Lack of system integration and standardization issues:

Lack of system integration and standardization issues relates to the fact that e-procurement is still relatively new business application and it is not unusual to find a lack of benchmarkable reference models. Another challenge is software immaturity and the lack of certain key features like invoicing, payment reconciliation or managing of different geographical jurisdictions, tax structures, currencies etc. Also, companies need to be aware of the possible hidden costs related to implementation of e-procurement solutions, such as system integration, content aggregation and rationalization, catalog and search engine maintenance, supplier enablement, end user training and procurement process re-engineering. These costs can easily exceed software licensing and maintenance cost by five to ten times.

Immaturity of e-procurement-based market services and end user resistance:

The second challenge relates to the immaturity of providers of e-procurement services and the lack of supplier preparation, and the resistance of solutions end users. In some cases the immature service providers may not be able to provide a complete suite of services, especially for more complex or advanced e-procurement implementations projects. The immaturity of suppliers and the lack of preparation is also a challenge for many companies. After all, suppliers need to learn how to generate catalogs, process electronic purchase orders, how to use invoicing mechanisms among other tasks. Including companies preferred suppliers is very important to the success of e-procurement solutions relies on the network effect that will be more effective if enough players are adopting the same technology. The other challenge here relates to the resistance of end-users towards operating the e-procurement solution. To prevent this state company should encourage using new e-procurement technologies through intensive training and educational sessions with end-users.

Maverick buying and difficulty in integrating e-procurement with other systems:

The third challenge is linked to the difficulty of changing purchasing-related behaviour among the company’s employees. Some companies find it difficult to eliminate maverick buying even after the implementation of e-procurement. This can be prevented by intensive end-user training and educational programs. Companies also need to be aware of the problems in integrating the e-procurement solution with other systems. Integrating e-procurement solutions with other business applications (e.g. accounting) can be more complex than businesses think.

v. Risks and impacts of e-procurement:

i. Internet-based e-procurement systems and B2B electronic market solutions need to be compatible to the greatest possible extent with the existing technologies, to have a reasonable chance to be widely adopted in the marketplace. Even e-procurement system provides numerous benefits to the firms; there is certain amount of risks associated with e-procurement implementation. These risks could be viewed as negative driving force affecting the e-procurement implementation.

ii. Security concerns and lack of faith in trading partners are the most significant factors holding back e-procurement.

iii. Trusted third party certification is required for the level of trust to increase.

iv. The risks associated with e-procurement can be classified into following types:

a. Organizational risks:

1. Companies are uncertain about having the appropriate resources to successfully implement an e-procurement solution. Implementing an e-procurement solution not only requires that the system itself successfully performs the purchasing process, but it integrates with the existing information infrastructure.
2. The threat of redundancy or redeployment is likely to lead to resistance to the introduction of the systems and this need to be managed.
3. Since the cost savings of e-procurement are achieved through empowerment of originators throughout the business to directly purchase their own items rather than through purchasing department there is s risk that some originators may take advantage of this.
4. This is known as ‘maverick or off-contract purchasing’, and it has always happened to some extent.

b. Technology risks:

1. Companies also fear the lack of a widely accepted standard and a clear understanding of which e-procurement technologies best suit the needs of each company.
2. The significance of this risk factor seems to suggest the need for clear and open standards that would facilitate inter-organization E-procurement technologies.
3. Without widely accepted standards for coding, technical, and process specifications, e-procurement technology adoption will be slow and fail to deliver the benefits as expected.
4. There is a different models for procurement. The models are evolving fast, so it is difficult to know which one to select.
5. Problems introduced by large-scale ERP systems may not dispose organizations to e-procurement.