India and Beyond: Surprise! Higgle Haggle Cultures Adapt Well to Sourcing and Reverse Auctions

About ten years ago, my first exposure to serious Indian consumer buying culture for big-ticket items came when I accompanied a friend who wanted to purchase a silk carpet in Bangalore. I distinctly remember the storeowner saying, "no higgle haggle here" which, of course, he preceded to engage in immediately. You might assume that buying and selling cultures (both consumer and business) that seemingly live to negotiate and bargain may not seem like the best fit for bringing a sourcing transaction online, at least not at the point of competitive price negotiation. But you'd be wrong in this assumption. From all accounts, e-sourcing adoption in India is one the rise. The above-linked article from the Economic Times details one Indian firm's adoption of an Ariba E-Sourcing platform (select other sourcing vendors that we speak to, including Zycus and Emptoris, are also seeing traction in emerging market environments on a regular basis).

According to the article, one organization that underwent a sourcing journey observed, "transparency and meritocracy were brought into the system as soon as the company moved from ad hoc, negotiation-led buying to the reverse auction platform." Moreover, "when price competitiveness was brought into the buying process, cost savings followed."

What types of companies in markets like India are taking the e-sourcing adoption plunge? The article suggests that those companies in the process of globalizing their capabilities and assets, gaining exposure to platforms from the outside in are most likely to head down an automated sourcing and negotiation path. Curiously, much of the early adoption of e-sourcing technologies in India appears largely centered on reverse auction-driven strategies. Which is a shame for such a negotiation-centric business culture given the potential for supplier (and buyer) feedback and expressiveness through optimization-based sourcing approaches that allow for greater negotiation creativity and differentiation -- not to mention outcomes that can create favorable relationships for both parties, rather than simply eating into suppliers' margins.

- Jason Busch

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