Partners in Profit
Cross-company alliances are blossoming. Even longtime adversaries are seeding strategic deals to cut costs and conquer new markets
Computerworld - One day in the middle of last year, General Motors Corp. Chairman John Smith Jr. was shooting the breeze with Edward C. Johnson III, chairman and CEO of FMR Corp., better known as Fidelity Investments. The companies' ties run deep; Boston-based Fidelity administers GM's employee savings program.
The executives got to talking wireless. Smith mentioned Virtual Advisor, a voice-enabled information-delivery system from GM subsidiary OnStar Corp. Johnson said Fidelity was looking at wireless to keep clients informed anytime, anywhere.
Nine months later, Fidelity and GM announced an alliance that lets GM's 800,000 OnStar subscribers monitor their investments (and will eventually let them buy and sell stocks) from behind the wheel. But how much the pact will contribute to either firm's bottom line remains to be seen.
Business alliances among not-so-obvious allies are skyrocketing. According to McLean, Va.-based Booz Allen & Hamilton Inc., the 1,000 largest U.S. companies earned less than 2% of their total revenue from alliances in 1980. By 1996, that percentage had hit 19%, and by next year, it's slated to reach 35%.
If you rely on the press releases that announce such partnerships, the reasons for them are many and convincing: cost reduction in the supply chain, access to new markets and the opportunity to bask in the glow of another respected company's reputation.
In the age of "co-opetition," even longtime foes are teaming up. FedEx Express, a subsidiary of Memphis-based FedEx Corp., recently partnered with the U.S. Postal Service. FedEx will fly about 3.5 million pounds of Postal Service packages each day and in return will be allowed to place FedEx drop boxes in post offices. FedEx says the seven-year deal will earn it more than $7 billion - $6.3 billion in transportation charges and $900 million in increased drop-box revenue.
A FedEx spokesman says there will be little IT expense. All U.S. mail will be the Postal Service's responsibility; FedEx will share that responsibility only when the mail is actually crated up for flight. At that time, each crate will receive a FedEx tracking number, just as any package would.
"There's little systems overlap," the FedEx spokesman says. "They pick up the mail, they put it in containers, we haul it and they pick it up [when the plane lands\]."
The alliance cuts cost by minimizing IT interaction - a theme echoed by partnerships such as the one between Blockbuster Inc. and RadioShack Corp., outlined below.
Still, the FedEx/Postal Service deal is an exception. Most partners find it tough to quantify exact returns on their joint activities.
An examination of some recent pairings reveals that
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