TIME. MONEY. TRUST.

Contents
EXECUTIVE SUMMARY INTRODUCTION REVERSE AUCTIONS PROMENAS BUSINESS MODEL REVERSE AUCTION BEST PRACTICES REVERSE AUCTION FEATURES TECHNOLOGY OVERVIEW 5 6 7 2 3 4 5

Promena
YOUR GLOBAL PURCHASING PARTNER

EXECUTIVE SUMMARY
Organizations implementing an Enterprise Supply Management solution know the importance of strategic sourcing and the value it extends throughout the organization. There are three critical components, that combined, achieve a successful strategic sourcing process: technology, information, and expertise. Few tools demonstrate this connection like online reverse auctions. The rewards of reverse auction technology are widely publicized: reduced costs, faster price negotiations leading to greater productivity, and a highly visible process. But so are the risks: damaged supplier relationships, contract compliance issues, time wasted, money lost, future savings opportunities lost, and a process that is ultimately broken. Reverse auction initiatives require considerable preparation, understanding, and expertise. Most importantly, the technology and people facilitating the reverse auction platform, and each bid event, must be independent and completely autonomous from every other sourcing or supply management solution, vendor, process, and organization, in order to achieve lasting success. This paper looks at the reverse auction landscape and examines the role of reverse auctions within the strategic sourcing cycle. It explains Promenas guidelines for implementing best practices to maximize the value of a bid event, for buyers and suppliers alike. By the end, youll evaluate the advantages that Promena possesses in providing your business with market intelligence, customized consulting services, seamless integration, increased cost savings and greater net income, without any up-front costs and without installing a single piece of software.

INTRODUCTION
In a world of global competition, continued pressures to reduce costs, control spending and operate more efficiently are apparent more than ever. Procurement function has become the most important weapon to ensure a competitive advantage in the market place. Thus, procurement and strategic sourcing issues have moved to the board room agenda. Reverse auctions present a very effective method that enables a much more effective procurement process. A total drill down to true market pricing, in effect the best price and terms that the market can offer, can be obtained as a result of a well-executed reverse auction project. When done right, reverse auctions have the highest rate of return and the shortest payback period of any process improvement you can make to your business. In spite of many success stories and testimonials, the number of companies that utilize reverse auctions remains lower than expected. Main reason for this is the fact that it is quite possible to incorrectly execute a reverse auction initiative. One common mistake, for example, is that such projects are looked at as software implementation projects and the process side is completely over-looked. Other examples include companies that start out applying reverse auctions to their non-strategic, MRO type of purchases and fail to expand the scope of the project to more significant purchase areas such as direct materials or investment items. Companies that have successfully implemented this method across their procurement activities and achieved results that directly affect their bottom line, partner with service providers (as opposed to software providers) that have process know-how, purchase category expertise, and implementation services in addition to a capable online software platform. Industry experts agree that while the reverse auction is only one of several steps in the procurement process, it is imperative that it not be mixed with any of the others. Doing so produces dwindling results and diminishing returns. Reverse auctions are not solely software implementations, after all. To succeed at creating a fair and open process in addition to generating cost-savings, they need to be treated as change management projects and be augmented with services. Promena has focused solely on producing income-generating reverse auctions for our clients, integrating the solution into legacy and enterprise processes when required, but never straying from our core competency or trying to take on other spend management functions. Promena has averaged substantial savings in more than 9,000 reverse auctions over more than 8 years. Our clients include 7 Global 100 corporations and 12 Global 500 organizations. And weve never had a client use our service just once! Weve helped the worlds leading organizationsincluding Ford, Fiat, HSBC Bank, Enka Construction, Petkim, Tupras, and Unicredit Groupintegrate reverse auctions into their enterprise. And we continue to manage their bid events on a daily basis.

