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 {complink 11480| Inc.} debuted a procurement service for equipment marketers, German communications giant {complink 1560|Deutsche Telekom AG} 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?

8 comments on “Deutsche Telekom Debuts Procurement Marketplace

  1. Barbara Jorgensen
    May 30, 2012

    I'm confused. Aren't businesses considered end-users? If I am reading Deutsche Telekom's model correctly, they are not an eBay or Amazon because they don't sell to consumers. But in business, a corporation can be and usually is an end-user. So is this a sort of eBay for businesses only?

    BTW, this is the same model e2open started out with–an open trading platform for b2b. It has since changed into something else entirely.

  2. _hm
    May 30, 2012

    What? Yes, I agree with you Barbara. It looks to be confused decision. Sometime, CEO/CTO get an eccentric ideas from thier family member or friends. But this looks very strange.


  3. Anna Young
    May 30, 2012

    It's obvious that things are changing in the Supply chain support services and the distribution and enterprise market is certainly entering a new phase. I'm not sure which of the systems will win. We'll have to wait and see.

  4. Taimoor Zubar
    May 31, 2012

    I agree with Barbara. The model seems like a typical B2B model that many companies are already offering and they don't seem to offer much differentiation there.

  5. elctrnx_lyf
    May 31, 2012

    B2B or M2M … you need to find the potential customers who actually use the service offered by you. This may be an additional request from the existing customers which is encouraging deutsche to entr into this kind of market space. Lets wait and watch how they can make an impact.

  6. mfbertozzi
    June 1, 2012

    Speaking for myself, I agree with Anna. We are still at early stage and quite long term is needed for evaluating properly pros and cons and business benefit of DT step. Anyway within European arena (at least for telco) it is really innovative. Looking forward…

  7. bolaji ojo
    June 1, 2012

    What this tells me is that many companies are sitting on resources they can leverage for additional revenue but may either not realize the potential of the dormant/extra capacities (network bandwidth in the case of Deutsche Telekom) or may think the firewalls between their traditional and core operation and adjacent markets are too thick for them to penetrate.

    The telecom companies have been in the vanguard of extending their brands by going into new markets. In the US, telecom service providers have entered the TV program distribution and the security services markets. They already have the fiber links to the homes so why not use it for anything the homeowner/businesses need?

    Deutsche Telekom doesn't have to invest that much more to take advantage of this new business opportunity. They don't keep inventory, negotiate pricing or ship products. They just offer a platform that's already built and functioning. Whatever extra money they make here is going straight to the bottom line.

  8. mfbertozzi
    June 1, 2012

    @Bolaji: that's right and I would like to insist on one point. It isn't a matter of technology or new huge investments to perform, it is a matter of managers and who is leading the company for going ahead and promoting these courageous decisions, taking in charge responsibilities of bad or good results.

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