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Lower Your IT Expense With Reverse Auctions

If you are experiencing pressure to lower your IT expense, a reverse auction might be a quick, efficient answer to ensure you are getting a competitive price. A reverse auction is when your vendors bid via third-party electronic software to compete based on price for their products or services. Typical savings from reverse auctions are from 5 to 20% in just under one hour!

Reverse auctions are an excellent resource to reduce your IT expenses for hardware, software, A/V conferencing equipment, and IT temp (contractor) labor. Reverse auctions work best when you can clearly define the specifications for the vendor’s products or services and when there is a buyer’s market for them.

An excellent example is laptops and desktops. One community college leveraged a reverse auction for laptops and desktops, resulting in year-over-year savings of over US$500,000, or 20% of the project or budget amount. Another example is a major private university that saved $45,000 on a software license from 33 bids and five suppliers.

Benefits of a reverse auction include:

  • Cost reductions beyond the target amount.
  • Competitive bidding resulting in market-based pricing.
  • Time savings with reduced negotiation cycles.
  • Decreased administrative burden.

Our Take

Reverse auctions can be piloted without investing in a full e-procurement suite. For example, Vendorful recently announced it is offering a single event usage for $2,500 per reverse auction. At this convenient price point, not only could you leverage a reverse auction as a “one-off” tactic, but you could also consider using a reverse auction as part of your pricing negotiations in your request for proposal (RFP) process.

For example, I issued an RFP for scanners, software, configuration, and integration. I used the RFP process for the vendors to propose how they would configure and integrate the scanners, and I combined those scores with a reverse auction for the pricing and maintenance. I saved over US$150,000, or 22% year-over-year budget. Regardless of how you decide to utilize reverse auctions, the potential benefits will doubtlessly exceed the effort and investment.

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