Journal of Management Information Systems, 2009, Volume 26,
Issue 2, Page 177-204.
To increase their firms' competitiveness, information technology (IT) managers are adopting a strategy that many deemed risky in the past. Recent IT advances combined with certain firm and industry characteristics are prompting firms to move toward a unified procurement strategy for enterprise software solutions. Unified procurement occurs when a firm elects to purchase all compatible products and services from a single vendor. Key benefits of unified procurement involve motivating managers to alter their procurement strategy. At the top of the list of benefits is transferred risk, which includes risks that can be transferred from one participating party to another during a transaction. In the case of unified procurement, they include technology risks and integration costs that are transferred from the procurement firm to its vendor. Firms have been shifting toward a unified procurement strategy for enterprise software solutions. We discuss the evolution of procurement practices in an industry that exemplifies a manifestation of Clemons et al.'s [10] "move to the middle" hypothesis predictions. The adoption of unified procurement is being driven by changes in IT, firm, and industry structure. We explore the "move to the middle," transaction cost economics, and industry clockspeed theory to explain this phenomenon. We present a series of propositions that extend the prior theory to the more specific setting of enterprise software procurement--an example of middle range theory development--and use mini-cases to validate the various perspectives that we offer.
Keywords: "move to the middle" hypothesis; competitive strategy; enterprise software; industry structure; IT procurement; middle range theory development; opportunism risk; software stacks; unified procurement