REVERSE AUCTIONS
Auctions can typically be defined in one of two ways: forward or reverse. While Promena performs many successful forward (surplus) auctions for its clients, reverse auctions are the more dominant type for businesses conducting online strategic sourcing. In this scenario, a company looks to procure certain goods or services and accepts descending bids from suppliers interested in winning the business relationship. There has been a heated debate about the value of reverse auctions. Most people describe it as a means to lower cost. Over the past several years and through many projects with clients in various industries, we have seen that reverse auctions offer other very distinct advantages in addition to cost reduction. Reverse auctions are a forum designed to spark healthy competition and help participants gain insight into true market conditions. Promena summarizes its benefits into three categories: Time. Money. Trust. TIME = Increased Productivity Price negotiation itself is an important piece of the overall procurement cycle. Its ordinarily the most stressful and time-consuming obstacle to getting large projects off-the-ground. Traditional contract negotiations use traditional tools. Phone, fax, and e-mail communication takes days, weeks, sometimes months, to exchange. Face-to-face meetings also take time and increase travel costs. Promenas reverse auctions collect more bids in less time, often reducing the price-negotiation phase of the sourcing cycle from months to minutes. By leveraging Promenas forum, buyers can extend their supply reach while streamlining the procurement process. Suppliers are given access to bid-related documentation via an intuitive, web-accessible interface, empowering them to quickly generate and send revised bids from the comfort of their office and fluency of their native language. Removing bargaining and arguing from Procurement Managers list of duties also frees valuable time that should be spent on more strategic tasks, like improving supplier relationships or finding new ones, analyzing key procurement data that could be presented to management, and identifying internal process improvements. MONEY = Cost Savings It is generally accepted that the best Procurement Managers will only negotiate a maximum of three bid revisions with each supplier. Electronic auctions are more effective at delivering the best price than traditional negotiation processes, where suppliers are contacted individually. Promena brings two or more suppliers together and commonly collect up to a bid per-minute, for the duration of the twenty-minute or hour-long auctioneach bid lower than the last, each bid increasing your cost savings. It is important to note that the chosen bid is not always the lowest price. Promenas reverse auction platform allows suppliers to compete on both price and non-price variables.

How long would it take your staff to collect that many bids? At what point would they stop? How much would that cost your company? TRUST = Transparency Online reverse auctions empower participating suppliers with equal informationavailable to all, in realtimeleveling the playing field. Suppliers have a clear view of the event and trust a competitive process that is open and fair. At the same time, Purchasing Managers gain the ability to observe the dynamics of their suppliers competing to win their business. Seeing a negotiation in this way reveals the truth behind past, present, and future bids.

PROMENAS BUSINESS MODEL

Promena is in the business of reverse auction project management. Our mission is to provide real, bottomline results to our clients. Our work is not done until our clients save money. We dont sell or license software. We dont charge for professional services or integration. We have learned over several years that performance-based pricing is the best fee structure, and it reflects our philosophy: We dont make money until you save money. We utilize a sourcing solution that leverages technology we have built ourselves, from the ground-up. We deliver our Software-as-a-Service through a hosted, On-Demand model, accessible from any web connection or integrated into the enterprise. This architecture allows us to minimize implementation time and start working toward our first auction, right away. And it is blind to borders, giving you global reach to international suppliers in the world economy. With the experience of over 9,000 reverse-auction bid events in 8 years, Promena works with your procurement staff to define, set-up, and execute each auction to ensure its success. We train your suppliers to use the system so they can confidently compete to win your business. We facilitate and monitor each live event, on the phones and online, to ensure smooth operation. And we generate and distribute Summary Reports to a designated list of recipients at the close of each auction.

REVERSE AUCTION BEST PRACTICES

A successful auction is one in which both the buyer and seller are satisfied, and some measure of value has been generated for both parties. Promena has created several Reverse Auction Best Practices and provides the following services in order to facilitate better results through online auctions: Event Preparation To speed your time-to-savings, we make our reverse-auction Business Process Expertise available to your procurement team. This starts with determining which purchase categories are best suited for online auctions. Weve gained and grow this expertise through on-going analysis of our vast portfolio of auction statistics. For example, knowing how results vary between capital expenditure, services, and commodity categories. The goal is to start where there is immediate money to be saved. After the purchase category is selected we determine which auction format will be most effective in attaining your goals. Different formats are more suitable for different sectors and purchase categories.

Goals for each buy differ as well. Sometimes you want the absolute lowest price. Other times you intend to buy from the incumbent supplier with the highest quality, but you want to entice him down a peg on the pricing. Promenas reverse auction platform allows suppliers to compete on both price and non-price variables. Counseling our clients regarding available options provides the best result. Supplier Training Promenas objective when helping Buyers introduce this new tool to their Suppliers, one that puts pressure on supplier profit margins, is that it be an intuitive productivity tool that saves them time and money, as well. Promenas team of Service Professionals provides initial training for new suppliers, over the phone. All users have access to the system and training manuals in their native language. Our Service Professionals are online during the Training and Initial Bid period to assist suppliers, and are always available to answer technical questions related to using the system. Testament to our success in working with suppliers is our high conversion ratio. Many companies who learned of Promena by participating as a supplier are now clients of ours on the buy-side. A number of other suppliers will only participate in a competitive bid for their buyers if they know Promenas service is being used. Only then are they certain they are competing in a fair arena. This has tremendous advantages for our clients. As your suppliers engage, understand, and leverage Promena for themselves, they are able to pass those savings on to you! Auction Management From our Operations Center, Promena Service Professionals monitor active auctions and offer supplierhotline assistance. This is to ensure that the event runs smoothly, that suppliers do not experience any technical problems or quickly address them if they do, and maximize the effectiveness of the event in reducing your cost in a fair and open forum that takes less time than traditional negotiations.

