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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.
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.
Want to Know More?
Evaluating vendor proposals is one of the most critical aspects of the RFP process, secondary only to negotiations. The ironic thing is that we've seen too many clients try to abbreviate this activity, take short cuts, or even avoid it altogether. Providing ample time for your team to review the vendor RFP responses is critical to a quality review process, while not rushing the evaluation process ensures that you understand their complete offer and proposal.
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