Gyula Bódis

About us

The ViNetBid System is one of the Visoft Kft. developed fullauction system, with the help of which any purchase and sales auctions can be handled easily.It enables electronic auctioning and tendering of products, services and other valuables via the Internet.

About VinetBidpdf logo

At the auction the suppliers / buyers who made an offer compete with each other on the basis of various aspects (price, deadlines, quality and other evaluation aspects). The system is symmetric, which means that many supported auction types can be used in both forward and reverse ways.

ViNetBid auction system

Visoft Kft received a grant for the further development of its auction system a year ago. The project was supported by the Hungarian Government and the European Regional Development Fund.
In the project, the ViNetBid auction system, which had been in use since 2011, mostly in public procurement processes, was extended and transformed so that it can be introduced to a wider market abroad. To this end, the range of supported auction types were extended to include those used on the free market, freely extendable language options were built in, and user documents for the system were created in English and German.

Our target market is mostly large corporations “east of the Elbe” which can achieve favourable prices in their purchases or wholesale sales using auction techniques. In these countries, economic development started late, which hindered the use of auction techniques considerably, and later, in the planned economy, such techniques were not needed at all. After the political transitions, however, the conditions for market economy purchase and sale techniques, competitive public procurement processes and the necessary electronic infrastructure were all created at the same time.
We are planning to make the system available for customers under two schemes. Under one scheme, customers are provided access to a separate part of the system. The advantages for the customers are that they don’t have to deal with the operation of the system and that software updates are transparent. Under the other scheme, the ViNetBid system is sold as an off-the-shelf product and customers install it on their own server. Customers receive all software updates.

Why choose ViNetBid?

Currently there are a number of operators on the market. The markets of Anglo-Saxon countries are practically full, and the markets “East of the Elbe” are also competitive. With so many stakeholders, our USPs, i.e. unique selling points, must be identified and highlighted as we need to stand out from the crowd and from the average.
What can we offer that convinces the heads of sales and purchasing we meet that they should choose our technology?

There was not a single error in the previous versions of the ViNetBid system over the course of 8 years, and there was not a single case when Visoft Kft. had to explain a system error or launch a new auction. Stability has been and will be guaranteed by the cutting edge framework and the fact that the whole system is in a high security server farm.

The parameters of the system can be set flexibly, and it can be used for any type of auction, forward or reverse, that is regularly used on the market. Where possible, “cherry-picking” and “bundle” auctions are supported.

When the parameters of the auctions are set, the system offers the solutions that can be interpreted in the given auction type – and only those. Even though there is a large number of parameters in general, when setting the parameters of a specific auction, only values that are relevant for that type need to be set.
The system helps prevent mistakes when an auction is created by offering reasonable default values and cross-checks.

You can create an auction using the language of your choice. In addition, the visual appearance and colour setting of the ViNetBid screens can be changed.

The system is available as an off-the-shelf product, but there are other options as well. Smaller businesses can lease the right to use ViNetBid for a fixed term. To use the system, the business does not need its own IT specialists.

The latest version of ViNetBid has been tested, user documents are available in several languages, and the system is ready to be launched on foreign markets.


