Auctionwire

Business Plan

Josh Gold and David Romeo are talented entrepreneurs who in early 2004 identified an excellent opportunity within the market to launch an online auction management business called Auctionwire.

The Auctionwire business plan in my opinion is strategically sound with excellent potential for success. First of all, Gold and Romeo have specified that the target segment is corporate clients in Canada. Through focussing on a specific market like this in one geographical location, Auctionwire successfully differentiates itself from other online auction management businesses.

One particularly attractive aspect of the business plan (from a customer’s perspective) is that Auctionwire will charge clients a commission on successful auctions only. This again differentiates Auctionwire from competitors. It highlights that Gold and Romeo have put time and thought into forming a business plan, in this instance thinking up unique ways of offering superior client service and value to help ensure business success.

Another innovative element to the business plan is that Auctionwire will manage the complete auction process for clients. This holistic offering illustrates that the business is likely to obtain competitive advantage through providing a superior unrivalled service to clients, again highlighting the attractiveness of the business plan.

Perhaps overly optimistically, the Auctionwire business plan targeted a May 2004 start date which meant that Gold and Romeo basically allowed themselves a three month period to set the company and software up. I believe that this is a suitable time period but only if Auctionwire uses off the shelf tried and tested software, as opposed to building software from scratch which would take considerable time. If building from scratch is the chosen option, I would conclude that this time projection of roughly three months is not suitable.

Another potentially negative aspect of the business plan concerns the commission charges. With Auctionwire, commissions would range from 40% of low value items to 5-10% of high value items. This is considerable higher than that of other online auction companies such as ebay. However, such competitors do not necessarily offer as many services to the customer. Unfortunately, it is difficult to determine which online auction company’s service is more beneficial to the customer without detailed market research. Subsequently, it is difficult to decide whether this aspect of the business plan is value adding or non value adding to the customer, in the context of competitor comparisons.

In general, it seems that the business plan is extremely client-focussed. This is obviously a good thing, since it is essential that client service is of an excellent standard if Auctionwire is to succeed. From analysing the information, I believe that the business plan outlined will benefit the customer, and thus I believe that Auctionwire have an excellent chance of success.

Software Requirements Specification

In terms of the software required by Auctionwire, most of the features are readily available within all software solutions under consideration. However, some more advanced features are required which complicated matters.

On reflection of Auctionwire’s needs, I think that they will contribute to meeting the objective of providing a superior service to clients. Although, I do not believe that all the requirements are realistic or even necessary, especially when Gold and Romeo do not want to spend more than $15000 on upfront software costs.

More specifically, Gold and Romeo have outlined many needs, all of which would benefit the customer, but some of these needs are particularly demanding and complex, and thus unlikely to be implemented by the launch date. What they should focus on initially is obtaining the essential software requirements, and thereafter try to add to the service over time rather than rush to incorporate too many things at an early stage.

It could potentially be financially dangerous to try and include too many costly software specifications before the company is established. Therefore, I would suggest that Auctionwire take a more cautious approach with regards to this area.

Should they build their own software or buy off the shelf?

In light of the detailed and complex software requirements specification, it could be argued that it is more sensible for Auctionwire to build their own software. This would mean that a developer could build a software solution more accurately aligned with Auctionwire’s needs, or even completely customised to Auctionwire’s needs.

Unfortunately, open source code software would have to be purchased by Auctionwire for $5000. On top of this, the cost of hiring an experienced developer could be considerable. Moreover, there is a risk that the developer might not be able to meet Auctionwire’s complex demands due to inexperience or lack of technical knowledge.

The substantial time period involved in developing software from scratch combined with time committed to upgrading it each year also contribute to me concluding that this is not a viable nor sensible option.

On the other hand, Gold and Romeo can choose to purchase an off the shelf software package for Auctionwire. Buying off the shelf software can also be considerably expensive, however the time involved in setting the software up is considerably less than that associated with developing software from scratch.

Furthermore, off the shelf software packages may be previously tried and tested, meaning that they are a safer and more sensible option for Auctionwire. Similarly, because of this, the risk of failure is reduced since off the shelf software packages are generally more reliable and robust.

On the negative side, Auctionwire requires many detailed specifications in line with its objectives. Unfortunately, off the shelf software can be inflexible, and therefore not able to be customised to meet the detailed requirements of Auctionwire. However, I still abide by the opinion that off the shelf software is a better option to begin with. This is aligned with my views regarding only implementing the essential features first, i.e. those included within off the shelf packages already, before deciding on upgrading or even developing new software from scratch.

Which supplier should they choose?

From analysing the various possible suppliers, I believe that SuperAuction is the obvious choice for off the shelf software. The other suppliers have some major flaws which cannot be ignored. For instance, Canauction and Blackthorn Pro are both particularly new and thus lack testing and reliability. In particular, Canauction’s software solution includes many bugs which still require to be fixed – clearly not a sensible option!

Clear-bid, a long established software provider, has a terrible customer service reputation and is considerably costly to set up, and therefore it would not be desirable for Auctionwire to purchase software from them.

SuperAuction on the other hand is a reasonably priced software provider with a strong relationship with ebay, as well as having relationships with other auction websites as (in line with Auctionwire’s needs).

SuperAuction’s 24 hour customer service team highlights their emphasis on the customer’s needs, in line with Auctionwire’s customer-focussed objectives. Furthermore, the offline system available with SuperAuction is another attractive advantage. Having such a system in place avoids the problems associated with downtime, for instance lost sales, which could potentially damage Auctionwire in both financial and reputation contexts.

SuperAuction is a long established supplier with more experience than some of the other candidates. Therefore, they are a more reliable supplier and thus it is more likely that the software will be implemented in time for the Auctionwire launch.

In addition, with SuperAuction, Gold and Romeo believe that can program workarounds to achieve approximately 80% of the missing functionality, which contributes to my opinion that SuperAuction is definitely the ideal supplier for selection.