What is appropriate for procurement through competitive bidding? Often, that depends on who you’re talking to – and what their motivation might be. Here we address the subject of telecom services and what the impact of using reverse auctions can be on purchasing these important, but costly, services today.
What can – and cannot – be the subject of reverse auctions always provokes an interesting debate – whether it is standing in a group by the finger foods at a conference, in a classroom setting doing training, or here on the Web. The truth is that quite often, whether from limited perspectives/experience or from corporate self-interest, organizations will fall into the trap of thinking that what they need to buy in terms of goods and services are not the “right fit” for reverse auctioning.
Telecom services are an interesting area. What can be more generic than voice/data/wireless services – so long as the service levels are specified and vendors are properly vetted and screened. However, Veramark Technologies, Inc., (http://www.Veramark.com/) a Rochester-NY based provider of Telecom Expense Management (TEM) and Call Accounting has recently taken on the subject in their blog post (read below):
Reverse Auctions – Do They Have a Role in Telecom Expense Management?
(http://blog.Veramark.com/2010/07/reverse-auctions-do-they-have-a-role-in-telecom-expense-management.html)
Not surprisingly, Veramark’s perspective is that telecom services are “too complex” to be subject to reverse auctioning. They state:
Reverse auctions are often not the right choice for sourcing telecom services because there are typically few potential providers, which will limit the price impact of competitive bidding. But more importantly, the variety and complexity of carrier contracts cannot be negotiated in the context of a simple bidding war. They typically call for face-to-face negotiations in which the customer’s greatest asset is knowledge of their own usage and spend data along with the carrier’s performance history. While rates are important, the ultimate cost for telecom services is a product of SLAs (service level agreements), service plan selections, and other negotiated terms and conditions.
Hmmm. I would argue that this is just the type of service that should be put to the test through competitive bidding. With proper up-front work done both to iron-out very clear specifications (i.e. the service level agreements) and to ensure that the potential suppliers fully understand – and can fully comply with them, then a reverse auction will ensure that the organization is getting the absolute best market price on what can be a very significant part of its overall procurement outlay.
Think about how much your organization is spending in total for telecom services – what would it mean if you could cut 5-10-20% off that amount. If you are in the private sector, this could have significant impact on your bottom-line. In fact, it could very well be the difference between being in the black (being profitable) or staying in the red (losing money)! And if you are a procurement executive in the public sector, every dollar saved on what are – in essence - ceteris paribus (so long as the service is there – are you listening AT&T?) - generic services, this will save taxpayer dollars in a time of great budget challenges. These savings are especially significant today, as savings of thousand – perhaps tens or even hundreds of thousands of dollars when we are talking about telecom spending – will allowing your agency to have resources for other pressing needs – and make the procurement area – and yourself – a hero!
So, what are you doing to explore how to strategically apply reverse auctions in your procurement operations? Contact us here at the Reverse Auction Research Center http://reverseauctionresearch.blogspot.com/ to learn more about how to learn more about how leading companies and government agencies – both large and small – around the world are leveraging the power of reverse auctioning to their benefit.
BIOGRAPHY
David C. Wyld (dwyld.kwu@gmail.com) is the Robert Maurin Professor of management at Southeastern Louisiana University in Hammond, Louisiana. He is a management consultant, researcher/writer, and executive educator. His blog, Wyld About Business, can be viewed at http://wyld-business.blogspot.com/. He also serves as the Director of the Reverse Auction Research Center (http://reverseauctionresearch.blogspot.com/), a hub of research and news in the expanding world of competitive bidding. Dr. Wyld also maintains compilations of his student’s publications regarding management concepts (http://toptenmanagement.blogspot.com/), book reviews (http://wyld-about-books.blogspot.com/) and international foods (http://wyld-about-food.blogspot.com/).
Read more:
Reverse Auctions: Are They Well-suited for Procuring Telecom Services?
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