Online reverse auctions look like a silver bullet that cuts costs quickly using e-business tools. Reverse auctions are fixed-duration bidding events hosted by a single buyer, in which multiple suppliers compete for business. Proponents claim reverse auctions can lower the cost of procuring products and services as much as 20 per cent, making them the e-business application of choice for companies faced with declining sales and margins. However, the raw savings overstate the value of this vaunted online procurement technique.
When we think about how the Internet creates value, we naturally think about its power to connect. That's how we define a network like the Internet: computer systems linked in a way that makes it easier to share information
This is a column about creating value. Like you, I spend a lot of my time thinking, writing and talking about value. But as I look at the crisis of confidence plaguing the corporate world in general, I am forced to consider a deeper question - in our unending quest for value, do we have to compromise our values? What is the relationship between values and value? Indeed, what is the purpose of a business?
We naturally assume that industrial enterprises are the most fertile grounds for e-business implementation. And we assume that conducting e-business requires communications infrastructure and a minimum level of computer literacy. On a recent trip to India, I discovered how wrong those assumptions are. A quiet digital revolution is reshaping the lives of farmers in remote Indian villages.
In today's harsh economic climate, CFOs and CEOs are asking tough questions about the returns on investment from their e-business projects. They are confronting CIOs with the command that Cuba Gooding Jr repeatedly says to his agent in the movie Jerry Maguire: "Show me the money!"Gone are the days when e-business projects would be approved based on faith, fear or greed. Nowadays, every such project has to be justified with a solid business case that includes an estimated ROI.
The Internet has ushered in the age of information democracy by shifting the balance of power toward customers. Nowadays, customers can compare prices through shopping engines. They can pit sellers against each other through reverse auction services like FreeMarkets. And they can get unbiased feedback on products and services through third parties like Amazon.com and CNet. Information transparency is here to stay