Using auctions to save the world

Reading The Economist’s leader on Hank Paulson’s plan to save the US finance system.

Guess what – they’re planning to use auctions.

Domain names are too cheap.

The lack of good domain names is one of the worst things about Web 2.0: All these companies with spellcheck-busting names as a by-product of the fact that so many good domain names are being squatted.

I was looking for domain names recently for this and my other blog. I even offered to buy some names from people who were squatting them. No-one even bothered to reply with a price. Seems that many domain squatters have even forgotten what they are squatting – or the click-through ad revenue is more than the cost of registration.

Some of these names aren’t even being used to generate ad-click revenue. They are registered but don’t even have IP addresses assigned.

The EU tried to come up with a way to prevent squatting when they released the .EU tld. If someone is squatting a name that you have better rights to then you can go through a dispute resolution process. I think it costs about €3000. So all this has done is set a price for squatters to sell their domain names.

At least the .ASIA people were smart enough to use auctions to set market prices (and generate more revenues for the registrars).

Once again the old cliche that regulation leads to unintended consequences and distorts the market holds true.

Which leads me to wonder whether there is a market solution for existing names. What would happen if .co.uk registrars started increasing registration fees for renewals of names?

Jargon

Was my father in law’s 65th birthday celebration over the weekend. I was hoping to go for a whole weekend without getting dragged into anything computer-related, and nearly did, except for the fact that he had a new digital camera for his birthday and needed to install the software on his PC for it.

The main thing that threw him was that the CD you have to install is called the Solutions disk. He had filed the CD away because he assumed it was for trouble shooting: He had assumed that the Solutions disk was for Solving problems.

Whereas any techie will tell you that solution is just a piece of meaningless jargon which can mean almost anything, but only very rarely does it actually solve anything. When a techie means solution, in the sense that everyone else understands it, they will more likely use the word resolution.

Don’t blame me, I didn’t invent the culture. I am convinced that the plethora of jargon is invented for the benefit of sales people – so they have something with a distinct name that they can sell.

However, from the buyer’s or user’s point of view the jargon is usually irrelevant, even misleading. SOA is an example doing the rounds right now (and I still don’t really understand it myself, or even particularly care). Web 2.0 is another.

Even in my own industry – the electronic reverse auction industry – the term auction has become a confusing jargon term. Sometimes it can mean a piece of software capable of running auctions, sometimes it can mean an event complete with suppliers, some times it can mean the whole process of negotiating a contract – from designing the specifications through to finally awarding the contract to the chosen supplier.

I suppose some of this is inevitable, and thankfully it’s not as bad as using obviously misleading language or meaningless neologisms. But it goes to show that even phrases that people can assume are commonly understood can have wildly different interpretations.

In other words: If the jargon doesn’t make sense, don’t think you’re dumb – it’s the jargon that’s dumb, not you. And also, even if the jargon does make sense – beware – because even common words can have very different meanings depending on who you are hearing them from!

EU Bureaucrats in sourcing innovation shock

So there I was last week having an email conversation with a client about the algorithm needed to relected the split of 70% price/30% non-price they were applying in their sourcing decision for IT hardware, and how this split would be reflected in their e-auction.

This was all being driven thanks to the EU Directive on Public Procurement, written into English law as the Public Contracts Regulations 2006. They state that, if non-price elements are to be used in the decision-making process then a precise weighting (i.e. a number) must be assigned to those elements. No room for fuzzy subjectivity – a sourcing decision under these regulations has to be fully transparent and objective.

This is particularly relevant where e-auctions are concerned because the final contract award decision should be made immediately after the e-auction, with the supplier who comes first in the e-auction being the supplier to whom the contract is awarded. So supplier bids may need to be modified to take into account different quality/ethical/delivery etc attributes amongst bidders.

It’s great news for competition because it means that all suppliers are bidding on a level playing field – coming first in the auction is a prize worth competing for, and coming first means you have the best overall offer (as distinct from having the lowest price).

It does mean buyers have to become more sophisticated than perhaps they were in the past, to be able to make decisions like the 70/30 split this post started with – this will come as good news to some and bad news to other. Though the expectation is that once they get over the initial learning curve, buyers will see that this kind of approach to an e-auction is no more and no less than best practice in procurement.

So far indications are that suppliers prefer e-auctions that take into account non-price factors – see an article I wrote for Industrial Distribution about multi attribute auctions earlier this year. I’ll post more about experiences with these kinds of auctions, but in the meantime let’s raise a glass to those unlikely innovators and implementors of best procurement practice: the suits in Brussels!