Subscribe    |    Sponsors    |    About Us   |   Contact Us                

Current Stories

Dangerous Liaisons

Symptoms of Outsourcing Success

Agile Workforce, Agile Company

A Phoenix construction company wins a big job in Los Angeles. The first stage of the project requires a D10 bulldozer. Instead of hauling the heavy machine from Arizona to California, a costly expense even before gas prices skyrocketed, the contractor typically called a broker to sell the dozer in Phoenix at an auction and buy another one in California. "It's easier to pack your crew and travel to Los Angeles than it is to pack your crew and equipment and travel to Los Angeles," says Tri Nguyen, vice president of technology for EquipmentAuction.com.

Unfortunately, the major heavy equipment auctions are held simultaneously or back to back. Travel or traffic make it impossible for any one bidder to take advantage of all the auctions. Nguyen tells the story of one bidder who traveled two days to an auction only to miss the bidding on the crane he wanted because he got caught in a local traffic snarl.

In addition, foreign customers routinely had problems attending American auctions. Visa problems made it difficult for buyers from Asia or South America to participate.

EquipmentAuction.com intends to solve these problems. The B2B site allows heavy equipment buyers to be able to bid at multiple auctions simultaneously. The Houston, Texas-based auctioneer attracts bidders in the construction, offshore oil, mining and forestry industries. "It's a trading community because every job is different," Nguyen says. In 1999 used heavy equipment formed a $6 billion market.

Split Second Bidding

Most auctions have between 300 and 700 bidders present, he estimates. Thanks to the activity of this Web site, an auction house now "has four million eyes," says Nguyen.

The Web-enabled auction company, which went live January 1, sends staffers to every auction, broadcasting the action live on television. If the TV watchers see something they like, they make their offers online, real time at EquipmentAuction.com.

EquipmentAuction.com has bid representatives at each auction. They raise their hands as soon as a bid shows up on their computer screens. Sales happen fast. The mean bidding time is 30 to 45 seconds.

Since it was holding sensitive financial information about its customers (their bank account numbers and credit references), laws required EquipmentAuction.com to store this information in a secure data center. Not interested in building and staffing a data center, EquipmentAuction.com decided to outsource this to VeriCenter, a Houston-based ASP.

VeriCenter also hosts the auction site. Nguyen says he didn't want to worry about bandwidth problems as the traffic on this site, currently the only on-line auction house for heavy industry, grows. "I can install a T-1 line in my office. But what happens in the middle of an auction if I run out of bandwidth?" the executive asks rhetorically. He didn't want to have to worry about the answer.

Phone The ASP For Phones

VeriCenter, however, sits on an optical ring which can handle 100 megabit bursts of traffic. Nguyen says the ASP provides him with unlimited bandwidth, a crucial requirement he could not cost-effectively supply himself.

The dotcom company also didn't want to worry about its telephone services. So it outsourced that to VeriCenter, too. This decision has many advantages. First, EquipmentAuction.com does not need to hire a resident telecom expert. Second, VeriCenter set up the system so the company could call a remote office in another city as another local phone extension, eliminating long distance charges. Finally, if the company needs another 50 phones, Nguyen calls VeriCenter to handle the order.

The ASP also has an EMC hard disk storage facility, which was the only high performance hard disk Nguyen would consider for his site. EMC disks are 100 percent reliable, he says, an important factor in the auction business. Also, these disks write to the cache instead of directly to the disk, speeding up performance.

VeriCenter's hard disk program is scalable. If EquipmentAuction.com needs another 100 gigabytes, that, too, is a phone call away. If a drive crashes, VeriCenter replaces it, not one of Nguyen's employees. "I'm not in the hardware business," says Nguyen. "Why have that headache when I can shift that headache to someone else?" he asks.

SLAs Your Way

The executive says he selected VeriCenter because he wanted his service level agreements (SLA) tailored to his needs. He had some earth shaking demands; one of those SLAs had to be disk storage on demand.  Other ASPs offered to increase disk space in 250 gigabyte increments; Nguyen did not want to commit to a specific number. The other ASP candidates were too inflexible to meet the auction company's needs. VeriCenter, however, agreed to increase disk space his way. "I can order 20 gigs at a time," he says.

Nguyen appreciates the fact that VeriCenter was willing to move heaven and earth for him. He likes the fact that his ASP treats him "as a partner and not just a number in its database." He says if potential buyers line up their ASP candidates, they will all offer the same thing with just a different flavor. But one will stand out. Go with that one, he advises.

Nguyen adds he's glad his ASP is located in the same city he is. "It's much easier for me to drive to VeriCenter than to get on a plane whenever we have a meeting," he explains.

Nguyen says he needs to concentrate on making the auction business a success. Outsourcing is allowing him to do that. "Why reinvent the wheel?" he asks.

Lessons from the Outsourcing Primer:

• Web-based businesses that have to worry about bandwidth and data center issues can get those needs met with an ASP.
• ASPs must be flexible and tailor the service level agreements to meet customer needs.
• Having your ASP in the same town saves time and travel costs.
• ASPs are scalable. That enables .coms to grow rapidly and not worry about their infrastructure.

Publish Date: July 2000

Copyright © 2000 - Everest Partners, L.P.

[Previous Story]     [Next Story]