Journal of Business & Industrial Marketing

Adoption of the Internet of Things technologies in business procurement: impact on organizational buying
behavior
Talai Osmonbekov, Wesley J. Johnston,
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 Adoption of the Internet of Things technologies
in business procurement: impact on
organizational buying behavior
Talai Osmonbekov
Franke College of Business, Northern Arizona University, Flagstaff, Arizona, USA, and
Wesley J. Johnston
Department of Marketing, Georgia State University, Atlanta, Georgia, USA

Abstract
Purpose – The purpose of this paper is to discuss the potential of Internet of Things (IoT) to affect organizational buying behavior. Potential impacts
on organizational communication, buying center structure and processes and privacy and security issues are discussed.
Design/methodology/approach – This is a conceptual paper that advances testable propositions based on the technology overview and use of
Downloaded by University of Louisiana at Lafayette At 21:40 17 September 2018 (PT)

existing organizational buying behavior theory.

Findings – This paper concludes that major changes are likely as a result of the adoption of IoT. The nature of organizational communication may
shift to more machine-to-machine communication and buying centers may become smaller, less hierarchical but more coordinated, with less
conflict. In addition, privacy and security concerns will need to be addressed.
Originality/value – This is the first attempt to conceptualize the impact of adoption of IoT technologies that may help future researchers to
examine the impact on a more granular level. For practitioners, it may help them prepare for the impacts of the IoT technological juggernaut.
Keywords Efficiency, Internet of Things, Organizational buying behaviour, Effectiveness, Buying center
Paper type Conceptual paper

Introduction assigned elevators to transport people according to those

The growth of the Internet of Things (IoT) in the coming
decades may have an impact on our everyday lives, as well as on
buying behavior of many companies. The IoT has been defined
as:
the use of sensors, actuators, and data communications technology built
into physical objects that enable those objects to be tracked, coordinated, or
controlled across a data network or the Internet (McKinsey Global Institute,
2013, p.51).
While the internet revolutionized the way people do business
via connecting personal computers, mainframes and other
business IT infrastructure, the IoT may bring further
incremental change to businesses and consumers alike via
connections among physical objects (Ashton, 2009) previously
unconnected and were thought unconnectable, such as cars,
houses, gas turbines and even dental implants. Already,
consumers use smart phones to connect to their cars, regulate
temperature and electricity usage in their homes, make
payments and analyze information on their golf swings and
running statistics via connected golf clubs and sneakers
respectively (Wasik, 2015). Schindler developed technology for
predicting elevator demand patterns and automatically
patterns thereby reducing wait time by 50 per cent (Porter and
Heppelmann, 2014). Businesses track their employee
productivity via subcutaneously implanted chips and radio
frequency identification devices (RFIDs), track shipments and
even remotely monitor turbines at a power plant (Wasik, 2015).
Philips Lighting is making lightbulbs that connect to a
smartphone and enable consumers to monitor and change
lighting in their houses remotely (Porter and Heppelmann,
2014). Recently, Qualcomm reported $1bn revenue for 2014
from the IoT-related business, as it sold more chips embedded
in cars, appliances and wearable devices (Tilley, 2015).
Consultancy McKinsey reported that the cost of the sensors
enabling IoT decreased 80-90 per cent in the past five years and
further cost reduction will enable about 1 trillion objects to be
connected to the internet in the future, with potential economic
impact of $6.2tn by 2025 (McKinsey Global Institute, 2013).
International Data Corporation forecasts a global market for
IoT of $7.1tn in 2020, and General Electric estimates that IoT
could add as much as $15tn to global GDP by 2030 (Weinberg
et al., 2015). Although this type of long-term projections should
be taken with a certain degree of skepticism, a number of large

The authors thank the anonymous reviewer for this helpful suggestion.
The current issue and full text archive of this journal is available on They are grateful to an anonymous reviewer for these series of important
Emerald Insight at: www.emeraldinsight.com/0885-8624.htm research questions.

