Gartner’s keys to success as a supplier in reverse auctions are: (a)
Thorough preparation – it’s essential to know your costs, your
suppliers, and your market to the greatest extent possible – tiny
details can make the difference between winning and losing, and between
being profitable or not; (b) Reverse auctions should be largely kept to
the supply of commodity products rather than proprietary ones; and (c)
Having a strong, competent bidder leading your effort at the time of
the auction, with clear guidelines on when to bid and when to fold is
Anticipating Hank Paulson, Gartner adds:
"I know most people don’t look at reverse auctions positively, but we see them as a process that makes you better,"
Here is the link. The article will soon be much longer. Here is a website devoted to summarizing the research against reverse auctions; it appears unrelated to critiques of Paulson and the Paulson plan. It seems to be fighting a personal war and so I doubt its objectivity:
The bottom line is BUYERS should not use reverse auctions because the amount of savings that can actually be achieved is greatly overstated. In addition, reverse auctions create numerous other problems for buyers. SELLERS should not participate in reverse auctions because there is nothing in it for them; especially incumbent suppliers. In almost every case, neither buyers nor sellers benefit from this purchasing tool because it is an unhealthy continuation of zero sum power-based bargaining that degrades the competitiveness of both parties. Reverse auctions are undeniably a bad purchasing practice and a wrong approach to spend management.
I hope to soon consider other research on reverse auctions.