Is it possible to run an eAuction in a market where prices are more or less dictated?

Situation

  • Our client had consolidated his demand of Software Licenses and needed up to 30.000 licenses
  • Only a few suppliers were certified and approved for selling the Software on the market in question
  • Our client wanted to look into the opportunities of switching vendor
  • The Software licenses were not purchased directly from the provider, but through a reseller
  • At first, the resellers were reluctant to participate in an eAuction and gave as reason, that prices were dictated by the Software provider
  • Our client decided to continue with the eAuction and request quotations from the resellers
  • Quoted prices were more or less on the same level, with little room left for bargaining
  • Incumbent supplier was reluctant to bid in the eAuction, but understood that this was mandatory, as our client was also considering new suppliers in the market

Solution

  • The Software Licenses were part of a total package and the client only wanted one supplier for the total order
  • A List Auction was chosen, in order to have the suppliers compete on the total volume and settings were applied to all lines, to motivate suppliers to lower their prices for all items in the package
  • The company had clearly stated that they were looking for a "winner takes all" supplier, so all 4 suppliers were highly motivated to take part

Result

  • Even though the resellers expressed that prices quoted were more or less dictated market prices, they were very active in the auction and willing to decrease their prices - 64 bids submitted within 32 minutes
  • Total Savings achieved were 14,59 % in relation to current price
  • The incumbent supplier ended up winning having the lowest total price