1. MIS 7003 MIS Core Course The MBA Program The University of Tulsa Professor: Akhilesh Bajaj Ecommerce: Online Reverse Auctions: Common Myths versus Evolving Reality © Akhilesh Bajaj, 2008. All Rights Reserved.

2. Myths Versus Reality Reverse Auctions are only About Price: -Customer firms can discover good vendors and screen out others -The contract can define the combination of price, performance levels, and so on. For example, a customer care solution that is being reverse auctioned can require that the vendor declare price they will charge for achieving different levels of customer satisfaction. -Use multiattribute weighting scales to evaluate the vendor (price, performance criteria, vendor financial stability, vendor track record)

3. Myths Versus Reality Reverse Auctions are only suitable for Commodities: -In general, if the number of supplies is higher, it can be a reverse auction -If one is happy with a supplier and has a long term relationship, then a reverse auction may be harder to do -Caveat: changing a product to one made via reverse auctions may drastically lower quality and innovation content in the product.

4. Myths Versus Reality Reverse Auctions damage the Supplier-Buyer Relationship: -Suppliers in general are opposed to them -As suppliers become more familiar with the technology, and if the auction is conducted with a multiattribute evaluation suppliers may trust it. Reverse Auctions result in decreasing savings: -First time auction savings are maximum, since you are identifying fat in the system and cutting it out. Reverse Auctions are dying: -They will continue to exist as a tool but general usage will decline www.priceline.comwww.priceline.com was bought by www.ariba.comwww.ariba.com Discussion: What is better? Reverse auctions, or a more discreet vendor identification strategy, followed by vendor partnering?