A brief history of auctions

The history of auctions goes back way longer than you would think. It was a popular method of selling items in ancient times already. The term itself comes from the Latin “augere” (increase).
The basic requirements for having auctions were the following: the start of coining so that bids could be compared easily, and sufficient population density so that enough prospective buyers and sellers could gather.
We learned about the earliest organised auction market from Herodotus. In Babylon, in the 5th century BCE, maidens were sold at auctions every year. Girls of marriageable age and men wishing to marry got together from several villages. The auction started with the most beautiful girl, and the man who offered the largest amount could marry her. Interestingly, the price turned negative with unattractive women: they had to offer dowry to get someone to marry them.***
One of the strangest auctions of all time was when the whole Roman Empire was put up for auction. In 193 CE, the Praetorian Guard killed emperor Pertinax, and put his head up for auction. It was announced: the person offering the most can take the throne. The highest bid, 250,000 sestertii, came from Didius Julianus. Not the best investment, though: he himself was beheaded two months later.
In Rome, assets confiscated by the state were often put up for auction. Ovid wrote that at the beginning of the common era, it became widespread that the right to collect taxes was auctioned off. It was also an effective way to sell prizes of war. Most probably it was some kind of open, ascending auction method that was used.
Auctions were used in other civilisations as well. Several sources state that from the 7th century, maintenance costs in Buddhist monasteries were partly covered by putting the belongings of deceased monks up for auction.
In the early Middle Ages, however, auctions were almost non-existent. The mobility of the population was low and there were few minted coins in circulation. In such conditions, it was practically impossible to have regular auctions. A significant part of the population was self-sustaining or lived by bartering.
In 1550, in France, art pieces and paintings were sold through auctions. The first law regulating auctions in France (1556) made auctioneering a hereditary, thus a prestigious occupation.
In Great Britain, it was the 1595 Oxford English Dictionary that first mentioned auctions. Records of regular auctions, however, only date back to the end of the 17th century. Works of art were auctioned off in coffeehouses and pubs in England at this time.
In the 18th century, the large auction houses Sotheby’s (1744) and Christie’s (1766) were established. At this time, some of the slaves in America were already sold at auctions. Tobacco, horses and land were also sold with this method. The identity of the owners was often not revealed, as putting assets up for auction was somewhat frowned upon. It was only later that auctioneers became respected members of the society.
In the United States, in the 19th century, auctioneers were already seen as people of power, people to be respected.
Auctions of certain goods like vegetables, fruit and especially fish became common in the Netherlands and in Germany at the end of the 18th century. This way fishermen could sell their catch quickly in the harbour and had more time to catch fish.
Auctions played a part in the privatisation of state-owned companies and assets in Eastern Europe and in the countries of the former Soviet Union, and in the area of transport and energy supply in the United Kingdom and in Scandinavia. In the United States, the right to use natural resources, including logging and oil exploration has traditionally been sold through auctions, and most recently, this method has been used to sell the right to use the electro-magnetic spectrum.
The sale of the rights to use the electromagnetic spectrum brought the implementation of the results of auction theory to the centre of attention. The now famous sale of the 3G mobile frequencies in England brought in astonishing amounts.
AOnline auctions opened up new possibilities, too. Before that, auctions had their geographical limits and time limits. On the Internet, a lot of sellers and buyers can come together, while transaction costs are negligible. Participants are usually required to register, and there are some regulations.

***Honestly, I’m not aware of any electronic bidding system, including ViNetBid, where bids during an auction could turn from positive to negative. If the ViNetBid system were to be used for this today, I would do the following:
1. I would ask the parents of all maidens about the maximum amount they would be willing to offer as a dowry for their daughter. The highest amount would be included in the auction notification.
2. I would hold an English auction similar to that of frequency auctions, with a cherry-picking option, and the starting price would be 0. This 0 would mean that the “buyer” would get the dowry announced if he married the ugliest maiden.
3. The price would be climbing up. For some less attractive girls, it would stop below the amount of the dowry announced. In this case, the parents of the girl would pay the difference between the amount announced and the price reached at the auction as dowry.
4. For some maidens, the price would go higher and exceed the amount announced. In such a case, the winner would have to pay the difference between the price he offered and the price announced to be able to marry the girl.

The mystical connections between step sizes, bidding rules and extensions - Part One

How to get the step size right

If you know the average market price or there are opening bids, the bid increment/decrement is best set at the 0.5-1% of the average price. With a smaller bid increment/decrement, the auction may be unduly prolonged, and a larger bid decrement may lead to the loss of the price advantage that is the difference between the winning bid and the price that could have been offered with a smaller decrement.

