Guest column: Why Web won't kill middlemen

Predicting the future is a dangerous game -- unless you don't have any business riding on what you see in your crystal ball. That's the condition for most futurists: they predict, we listen, and most of the time we take the business risk. So it's worth keeping score of predictions. Here's one I think is wrong -- the demise of the middleman.

Several years ago, strategists and futurists began predicting that companies would increasingly sell directly to consumers, cutting out distributors and any other distribution intermediaries, including some retailers. The change was given a fancy term: disintermediation.

There are certainly some great examples of disintermediation at work, such as Dell Computer's direct-to-the-customer strategy. But I don't assume that most manufacturers will be selling consumer-direct very soon.

Why? Because most manufacturers don't understand consumers well enough to deal with them directly. When they think of consumers, they think of marketing -- pushing their products instead of trying to understand real consumer needs. It's a natural phenomenon. Most manufacturers, especially those dealing in technology, are product-driven. They focus their energies on making stuff, while someone else worries about getting the stuff to the customer.

But there's also another phenomenon that's supporting the rise of a new class of middlemen. It's that consumers today often want products and services packaged in different ways to meet their specific needs. I call the middlemen who do this work consolidators. They stand in the middle of a distribution channel, somewhere between manufacturers and consumers. And they come in various forms -- some old, some new.

For example, there are the food home-shopping services that provide a combination of service and products. In the Northeast, Hannaford Brothers, a large food retailer, operates Home Runs (http://www.homeruns.com). Just order $US60 or more in food by fax, phone or over the Internet, and your order is delivered to your kitchen, free of charge, the next day during a two-hour period you specify. Pricing is competitive.

In one sense, the famed Amazon.com isn't just a retailer. Rather it, too, is a consolidator. It assembles products and search and delivery services in a manner that responds to a specific consumer need.

And consolidators aren't limited to companies that deal only in the combination of products and services. There are consolidators that just put services together. Take Fidelity's Charitable Gift Fund service. It stands between an individual donor and a charitable beneficiary.

Here's how it works: Make a gift to the fund at your convenience, place its investment into any number of Fidelity's mutual funds and then, over time, direct the fund to make grants from your account to charities of your choice. It has the convenience of a private foundation and little of the cost and administrative headaches.

And then there are all the telecommunications companies and utilities that aspire to sit between you and your bank, health care provider and airline. They want to package and sell you as many products and services as you will buy.

No one has done it at scale yet, though IBM's Integrion banking consortium and the Microsoft-First Data TransPoint partnership aimed at allowing customers to pay all their consolidated bills over the Internet come closest. That means wide opportunity.

But what does it mean for information technology?

First, get excited, because IT is the real enabler of these kinds of consolidator businesses. There's much more ahead in 1999 than the boring work of Y2K. There's the need to figure out how to put together the systems that will assure a food delivery within two hours, that will let consumers shop online as they wish and that will manage, track and spend money in new ways.

There's complexity in making consolidation work. But it's also the opportunity for IT -- at long last -- to participate in real business creation.

Champy is chairman of consulting at Perot Systems in Cambridge, Massachusetts. His Internet address is JimChampy@ps.net

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