Dell closes online marketplace after four months

Analysts said Dell Computer Corp.’s sudden shutdown of a business-to-business exchange it launched with great fanfare just four months ago provides more evidence that companies need to be sure of what they’re doing before they dive headlong into new Internet-based business strategies.

Like many other participants in business-to-business exchanges, Dell was lured by predictions that online marketplaces would make good sales channels, said Ronald Exler, an analyst at Robert Frances Group Inc. in Westport, Conn. “They got caught up in the hype,” Exler said. “I think they probably didn’t realize the nature of what they were getting into.”

Dell yesterday confirmed that the Dell Marketplace exchange it opened last October was closed earlier this month. The PC maker teamed with Ariba Inc. and other software vendors to set up the exchange as a site where users could shop for Dell systems and business products from other companies. But Dell pulled the plug after only three suppliers – 3M Co., Motorola Inc. and Pitney Bowes Inc. – signed up to offer goods through the marketplace.

Rob Rosenthal, an analyst at IDC in Framingham, Mass., said the speed with which Dell gave up on the B2B venture was noteworthy. “I’m surprised they would pretty much abandon something that quickly,” Rosenthal said. “They might not have realized [up front] that it was going to be a longer-term venture [to make the exchange a success].”

Dell spokesman Ken Bissell wouldn’t comment today on how much money the company had invested in its marketplace. The decision to close the online exchange wasn’t based on the small number of suppliers that had agreed to participate, Bissell said. But he added that the kind of collaborative commerce showcase Dell had in mind is “somewhat immature.”

The company quickly discovered that customers aren’t ready to use exchanges such as the Dell Marketplace in droves, Bissell said. Some users had asked Dell to develop a Web site with the capabilities that the exchange offered, he said, “but as things sometimes go, you recognize that situations can change.”

The shutdown of the exchange comes two weeks after Round Rock, Texas-based Dell warned that profits will likely be well below expectations in its fiscal fourth quarter, which ended last Friday. At the time, CEO Michael Dell said the company would aggressively manage its internal cost structure as a result of the fourth-quarter showing.

Dell will now use a Supplier Advantage program that it set up with Microsoft Corp. to market B2B technology to users who want to create their own online marketplaces. That offering bundles Dell’s servers with software from Microsoft and consulting services provided by Chicago-based Lante Corp.

Bissell insisted that prospective Supplier Advantage customers shouldn’t view Dell’s pullout from its B2B exchange as an ominous sign for the online ventures they have in mind. “I don’t see it as a mixed message at all,” he said.