An example for the latter: purchasing electricity with a reverse English auction, where you must place a bid better than your own, there is no tie and the bid decrement is 0.1 HUF/kWh. Let’s take an auction where towards the end, there are only two active bidders, “AAA” and “BBB”. The limit of “AAA” (the lowest possible price they can offer) is 18.25, while for “BBB” it is 18.30. If, before the last bid, “AAA” is at 18.31 and “BBB” is at 18.39, neither of them can place another bid because of the bid decrement. What happens: the buyer buys 1 kWh electricity for HUF 0.06 more than the theoretically possible best price, and for HUF 0.01 more than the second best. Let’s say the amount to be purchased is 50 GWh. As a buyer, you wouldn’t want to lose HUF 500,000 per every missed HUF 0.01/kWh, would you?

Solution: The buyer should set the bid decrement at 0.02 HUF/kWh. “AAA” is in a winning position with the 18.31 they offered and is not placing a new bid. “BBB”, however, places a bid at 18.30 (their limit), and “AAA” can now offer 18.29. The buyer did not get the theoretically possible best price. For that, “BBB”’s limit should have been 18.26 or 18.27. However, the best possible price in this situation was reached, and it was altogether HUF 1 million better than in the previous case.
In the ViNetBid system, the maximum step size must also be set. What would happen without it?

Let’s take a simple gas procurement as an example. Bidding is now at approx. 100 HUF/m3. Our bidder wants to place a bid at 98.29... and quickly writes 89.29. Yes, the transposition error we know from accounting, when two digits are accidentally reversed. The bidder places the unrealistic bid, but the system, as no maximum step size value was set, accepts it as a valid bid. The bidder’s boss will not be happy if the limit was set at 95 HUF/m3. Let’s protect the bidders from their own mistakes, and as buyers, let’s protect ourselves from future litigation.

Solution: let’s set the maximum step size at 10% of the average price, in this case HUF 10. This protects bidders from transposition errors. Please note that these kind of errors are only dangerous if the first and second digits are reversed. If the second and third digits are reversed, it means, at most, a 1% difference between the actual and the intended bid, so no preventive steps are necessary. When selling, i.e. at ascending prices, the correct value is 11.1%. (E.g. when instead of 89.29 a bid of 98.29 is placed accidentally, the difference is over 10%. It does matter if we accidentally write a higher number instead of a lower one or vice versa. This can be derived mathematically, but I’ll spare the reader this time...)

Summary and a tip: Unless there are other, compelling arguments against it, set the bid increment/decrement somewhere between 0.5-1% of the expected average price, and the maximum step size at 10% when purchasing and at 11% when selling.

Next time we will discuss bidding rules and step sizes.

The mystical connections between step sizes, bidding rules and extensions - Part Two

