Analysis of Reverse Auctions and the Hardware and Software Components Thereof


Unlike some technologies that have sprung up for business use in the recent years, reverse online auctions is not at its core a technology, but rather an amalgamation of a plethora of technological subsets, both hardware and software. Reverse online auctions is a concept, a business process, that utilizes technology to facilitate the exchange of money and supplier contracts at the lowest possible price while still taking into account many other factors that may affect a business deal and prohibit it from reaching its potential success level. Reverse online auctions can be broken down into two components: hardware and the hardware vendors and software and the software providers.

First, the issue of hardware is paramount. If the current IS implementation of a company cannot handle the increased load of database calls and other integrated systems, then the client-side software provided will be of little use. The minimum software requirements for a server run by the company for the auction software are Apache Web Server, PHP 4 to 5, and a SQL database. Though Apache is the most resource intensive application on this list, it is one of the least resource intensive applications available as web server software. Existing servers can be used for the hardware as long as they are able to support the Linux operating system. However, if the software is being purchased on demand from a vendor, then the only hardware needed is a computer that can run the Windows operating system.

On the software side, multiple vendors sell the components needed to establish a connection to an online marketplace and offer contracts to suppliers. One of the largest suppliers of software as a service (SaaS) is Procuri. Procuri offers bundle packages for both suppliers and buyers, each available on demand. This software combines to form the backbone which allows for the completion of a reverse auction online. There are relatively few steps from signing up with Procuri to completing a successful auction. First, a financial management software package is implemented which allows a budget to be made for the auctions. Next, suppliers are found by listing the auction in Procuri’s marketplace and then evaluated using the sourcing software package. Next, the auction takes place, each subsequent supplier bidding lower than the previous supplier in order to win the contract. This allows for incredible cost savings for the company that listed the contract, though it is disputed how much these savings apply when all factors are considered. At this point, contract management software is used to ensure that the contract remains permanent in a digital environment and easily accessible for approval and renewal. Lastly, the supplier management software suite allows companies to audit their suppliers based on the claims that were set forth when the contract was created. This allows for corrective action to be taken quickly and effectively while alerting both the supplier and the buyer that an issue has arisen.

It is easy to think of this entire process as simply online reverse auctions, though there is much more underneath the surface than can be initially grasped. Like every new technology, studies constantly conflict about the benefits of using it; some, like Fortune Brands, claim savings of over 18 percent, while others debate if these savings, when they do exist, serve as a detriment to company/supplier relations and negatively impact the future of the business. As this technology is studied more heavily, businesses will eventually be able to see both sides of this argument clearly and make an informed decision about whether this technology is cost-efficient and prudent to use in their industry.


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