Received 18 October 2015

Revised 11 April 2016
Journal of Business & Industrial Marketing 15 September 2016
© Emerald Publishing Limited [ISSN 0885-8624] 3 November 2016
[DOI 10.1108/JBIM-10-2015-0190] Accepted 4 November 2016
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
companies are already investing to take advantage of this
technological trend and high-profile strategic and technology
analysts outline strategies to compete in this new technological
environment (Porter and Heppelmann, 2014; Iansiti and
Lakhani, 2014; Lopez, 2014; Allmendinger and Lombreglia,
2005). For example, GE is planning to connect all of their
physical products to each other and to the “industrial internet”
and investing millions in developing software and human
resources to support it (Iansiti and Lakhani, 2014). Google
spent billions of dollars acquiring Nest, a smart thermostat
company, to enter the business of smart homes, as well as a
multitrillion industry of regulated electric utilities (Iansiti and
Lakhani, 2014). At the same time, Google joined GM, Honda,
Audi and Hyundai in a race with Tesla to develop connected
cars that could be driven autonomously and also interact with
other smart devices that people own (Porter and Heppelmann,
2014).
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Much of media and research attention has been on the
implications of the IoT in the consumer space; that is how
consumer lifestyles may change in the future and what
implications this change bring to companies marketing directly
to consumers. This paper attempts to examine the impact on
the business-to-business space, where the dollar amount of
transactions is far greater than that of the consumer marketing.
In business press, the issues of IoT and the related issue of
using Big Data are constantly discussed. In the airline industry,
Delta uses its Big Data capabilities to share information not
only with consumers to tell them about the location of their
luggage but also to share information with their partners and
suppliers (Fortune, 2014). Surprisingly, not much has been
written in academic literature about the IoT and its impact on
business-to-business marketing. One notable exception is a
paper by Johnston (2014) where the author suggested that the
impact ought to be great, connecting this emerging technology
trend to the use of big data by business marketers.
To understand how to market to businesses, researchers
typically focus on organizational buying behavior (Johnston and
Bonoma, 1981). Although information technology is playing an
increasingly important role in business-to-business relationships
(Cegielski et al., 2012; Want et al., 2013), few studies examine
Figure 1 Model of the IoT adoption impact on buying center
Journal of Business & Industrial Marketing
the potential impact of information technology on
organizational buying (Osmonbekov et al., 2002) and
specifically the emerging IoT technologies. To address this gap
in extant research, we use existing organizational buyer behavior
theory and what we know at this point about the IoT to propose
a model to describe possible implications of further adoption of
the IoT in industrial buying. Specifically, we examine the
possible impact on the transactional and communicational
aspects of business procurement in the context of different
buying situations: straight rebuy, modified rebuy and new task.
In addition, we examine the possible impact on the structure
and processes of a buying center. In terms of structure, we
propose the impact on the size, participation and hierarchy of
the buying center. In terms of processes, we propose that the
main impact will be on the levels of conflict and coordination.
Ultimately, the adoption of the IoT may improve the efficiency
and effectiveness of the decision-making unit (DMU), not only
because of technology but also because of changes in the buying
center structure and processes. See Figure 1 for the overview of
the conceptual model.
We begin by reviewing the role of the IoT and enabler
technologies in business today and their relevance to industrial
buying. Then we review possible impact of IoT on
communicational and transactional aspects of the buying
process across different buying situations. Next, we propose a
set of testable propositions outlining the impact of the IoT on
buying center structure and processes. Finally, implications of
this model for researchers and practicing managers are
discussed.
The Internet of Things
The IoT technologies involve a massive use of sensors such as
RFIDs and similar sensors and devices that wirelessly or via
wire connect to each other and to the internet. What enables
them to interact with each other are new or updated
older communications technologies such as near field
communication, bluetooth (and updated Bluetooth 2.0
version), Wi-Fi and internet communications protocols. The
data from these sensors are gathered, routed through an
internet-based cloud storage and analyzed by a computer type
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
smart device, such as a PC, smartphone or a similar device.
Importantly, this central hub-type device is not necessary for
the sensors and sensor and actuator embedded devices to
communicate and interact with each other (Wasik, 2015;
Porter and Heppelmann, 2014). Unlike current widespread
technologies, IoT devices are capable of learning and
programming themselves without human involvement. For
example, a new generation thermostats (such as Nest, now part
of Google) are able to sense human (or pet) presence in the
house and program themselves for different temperatures
during different times of the day. These data are captured,
stored and analyzed by Google’s cloud services systems. These
systems help homeowners to control heating, ventilation and
air-conditioning systems, and may provide cost savings to
consumers by intelligently managing energy consumption. On
the industrial side, these data services may help electric utilities
companies to forecast energy usage more accurately and thus
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offer firms to manage energy production in a cost-efficient
manner (Iansiti and Lakhani, 2014).
Researchers suggest that the IoT is the third wave of
information technology-driven competition (Porter and
Heppelmann, 2014), and builds a foundation for rethinking
and reworking business processes for maximum efficiency and
effectiveness (Lopez, 2014). Others see the potential power of
the IoT to be harnessed by companies in their move to develop
deeper, more integrated relationships with customers and drive
recurring service revenues (Opresnik and Taisch, 2015; Porter
and Heppelmann, 2014; Allmendinger and Lombreglia, 2005).
For example, GE power turbine business is embedding sensors,
controllers, and microprocessors into their turbines. These
devices then provide GE technicians with real-time diagnostic
information on the performance of the turbine at the
customer’s location. Armed with this information, GE is able to
provide preemptive service and maintenance. The customers