We discussed step sizes in the previous part. Now we explain that in addition to observing step sizes, what other requirements there are for a bid to be valid.
Almost everyone has seen a bidding, if not in real life, then in a film. And what have they seen? An auctioneer is standing on a platform, jabbering, rapidly repeating the leading price with the essential hammer in front of them. Facing the auctioneer there are the bidders, sitting – usually with small paddles with numbers. The price is always going up, then there is less fervour and the person who raised their paddle in the end takes the item. Or the slave. This is a realistic scene – there have been and will be a lot of such auctions (except for slave auctions). Almost all auction houses have been using this method for about 300 years. It is simple, fast and unambiguous. Whether it is a floor auction or an electronic one, it is clear when it is extended: after the latest bid, the auctioneer always waits for a while (talking rapidly), and if nothing happens, the hammer falls and auction is over.
In the ViNetBid system, this bidding rule is called the “better than the best” bidding rule, and the “waits for while” period is called the “last minute interval”. Of course, there is a regular period. This is usually much longer than an extension period, and the auction does not end before the end of the regular period, even if there are no bids in the final minutes. (A simple example explains the reason for this. Force majeure may always happen. The best bidder may get stuck in traffic and arrive late. It is clearly not in the interest of the auctioneer to exclude the best bidder from the auction and have the second best bidder win, is it?) Visoft Kft. has a lot of procurement auctions (reverse auctions). The regular period is at least 30 minutes, and the “last minute interval” that triggers an extension and the length of the extension are usually 2-3 minutes. In the first 15 minutes, usually nothing happens, the bidders log in and towards the end, they get more active and there are extensions. With reverse auctions, it is almost always during an extension that we have a winner.
How would we establish the winner if there were no extensions, one may ask. The best example for this is the bidding software of Vatera, which, by the way, I really like. There is only a regular period there, and in the final moments of the auction of some more popular items, bidders are sitting at their computer with their finger on the ENTER key. If you have good reflexes, you can win with a bid you place at the very last moment. This is a good solution in P2P transactions, but it is not suitable in a B2B or B2G setting. Multimillion Forint deals should not depend on anyone’s reflexes.
If the “better than the best” auction rule is this good, why would we ever use different rules? A real-life story reveals how useful the “better than own best” rule can be.
It was a procurement, the buyer wanted to purchase a large amount of electricity. There were 5 energy traders, and as it was a public procurement, there was an opening bid as well. The bidding rule: “better than own best”, the last minute interval and the extension were both 2 minutes long. The auction began and it seemed to be clear in the first extension already that one of two bidders would win. After a few extensions, one of them stopped, having reached the limit for the price they can offer, probably, and we were waiting for the extension to be over. Then something strange happened. One of the bidders that hadn’t been active placed a bid, just slightly better than their own. This was still a far cry from the leading bid, but as it was a valid bid, it triggered an extension. This happened like 10 more times.
I was at the Help Desk, monitoring the platform of the buyer. Oh, no, I’ll have to spend the night here because of a saboteur, I thought to myself. The regular period of the reverse auction was 30 minutes, and it had been going on for about an hour. Then something strange happened again. This bidder, who started so late, placed a new bid with the maximum step size and got rather close to the leading bid. 10 seconds later, the bidder placed another bid, this time HUF 0.1 better than the leading bid. Everyone was shocked in the virtual space; and this bidder won.
I called the winner to congratulate them. At least that was my excuse, what I wanted was to find out what had happened. This bidder and I had known each other for quite some time, and he told me without being asked. He couldn’t contact his boss, who could have set his limit, for an hour. When he finally reached his boss, he was given the limit that was the winning bid eventually. He won, but the buyer also won, saving millions of Forints as compared to the price that it would have reached had the auction been over 20-30 minutes earlier.
In addition to the “better than own best” rule, you should also add “no ties”. It is easy to see why this is useful and necessary. When bids must be better than the best, it is impossible to have a tie, because the new bid must be different from the leading bid by the amount of the bid increment/decrement. It is different if you must place a bid better than your own best bid. It could happen easily that someone who is behind places a new bid, observing the step size, and catches up with another bidder. If there is no “no ties” rule, you must devise a rule for how ties are broken, how this is announced and explained. The ViNetBid system is very strict in this regard, it does not allow for ties in the winning position or anywhere else. Naturally, opening bids are exempt from this, as these are placed “blindly”, and bidders can’t be expected to avoid a tie. Ties are always broken in the regular period.
What does all this suggest? Which bidding rules should we choose and how should we set the parameters of extensions?
Choose the “better than the best” rule in the following cases:
  • “cherry picking” auctions, to make them faster,
  • when there is a great difference between the bids, otherwise a saboteur may start using tricks to play for time.
  • when you want to have extensions to provide more time to bidders to place their bids
In all other cases, use the “better than own best, no ties” rule. Especially at multi-criteria auctions. Even though the ViNetBid system displays the score a bidder can get with a new bid at any given moment, because of the relative evaluation methods, competing bids can change that immediately. Don’t expect the impossible from the bidders – allow them to place bids that are better than their own.
In a “better than own best” setting, extensions should be short. After the last extension, the “better than own best” will also be better than the leading bid. In our experience, the better than the best and the better than own best rules coincide in the extension period. This is not surprising, because if you want to win, sooner or later you will place a bid better than the leading one.