“When is it beneficial for a firm to pursue a unified procurement strategy for enterprise software solutions?,” 42nd Hawaii International Conference on Systems Science (HICSS), Kona, HI, January 2009

1. When Is It Beneficial for a Firm to Pursue
a Unified Procurement Strategy
for Enterprise Software Solutions?
Juliana Tsai
with Rob Kauffman
W. P. Carey School of Business
Arizona State University
Copyright © 2009 by J. Y. Tsai

2. Shift in Market Dynamics
Industry Consolidation Vendor Consolidation

3. Move-to-the-Middle Theory
Clemons, Reddi, & Row, 1993
• Increase in outsourcing
• Reduce cost with fewer suppliers
• Establish close and long-term
partnerships with suppliers
• Incentivize suppliers to provide non-
contractible benefits

4. Research Questions
What expected outcome is motivating firms?
What conditions prompt unified procurement?
What is the realized value achieved?
Unified Procurement Strategy
A firm elects to purchase all compatible products
and services from a single vendor

5. Theories & Motivations
Move-to-the- Fewer suppliers incentivizes higher
middle product quality
(Clemons et. al, 1993) (Clemons and Reddi, 1994)
Equal inputs and outputs maximizes
Equity
(Adams, 1963) results
(Joshi, 1989)
Absence of compatible goals increases
Agency agency cost between principal and
(Eisenhardt, 1989) agent
(Bakos and Kemerer, 1992)
Cognitive Vendor partnership delivers unique
unique
Dissonance non-
non-contractible benefits
(Festinger, 1957) (Bakos & Brynjolfsson, 1993)

6. Unified Procurement
Adoption Process
Stage 1: Determine the Stage 2: Evaluate the Propositions
strategy’s fit firm’s state
- Scale - New IT infrastructure 1. Strategy Fit
- Time - IT transformation 2. Low Cost
- Operations - Industry consolidation Driver
3. Vendor
Selection
Stage 3: Adopt the Stage 4: Measure the 4. Potential and
unified procurement solution’s business Realized Value
strategy value
- Fit of solution - Value of IT investment
- Fit of firm - Value of partnership

7. MINI-
MINI-CASES

8. Case 1: Banking
Firm State Adoption Driver Reason for Vendor
IT Transformation Scale: vendor Strength & experience in
eliminates need for the industry
large IT staff
Unique Benefit Realized Value Executive Quote
Contribution to - Reduced time to “With SAP solutions, we
research and market aim to achieve the lowest
development - Streamlined processing costs and
processes fastest time to market in
- Improved retail banking.”
efficiency – Dirk Berensmann, CIO & COO
- Reduced cost

9. Case 2: Healthcare
Firm State Adoption Driver Reason for Vendor
New IT Operations: Strong partnership model
Infrastructure packaged,
standardized
solution
Unique Benefit Realized Value Executive Quote
Full partnership for - Improved “An integrated innovation
products and productivity solution from Microsoft
services - Reduced cost works together right away;
- Increased it is cost-effective and
revenue reliable.”
– Douglas Payne, CTO

10. Case 3: Communications
Firm State Adoption Driver Reason for Vendor
Industry Time: reduced Strong technology and
Consolidation complexity yields chance to expand
(external) faster launch time partnership
Unique Benefit Realized Value Executive Quote
Pre-integration for - Improved With Oracle’s solution,
new products productivity “Cablevision is in a position
- Reduced cost to capitalize on the market
- Increased opportunities …build
revenue loyalty & reduce churn and
that helps our bottom line.”
– Juan Jose Colon Carbajal, CIO

11. New Knowledge
• Industry consolidation is moving firms towards
a unified procurement strategy of enterprise
software solutions
• A four-stage unified procurement adoption
process is proposed
• Three industry mini-cases are presented to
illustrate unified procurement adoption