Borders Turns to Amazon for Outsourcing

Renting online infrastructures is Plan B for struggling dot-coms

After three years in the red, the second largest U.S. bookseller is calling it quits online, choosing instead to outsource its operations to Amazon.com Inc.

In turn, Seattle-based Amazon is adopting a well-established model for drumming up additional revenue used by other dot-com companies with infrastructure to spare.

For an undisclosed fee, Amazon.com will take over the Web operations of Borders Online Inc. and relaunch it as a co-branded site. It will be powered by Amazon's e-commerce platform and technology infrastructure. The online retailer will also handle inventory, customer service and shipping services for book, music and video sales. Ann Arbor, Mich.-based Borders Group Inc. will receive a commission on sales, officials at both firms said.

"It's only gravy for Amazon," said Carrie Johnson, an analyst at Forrester Research Inc. in Cambridge, Mass. "They're already in the book business, they've eliminated a competitor and they will possibly get new customers and some incremental revenue."

Amazon officials said the online merchant would also seek out additional opportunities to outsource its application infrastructure to other Web-based retailers, though no additional deals are in the works.

"Amazon is looking in all directions for ways to monetize what it already has," said Faye Landes, a financial analyst at Sanford C. Bernstein & Co. in New York. But because of its unique fit, the Borders deal is unlikely to serve as a blueprint for other deals, she said.

Irving, Calif.-based Autobytel.com Inc. has also resorted to renting its application infrastructure to rivals to drum up new revenue. General Motors Corp. will run a 90-day pilot to test a new online sales model starting May 1 on Autobytel's Web site.

GM paid a one-time fee to run the pilot, but Thilo Koslowski, an automotive analyst at Gartner Inc. in Stamford, Conn., said the deal would never have been hatched if Autobytel didn't need a revenue boost.

Copyright © 2001 IDG Communications, Inc.

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