Could This be the Future of Outsourcing?

Filed in archive Outsourcing News on June 9, 2009

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I don't usually quote press releases - they tend to be speculative, at best, and over-hyped, at worst. However, the process offered here is interesting - not so much for its actual presence in the market, but because of the underlying concept of reverse project auctions.

I have long thought that outsourcing projects could be susceptible to reverse auctions. In commodity-level sourcing, a project can be positioned in the marketplace and prospective bidders can bid price, quality and turnaround. A customer could choose the best bid, send the work out and receive turnaround in a very price-efficient manner.

Even in higher-order outsourcing, this approach could work. If a company maintains a multi-supplier environment - where each is familiar with the baseline requirements - projects can be opened for formal bid by each supplier and select the one that offers the best price and terms.

There are some real potential benefits for both suppliers and customers. First, customers could take comfort in the fact that they're getting the best price for their requirements. Suppliers, too, can bid to fill gaps, for example, turning previously underutilized bench time into a revenue generator.

Unfortunately, this approach does wreak havoc on relationship-oriented suppliers - it is unlikely that the relationship will be well factored into the auction. Still, as a way to ensure best-price sourcing, it may have promise. Stay tuned!

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