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Practical implementation of cloud computing and its impact on procurement process


Cloud computing has begun to use by many organisations across the different business
functions as a tool to meet the globalisation demands and IT needs. It has been realized that
cloud computing market had reached to 8.1 billion dollars in 2013 and will increase with
same pace in the coming years (Lin and Chen, 2012). Big organisations for instance Walmart,
General Electric etc. have developed internet designated hub for their buying and selling
activities and centralised procurement for cost reduction and speedy procurement. Many
major automotive industry players like Ford, GM, Chrysler etc. has joined the e-procurement
consortium for their competiveness (Business Wire, 2013). E-ordering system and e-services
has been noted used many retail, restaurant and other businesses for effective procurement
(Arbin, 2008). Many organisations have been successfully shifted to cloud computing but few
face problem in their success (Lin and Chen, 2012). This section will discuss organisations
practical cloud computing implementation and its impact on the core business functions
especially procurement process through different case studies analysis and practical
examples.
7.1. Unsuccessful implantation of cloud computing
7.1.1. Integrated ERP systems for a decentralised company
Hospital operating environment has dramatically changing which demands Medical Device
Corporation (MDC) for organisational restructuring and strive for greater purchasing power
through consolidating the purchase with increasingly less vendors. This case study discusses
the trend of formation of buying groups and use of e-procurement system for purchasing.
MDC was following the decentralised management approach and beside some benefits of
decentralisation, MDC was facing measureable drawbacks such as lack of update data
availability, duplication of services, difficulties in managing inventory, cost and standard
inefficiencies. The aim of MDC (i.e. a leading medical devices manufacturer and distributor)
is to implement an e-procurement system to increase the efficiency of the purchasing
transaction and add values to customer satisfaction. This case study describes the MDC
integration strategy in the context of medical supply industrys unique features and
environment of immensely changing work processes with different regional characteristics
(Bock, Flores, Latumahina, Lam, Stephanie and Kang, 2009).
Before the implementation of the e-procurement system, MDC has to standardise and
integrate their work processes in different regions and integrate incongruent ERP system

respectively. MDC conducted integration in 2 segments but unable to achieve the expected
benefits after go-live and produced interoperability issues. Operating the new ERP system in
parallel to the legacy systems were also obstacle for attaining desired outcomes. Data quality
and transformation were underestimated for the implementation and thus it caused the related
issues. MDC would not be able to use the new ERP system to accommodate the new hospital
buying group segment. On the other MDC also facing the difficulties in EDI processes to
work properly. This affected the processes, real time data availability, inventory management
and procurement processes (Bock, Flores, Latumahina, Lam, Stephanie and Kang, 2009).
7.1.2 A leading American Furniture manufacturing Company
Hafford furnitures vice president of IT suggested the cloud computing technology solution to
reduce internal IT cost when the company was financially strapped after a hurricane. This
would help to downsize the internal IT department employees from 12 to 6 and IT
infrastructure would be provided by the vendor i.e. cloud. The company has been facing
different problems for instance the MIS, decision support system and financial control system
was using with the traditional VAN system.

The company has been shifted to cloud

computing solution i.e. Software as a Service (SaaS) but it was proven disaster for them as
cloud system affected the whole procurement process and other business processes. This case
study discusses that rash decision were made, proper oversight was ignored as president had
took all the matter in his hands and selected the vendor without following the protocol. Due
to low technological capabilities, vendor went bankrupt and left the company to dire situation
(Levine, A. White, 2013).
7.2. Successful implantation of cloud computing
7.2.1 Company saved million by optimizing and centralizing purchasing process in
cloud
Rent-a-centre incorporation, an American company nearly four thousand locations and
twenty thousand employees has been going through challenges of decentralization, manual
procurement processes and time consuming and complicated supplier on-board procedures.
Whole procurement process was not efficient enough for better optimization of pricing,
contract, invoice and supplier management processes. IBM and Coupa provided solution for
the company and using the IBM emptoris delivered through Software-as-a-service (SaaS) and
Business Process-as-a-Service (BPaaS) model used to revamped procurement process and
this model has reduced the sourcing cost and cycle time and increased cost saving, ROI and

capacity of large sourcing. Procurement suit helped the company to manage the supply and
demand processes through automation which can be delivered via SaaS or cloud delivery.
This would streamlined and control the supplier management and centrally reporting solution.
Company uses this procurement software across the world and used for local sourcing and
procurement in newly open 90 stores in Mexico. This would minimized the cost and
increasing the company efficiencies especially procurement process (Business Wire, 2013).
7.2.2. Chaves County and City of Arvada
In 2013, Chaves County purchasing department works with 30 different county departments
but due limited resources and staff within purchasing department Chaves County was
observing the difficulties in finding strategic sourcing, faxing tenders, tracking return receipts
and vendor contact information update and streamline purchasing processes. To cope these
challenges Chaves County used the New Mexico Purchasing group which has been
empowered by cloud based e-procurement solution. This would help to streamline their
procurement process and enhance efficiency.
Similarly, City of Arvanda works under the decentralised purchasing system and 13
department of city has the authority to do their procurement separately according to the
purchasing ordinance. But, City of Arvanda was struggling with the consistent procurement
solicitation process. Under the decentralised purchasing process, every associate department
was using different methods to distribute solicitation but City of Arvanda wants to bring all
the purchasing solicitation together to improve the purchasing efficiency and
transparency. In 2011, they adopt the RMEPS (Rocky Mountain E-purchasing
system) which provided the access to shared, centralised and internet based
purchasing group (SourceSuite, 2015).

References:
Lin, Angela, and Nan-Chou Chen. "Cloud computing as an innovation: Percepetion, attitude, and
adoption." International Journal of Information Management 32, no. 6 (2012): 533-540.
Grilo, Antnio, and Ricardo Jardim-Goncalves. "Challenging electronic procurement in the AEC
sector: A BIM-based integrated perspective."Automation in Construction 20, no. 2 (2011): 107-114.
Rent-A-center saves millions through cloud procurement innovation with coupa and IBM smarter
commerce. (2013, Mar 22). Business Wire Retrieved from
http://search.proquest.com.dbgw.lis.curtin.edu.au/docview/1318716799?accountid=10382.

Arbin, Katarina. "The road towards successful e-ordering implementation: success factors and
barriers." International Journal of procurement management 1, no. 4 (2008): 415-429.
Bock, Gee-Woo, Emilia Flores, Donald Latumahina, Harry Cheng, Vu Tung Lam, Chan Stephanie,
Ronald Soeharto, and Youn Jung Kang. "Integrating ERP systems in a decentralized company: A case
study." Journal of Information Technology Case and Application Research 11, no. 1 (2009): 47-64.
Levine, Keith, and Bruce A. White. "A crisis at Hafford furniture: cloud computing case study." Cases
on Emerging Information Technology Research and Applications (2013): 70.
SourceSuite.2015.eProcurement. success stories. http://www.sourcesuite.com/procurementlearning/success-stories/decentralized-purchasing-finds-centralized-bid-system-in-colorado.jsp

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