Intermediaries and the internet: Does IT disintermediate - Literature review Example

The removal of intermediaries is an ancient concept that dates back to 15th century when Queen Isabella and King Ferdinand removed all the intermediaries to procure spices directly from the source in India (Sampson & Fawcett, 2001). In today’s modern business environment, the elimination of intermediaries has become quite common due to the rising interest of organizations to deal directly with the customers rather than involving intermediaries to deal on behalf of organizations (Ritchie & Brindley, 2000).

For instance, the delivery of books included variety of supply chain partners that work in collaboration of one another for the achievement of goals and objectives. With significant rise in the information technology, organizations eliminated the intermediaries and started delivering books through the internet (Wamer, 2001). This clearly reflects that elimination of intermediaries has been playing its role even before the introduction of term ‘disintermediation’ (Chircu & Kauffman, 1999; Jallat & Capek, 2001).

Producers tend to directly sell their goods and services to the consumers through the internet that eventually results in the elimination of intermediaries, while significantly reducing the transaction costs associated with the process (Mehra, 1999). This is the primary reason due to which organizations that once acknowledged the role of retailers, distributors, brokers and other middleman in transaction are now eliminating them to deal directly with the customers. However, there are still some organizations that have become new online intermediaries that are perfect substitute for ‘brick and mortar’ intermediaries.

But the exponential growth of internet along with information technology has allowed the disintermediation of web intermediaries. For instance, a customer can directly purchase books from the publisher rather than any other online intermediary, while the producer ships the book from the printing plant. With the rise of technology, the author can even sell the book directly to the customers in the form of e-books. This has eventually resulted in the disintermediation of publishers and printers, as done by Stephen King (Atkinson, 2001).

(Katz, 1988) According to Chircu & Kauffman (1998), the exponential growth of information technology will eventually threaten the traditional intermediaries’ existence. This disintermediation can be clearly witnessed in wide range of industries and professions, even including the organizations that distributes and delivers physical goods (e.g. auto dealers, wine wholesalers); transactional service providers (e.g. travel agent, banks) and even the providers of professional services (e.g. lawyers, college and university professors).

The rise of internet has not only put the traditional intermediaries’ existence at stake, but also the existence of online intermediaries as producers have access to the internet to sell directly to the customers (Nielsen, Basalisco, and Thelle, 2013). According to Delfmann et al. (2002), intermediation has increased the costs of doing business in form of handling, profit and transactions. Despite the fact that intermediaries add costs to existing business, but they also add significant amount of value to the product offered (ibid).

Similarly, Li, Chen, & Huang (2006) suggested that organizations tend to avoid or eliminate