Shop till you drop

Online trading. The average Joe may not think it's any great shakes,but to a company like Tplc, it could mean money, money, money. Drew Cullenlooks at the emergence of online trading in the corporate channel

Tplc, formerly known as Technology, wants to tell the world about three major contract it has recently pulled off.

It is seeking permission from its customers to publicise the details, but until then it will say only that the accounts, all in the commercial sector, will add an estimated #50 million sales a year to its turnover.

According to Dave Wilson, Tplc finance director, all three were won on the back of Quik, Tplc's online trading suite. 'We are winning a lot of big accounts because of Quik. It costs one of our new customers #120 each time it raises a purchase order. We can help companies cut their costs by be tween u50 and u100 per purchase, depending on the size and bureaucracy.'

Tplc, with its trading partner Infobank, is one of a handful of UK resellers using online trading systems. Other members of this elite band are Computacenter and recent arrivals Elcom Lantec and Action Computer Supplies, both of which went live with their online trading systems this month.

The gang of four are all pretty damn big - each with sales well into eight figures and all focusing on the corporate sector. All four are confident that they have stolen a march on their rivals, many of which are also believed to be developing systems of their own.

Corporates using reseller online trading systems for their IT purchasing include companies such as British Gas, BT, Esso, Glaxo and WH Smith, and many more are expected to follow suit.

But these systems do not come cheap. To date, Elcom Lantec's US parent has spent $10 million on Pecos development and maintenance. Tplc is spending - on top of its initial investment - u2 million to u3 million a year on Quik 'to stay ahead', Wilson says. Computacenter and Action also refer to the significant development costs of their systems.

Computacenter has the longest established trading system of the lot.

Thirty per cent of its business, worth an estimated u180 million a year, is handled through its online trading system. The company is rolling out the system through the international consortium of computer dealers. Dutch and Danish members have already adopted the system.

Computacenter is turning up the heat on its rivals. This month it is performing an image makeover of the system, first developed six years ago, with a name change from The Customer System to On Trac. It is also launching an advertising campaign in Computing and Computer Weekly to highlight the system's benefits.

Martin Hellawell, Computacenter head of marketing, says: 'We think On Trac is a major differentiator which improves customer service and lowers our cost of sale. It cuts down on time, cost and hassle by automating the whole purchasing process. It solves one major problem that corporates face, the time in getting products to the desktop as well as cutting down their costs.

There is also stacks of management information, for example, customers can check how many portables they have bought by department over the past six years.'

Elcom Lantec is a newer arrival on the online trading scene. The Slough reseller introduced a full implementation of Pecos on 9 September. The company has gone for broke after UK trials involving more than 250 live system users.

Pecos may be new to the UK, but it is well established in the US, where Elcom Lantec's US parent has spent five years in developing the system.

Phil Garnar, MD at Elcom Lantec, is bullish about Pecos' prospects. 'Pecos sits on the customer's desk. It uses point and click technology to create a purchase requisition which is electronically transmitted for signature.

'Customers can check stock availability, pricing and statistics on the amount spent. Their purchase order comes into contact with us for the first time when it is sent electronically to the warehouse for picking.'

There are two main drivers behind Pecos, Garnar says. 'First, it is a more efficient way of product fulfilment. Information lives on the desk and is up to date. Second, the cost of sale and the cost of administering the purchase is reduced.'

The system is most useful to large customers, he says. The bigger you are, the more you benefit.' To start getting real value and reduced overhead you need to make regular purchases and should expect to spend at least half a million pounds. The bigger you are, the quicker your overheads and cost of sale reduce.

The reseller intends to license Pecos in the UK to companies operating in non-competitive sectors and hopes to announce the first sale in the next few weeks. In the US, Elcom has licensed the system to Daisytek, a big consumables supplier.

Action Computer Supplies, by contrast, is not interested in licensing its online trading technology, according to sales and marketing director Duncan Wilkes. 'If it does what we think it can do, we will keep it for ourselves. The system will deliver a competitive advantage - and we have no desire to turn into a software house.'

The Wembley-based mail-order reseller went live at the beginning of the month with its in-house developed system Order Point, after a one-year pilot. 'In the beginning, we thought we were developing an electronic catalogue, but it has developed into more of an electronic trading system,' says Wilkes. 'We have worked with a very large sample customer base and have been through a whole series of beta versions to design the system that customers wanted - one that reflected the way customers were using the system.'