REVERSE AUCTION FEATURES

Language Support and Time Zone Support: all auctions are conducted in real-time. International suppliers access the system in their own language and time zone. Currency Support: bids submitted in different currencies are converted to a single (buyers) currency. Auction formats: Sealed bids, Ranked Bidding, Show Bidder Name Only, Show Bid Amount Only, Show Bid Amount and Number of Suppliers, Show Bidder Name and Bid Amount, and more. Reporting: Many post-auction report formats are available: Auction Analysis Report detailed analysis of any Closed auction. Supplier Performance Report review information regarding a specific supplier's performance over all events in which they have participated. And more Automatic time extension: if a bid is received within the last few minutes of the event the event will automatically be extended by a pre-defined (by the buyer) number of minutes. Attachments: buyers can upload file attachments (Word, PDF, images) to include pictures, engineering drawings, or additional specifications. Suppliers can also attach files during events for realtime buyer analysis. Messaging: Pre-event Messaging, 1-to-1 Messaging, and Public Messaging. Zero-footprint Technology: Promena auction platform is a Zero-Footprint client, meaning there are no installations required, and it is optimized for minimum hardware and network bandwidth. Bid decrement: buyers may set a minimum level (%/$) by which suppliers must decrease their bid. Multi-dimensional Bidding: buyers can weigh different supplier criteria individually.

Multi-criteria Bidding: bid templates allow buyers to factor in supplier variables, beyond price, to aid decision-making and cost analysis (quality, delivery, warranty, payment terms, technical specifications, etc.). Complex Mathematical Transformation Bidding: buyers can create equations to produce an adjusted evaluation price. This can be applied to: net present value, quantity discount analysis, dollar cost averaging, currency conversion, and algorithmic processing. Multi-day Bid Events Import/Export Line Items Email Templates/Custom Supplier Correspondence Re-Open an Auction Roll-back a Closed Auction Cancel/Delete Bids Auction Analysis

TECHNOLOGY OVERVIEW
The Future of On-Demand Software The combination of abundant bandwidth, powerful processors, and inexpensive storage is broadening the choices for designing, deploying, and using software. On-Demand solutions are delivered as a Web-based service that users access instead of own. On-Demand leverages a multi-tenant architecture that enables rapid deployment of and creates a highly scalable economic model for end users. Source Code and Delivery Model The ownership of the source code allows Promena to have flexibility and agility in meeting customers requests. There is no waiting period for customer specific development projects or enhancements. Integration projects can be implemented with minimum lead-time. Promena decided to deliver its software via the Software-as-a-Service (SaaS) model. There are no license fees and there is nothing for users to install or to upgrade. Secure, Reliable, Proven Technology All our data is secure and centralized both logically and physically. Promena employs state-of-the-art, robust and efficient technology, in order to offer our high level of service. We exclusively use products from industry leaders such as Microsoft, Oracle, Cisco, Dell, and VeriSign. There are no third-party tools or technologies used in our development. This frees us from inconsistent and unreliable results. At the same time it opens doors for modifications, enhancements and integration subprojects.

 Unique Aspects With Promenas adoption of the latest AJAX technology, we are one of the few real-time applications on the Internet. This is crucial in an online bidding event. Suppliers need to be presented with one single screen where they have access to all the relevant, up-to-date data within the current biddig event. Real-time communication is always open between the Buyer and Promenas Operation Center during the event. The bidding platform is independent of location, time zone, language and currency. Both suppliers and the Buyer participate in the bidding event in their own language. Critical information, such as dates and times, are presented in the users own time zone. Promena has overcome the technical challenges of globalization, such as worldwide platform deployment, bandwidth, and hardware restrictions. Promenas platform is a Zero-Footprint client, meaning there are no installations required, and it is optimized for minimum hardware and network bandwidth. The result is maximized net income through cost savings that flow directly to your bottomline. Global Model Another critical advantage our model provides your enterprise is the ability to expand globally, allowing participation in bid events by vendors in any nation and their native language. Promenas Global Model includes Buyers and Suppliers in more countries than any other electronic auction vendor: UK, USA, Russia, France, Germany, Finland, Netherlands, Austria, Australia, Romania, Greece, Italy, Spain, Bahrain, Ukraine, Kazakhstan, Sakhalin, China and Taiwan. Our solution supports all languages and cultures and already has localization for Arabic built-in. Localization is a core function of our solution; connecting you with an expanded vendor-base, eliminating the learning-curve, and getting all parties down to the business of the bid.