How should CIOs deal with Web-based auctions?

xploiting the Internet for commercial benefit has become a key theme for Chief Information Officers at most organizations. Significant advantages are to be gained for both sellers and buyers. Savings are made by reducing transaction costs, increasing the circle of potential customers as well as by improving the search-and-find capabilities for all parties concerned [1, 2, 4]. Web-based auctioning is a rapidly expanding application of the Internet. The matching of demand and supply at the best price at one specific point in time is the additional benefit of a Web-based auction. The advantages, however, must be considered against lower switching costs for auction participants. Are auctions always beneficial to the company? In particular, which technical and business arrangements must the CIO satisfy to give the organization a lasting advantage in this new field of electronic commerce? The following types of Web-based auctions can be distinguished as shown in Figure 1 and are further described here. Web-based Sales Auctions: One seller offering to as many buyers as allowed into the auction. Example: “Onsale” (www.onsale.com) offers 24-hour, interactive auctioning for all types of computer equipment and consumer electronics by means of an innovative arrangement called a “Yankee-auction.” Bids are sorted in order of price, then quantity, then bid time. When the auction closes, the highest bidder is considered the winner. Web-based Procurement Auctions: One buyer tendering his procurement needs via the Internet. Example: General Electric (www.tpn.geis.com) tenders its procurement needs to a selected set of suppliers via the Internet and subsequently uses auction techniques before issuing orders. Many more large companies as well as government bodies are currently considering or implementing these types of Internet-procurement systems. This requires multicriteria auctioning systems that optimize on price as well as other criteria such as product quality, delivery time, and reliability. Web-based Many-to-Many Auctions: Many suppliers offering to many potential buyers. Example: The Arizona Stock Exchange (www.azx.com) offers a call auction for stocks. In a call auction, trading takes place only at certain prearranged times—the “calls.” Between calls, orders accumulate. At the call, a price is established by identifying the supply and demand. Bringing sellers and buyers together at the same time, and at a single price, avoids the market spreads and random turbulence common in continuous markets. Current understanding of Web-based auctions is still limited. There is a significant theoretical base for traditional auctions [5], but the pervasive impact of advanced electronic communications is usually not addressed. Recent research suggests that almost any good or service can be put forward for electronic auctioning to the advantage of the business concerned, but this is not without risk [3]. However, the implications for the information and communications sys-