Order Point 'makes it easier and more convenient for customers to make purchases with Action', according to Wilkes. 'The key driver in our belief is that the cost of transaction is cheaper, with customers making their own orders. It ought to save you in the long run, but you have to give the customers a real service benefit.

'Customers will use this only if they are making regular purchases. The system could be the easiest in the world, but it still requires an effort to understand and learn something new. Frankly, if you were learning for fun you would be looking for something other than how to master an electronic ordering system.'

Tplc is cock-a-hoop about its electronic purchasing system. The company has developed a modular system, built around a Sybase engine, which contains details of 36,000 product lines. Earlier this year, it signed an agreement with Infobank, the reseller cum developer, to include its pioneering electronic commerce system as a customer front-end for Quik.

Infobank has signed a three-year deal with Tplc which gives the Warrington-based reseller exclusive UK rights for its software. Graham Sadd, technical director at Infobank, said the company is currently negotiating with resellers in Germany, France, Italy and Spain to take on its software.

'We think alliances are the way forward for us,' he says. 'It is clear that among other criteria corporates apply when evaluating tenders is a substantial balance sheet. So it was easy to make a decision to work with Tplc. We will adopt the same strategy for Europe. We want to work with well-established local companies, that way we will grow more quickly.'

Tplc appears to have pulled off a canny deal with the Infobank lock-in, gaining useful addition to Quik, while shutting out potential competitors.

The u320 million ICL subsidiary does appear to be on a bit of a roll.

Its online trading technology was a prime contributor in its successful bid earlier as part of the EDS consortium to handle GCAT, an online product delivery mechanism for government departments.

This deal is worth anything from u200 million to u1 billion, depending on whose figures you believe. The GCAT roll-out is proceeding at a stately pace,' Wilson reveals. This is determined by customer constraints. Customers are cautious, because of the culture of change management in moving from paper-based ordering to electronic procurement systems. The customer take-up won't happen until they feel comfortable with using the system.

Government departments are not forced to buy through GCat, but it is reasonably safe to assume they will gradually fall into line.

It is still early days for GCat, but make no mistake, this is a massive win for Tplc, and one which carries enormous implications for the rest of the channel. Tplc's corporate wins involve straight market share wins against other top-tier resellers. But GCat will eat into the heartland of small and medium resellers and OEMs.

Now local government and health sector purchasers are expressing interest.

'We will gain market share against any company operating in this sector,' Wilson confidently predicts. It is difficult to disagree.

While some large purchasing departments may be happy to place their orders with smaller resellers by email or over the Internet, many more will be attracted by single source supply agreements wrapped into an online trading system that can reduce costs significantly.

Online trading systems are the domain of the big resellers. Development costs are simply too prohibitive for more than a score or so of UK developers to contemplate building their own systems.

The removal of Infobank from the UK licensing scene, with the Tplc agreement, also means it is impossible to buy a market-proven trading system off the shelf. But a possible scenario in the future could see distributors extending an electronic commerce hand to their customers.

Ingram Micro has been developing its own product, while Frontline has designed an online trading system called In Touch, which has been in operation for more than two years. These systems could provide the basis of a computerised ordering service that resellers can use with their customers This would be good value-added distribution service which will benefit distributors and resellers alike.

Frontline has already had a try-out. Its systems formed the online trading element of IBM's unsuccessful bid to win the GCAT catalogue. Robert Palgrave, Frontline MIS director, is examining the options on how In Touch should evolve. He has commissioned a survey of the company's top 700 customers towards electronic commerce through the different levels of the channel. 'We are posing questions, not outcomes. But it is unlikely that we will license In Touch to resellers in the immediate future,' he says.

A more likely option, Palgrave says, is to set up EDI links and data feeds which resellers can publish in their own style. In the mean time, the big online trading providers look increasingly likely to capture the collective hearts and minds of IT purchasing managers.

Independent channel consultant Philip Howells puts it in a nutshell.

'Traditonal resellers have been astute over the years and will have a role to play in the years to come, as long as they adopt electronic methods of distirbution.

'The winners of the future will need to develop services around the emerging electronic trading distribution channels.'