward way, thereby lending greater dynamism to M2M business.

Okay, I am a bit perplexed. Amazon's decision to create a marketplace for direct sale of components and equipment to end users as well as businesses can be rationally explained. The company was already a major player in direct sales and the brand obviously can be extended into other retail end markets.

Deutsche Telekom's move is a bit more difficult to comprehend. The telecommunication service provider is a giant in its field, but as companies in that market have begun moving into adjacent services such as television, security services, and networking equipment, it has also realized that other existing infrastructure owned by the company can be tapped for new revenue. Deutsche Telekom operates in more than 50 countries and generated $72.8 billion (58.7 billion euro) in sales in 2011. More than half of this came from outside Germany, according to Deutsche Telekom.

What's pulling nontraditional players into the global economic supply chain and why should potential customers bother to check out the new offerings? Companies like Amazon and Deutsche Telekom don't get involved in frivolous excursions outside their core markets so I suspect their foray into supply chain support services could be because they see opportunities to help untangle some of the mess within this segment of the economy and make money in the process.

Supply chain efficiency is now acknowledged as a major competitive weapon beyond just the manufacturing arena. This has been known for long in the electronics industry, but other segments of the global economy are beginning to similarly accept that it's no longer enough to simply have great or innovative products. Even these must be supported by an efficient procurement and marketing program and when it looks like the traditional service providers have left an entry point, a new set of unknown rivals would gladly step in.

Deutsche Telekom's M2M site aims to bridge any perceived gaps between businesses that make, sell, or source end equipment used in the production of other services. Its offering is distinct in that unlike Amazon, Deutsche Telekom won't be carrying any inventories. Rather, the company is offering companies a robust network and communication platform to engage in direct and open transactions. Here's how Deutsche Telekom further explains the service:

The Marketplace provides vendors with another attractive, global distribution channel for their M2M products in addition to their own sales channels. Interested customers can simply and conveniently compare offers on an international scale and cover their individual M2M needs from the broad range on offer or alternatively purchase a full-package solution. Vendors put details of their hardware, software and industry apps on the portal, including a precise description and pictures of the product, or screenshots of the web interface. There is also the option of including technical documentation for download.

Services like Amazon Supply and Deutsche Telekom M2M Marketplace directly compete with not just the equipment manufacturers and software developers themselves, but also against wholesale distributors, retailers, and other vendors. How all these competitors will differentiate themselves in the market should soon become obvious, but the distribution and enterprise market is obviously entering a new phase. Which system will win: the old, the new, or a variation on the two?