Analyzing E-Procurement Adoption Efforts

Abstract

This case study looks into the evolution of various e-procurement systems at an Indian steel manufacturer, Tata Steel. This chapter argues that rather sticking to one system, organizations need to manage a portfolio of e-procurement systems to realize the full potential of the Internet. Further, these systems evolve over a period of time, thus necessitating dynamic instead of static analysis. Prior research has analyzed e-procurement and its predecessor, EDI-based IOIS, as a static game with adoption and subsidy being the key issues. However, with e-procurement increasingly being a competitive necessity, the issue is not “if to adopt e-procurement”, but “how to adopt e-procurement”. This chapter analyzes e-procurement adoption efforts in a dynamic game setting. First, the e-procurement adoption effort is analyzed in a “without subsidy” scenario and then in a “with subsidy” scenario. Results show that e-procurement adoption efforts are likely to be more if the buyer and suppliers are not myopic, and the rate of decay in strategic benefits from the dyadic relation is low. Further, the buyer can induce more effort from the supplier by offering him subsidies. The buyer will offer a subsidy only if he can take away more than half of the total e-procurement benefits. The level of subsidy depends on the effectiveness of the supplier’s e-procurement adoption effort. Results for the game theoretic model are corroborated with the case study.