FOR IMMEDIATE RELEASE

IBM'S INSTITUTE FOR ADVANCED COMMERCE CYBER AUCTIONS PROJECT FACT SHEET

Summary:
As use of the Internet(and extranets) for electronic commerce grows, early forms of cyber-auctioning are taking shape, mainly for traditional business-to-consumer transactions. Researchers at IBM's Institute for Advanced Commerce are pursuing a number of advanced approaches to overcome the significant technological and economic challenges to implementing flexible, robust systems also capable of facilitating wide-scale business-to-business cyber auctions.

"The concept of Cyber Auctions is certainly not new, but current technologies simply don't take into account the complex needs of businesses and organizations that operate in a 24-hour-a-day, seven-day-a-week global environment," says Dr. Stuart Feldman, director of the Institute. "In the physical world, businesses already conduct transactions using more than two dozen types of auctions; electronic buyers and sellers alike are finding their options much more limited. That's why we're asking how technology can replicate -- and, more important, improve on -- the physical processes currently in place."

Institute researchers believe that networked technologies are accelerating the return of variable pricing models for business and consumer transactions, after more than a century largely dominated by fixed prices for goods and services. What's more, their work shows that pricing will be just one of the negotiable elements of the robust Cyber Auctions of the future.

Project Background: Cyber Auctions
There are already more than 150 commercial on-line auction houses, each hosting 5,000 or more auctions per day. These Web sites mostly rely on classic auction house bidding ("open cry") to sell goods such as PCs or used cars. IBM researchers are focusing on more diverse systems that will handle competitive bidding, at low transaction cost, for goods and services as diverse as spare capacity on a manufacturing line to crates of bananas.

The Institute's work focuses on four key criteria considered essential for next-generation cyber auctioning: scalability, integration with back office systems, flexibility and security. That's because future systems will need to handle the approximately two dozen different forms of auctions and their variants, including:

Dutch auctions, in which the seller starts off with a high asking price and reduces the price until buyers emerge; Rules for relating bids to the actual settlement price (discriminative and nondiscriminative pricing, Vickrey auctions); Single and multiple round sealed bid auctions; Auctions with complicated and flexible closing criteria (such as deadline or a specific period of bid inactivity); Rules to control the pace of bidding (such as minimum starting bid, minimum bid increments that depend on the last valid bid), and special mechanisms for controlling auctions (such as reserve price, tie-breakers, and rules peritting the seller the bidder to retract a bid or action).

"Competitive bidding is currently conducted by human agents and brokerages using traditional auctions," explains Feldman. "Advances in intelligent agent technology will allow networked trading applications to carry out the role of these intermediaries at a fraction of the cost and without extensive advance set-up and third-party structuring. In addition to supporting price negotiations, these trading applications will also be able to handle more complex terms and conditions, including delivery dates, exchange rates, shipping and credit terms."

Feldman says that Institute researchers are also experimenting with methods to integrate Cyber Auctions into the management of everyday purchasing, inventory, logistics, sales and distribution, EDI (Electronic Data Interchange), RFPs (request for purchase), etc. "Networked technology should provide businesses greater flexibility to customize auction rules, as well as the ability to integrate auction technology with back office systems and with e-commerce Web sites," Feldman explains.

Other issues being addressed by the researchers include user and credit authentication, access control, prevention of bidding collusion, privileges for preferred clients, multiple bids, anonymity and the ability to notify a large number of parties of bidding changes at high speeds.

The IBM Institute for Advanced Commerce began operations on January 1, 1998, and is dedicated to exploring the impact of emerging technologies on the future of business and commerce. Its inaugural roster of advanced commerce research projects has initial funding commitment of more than $10 million and is supported by more than 50 scientists from IBM Research. These projects include a diverse mix of near-, mid- and long-term research efforts designed to overcome current barriers to robust and widespread electronic commerce, and are primarily focused on complex business-to-business applications.

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