are willing to pay a premium for such value-added service, as it
may prevent equipment breakdowns that could be very costly
for the customer (Allmendinger and Lombreglia, 2005).
Although capital equipment such as turbines, assembly lines
and office printing systems already come with standard
maintenance schedules, varying operating conditions at specific
customer locations (such as workload, humidity, air pollution
and temperature) usually lead to different rates of breakage and
failure (Brown and Duguid, 2000). Unique operating
conditions for equipment render standard maintenance
schedules obsolete relative to preemptive maintenance
provided based on real-time data received from the sensors and
other IoT devices embedded in the equipment. At the same
time, GE could eliminate unnecessary site visits and make
maintenance more cost efficient (Allmendinger and
Lombreglia, 2005).
Next, we examine the literature on industrial buying to make
meaningful connections among the IoT technologies and
industrial buying structure and processes.
Industrial buying
Prior research identified the industrial buying process as a
complex series of interdependent actions that include
recognition of a need, technical specification, supplier
evaluation and final purchase decision (Robinson et al.,
Journal of Business & Industrial Marketing
1967). Although these steps are fairly straightforward and
simple, procurement in the real-world situations vary greatly
because of differences in procuring different types of
industrial products, buying situations and interactions that
occur in the buying center (Vyas and Woodside, 1984).
Much research in industrial buying focused on various types
of decisions faced by the industrial buyers (Doyle et al., 1979;
McQuiston, 1989; Moriarty, 1983). Buying situations vary in
their novelty to the organization and complexity of the
decision to be made, as well as the importance of the
particular purchase to the organization (McQuiston, 1989).
Previous research found that the length of time, the number
of people in the decision making unit, the number of suppliers
contacted during the search process, who initiates the
purchase, negotiating tactics, the composition of the decision
making unit, reasons for supplier contact by customer and
post-purchase evaluations all varied across buying situations
(Doyle et al., 1979). This finding gives further credence on
the variety of buying situations and changes in industrial
buying in relations to buying situations.
The structure and processes of the DMUs within
companies called buying centers have also received
considerable attention in the past research (Barclay, 1991;
Dawes et al., 1998; Johnston and Bonoma, 1981;
McQuiston and Dickson, 1991; Patchen, 1974; Ronchetto
et al., 1989; Johnston and Lewin, 1996). Johnston and
Lewin (1996) noted that the purchase risk will relate to
many of the dynamics of the buying center. For instance, as
the purchase risk increases, the size of the buying center
decreases and the composition of the buying center changes
to include higher-level managers (Johnston and Lewin,
1996). In addition, higher risk purchases motivate buying
centers to expend more effort to collect information from a
variety of sources both impersonal and personal but the
conflict may increase as the larger buying center consisting
of representatives from different departments with varying
priorities may lead to more disagreements (Johnston and
Lewin, 1996). To reduce the risk, there may be more
communication among the selling team and the buying
center and cooperation may develop to reduce the riskiness
of the situation (Johnston and Lewin, 1996). More recent
research suggests that buying centers may focus on brand
information to reduce risk in buying (Zablah et al., 2010),
especially in situations of very high or very low purchase
importance (Brown et al., 2012). In addition, researchers
found that customer satisfaction may moderate the impact
of price importance on the internal and external price search
(Homburg et al., 2014).
Previous research suggests that there are two fundamental
aspects to a procurement process:
1 communication aspects i.e. obtaining, retrieving, analyzing
and distributing information relevant to a purchasing
decision; and
2 transaction aspects, i.e. activities related directly to the
consummation of the actual purchase (Osmonbekov et al.,
2002).
We examine the potential communicational and transactional
impact of IoT adoption in industrial buying next.
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
Business buying situations and potential impact
of Internet of Things
Previous research in business-to-business marketing suggests
three distinct buying situations faced by industrial buyers:
straight rebuy, modified rebuy and new task (Robinson et al.,
1967; Hill and Hillier, 1977; Nicosia and Wind, 1977). These
buying situations vary in complexity and buying processes that
occur prior to the industrial buying decision. For example, in
terms of length of time it takes to go through a purchasing
decision, new task situations typically last the longest relative to
the straight rebuy situation (Wind and Webster, 1972).
Typically, there are a greater number of functional areas and
persons participating in the new task situations than in the
straight rebuy situations (Nicosia and Wind, 1977). In
addition, the composition of the buying center fluctuates for
the new task situations while remaining stable for the straight
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rebuy, and post-purchase evaluation is more extensive for the
new task and very brief, often only verbal for the straight rebuy
(Doyle et al., 1979). Previous research also found that in a new
task situation, an engineer or other technical personnel is more
likely to reach out to suppliers versus it is usually a purchasing
agent who contacts suppliers in a straight rebuy situations
(Wind and Webster, 1972). The three buying situations also
may vary across the risk/uncertainty continuum (Johnston and
Lewin, 1996). For recurring purchases such as straight rebuy,
most companies have formalized purchase procedures;
however, in new task situation where the outcome uncertainty
is high, these procedures may not be as appropriate (Johnston
and Lewin, 1996). Previous research found that high
uncertainty leads to more participation in the buying center and
the increased influence of the purchasing agent in the buying
center (Spekman and Stern, 1979; Spekman, 1979).
The potential impact of adoption of IoT across buying
situations may alter the transactional and communicational
dynamics of a buying center. For example, in a straight rebuy
situation, communications and transactions aspects of a
purchase may be fully automated in the future. Most buying
center scholars agree that straight rebuy is the simplest
purchasing situation many times involving maintenance, repair
and overhaul items, where the only reason a purchasing
manager contacts a supplier is when those items get depleted
(Doyle et al., 1979). Currently, most activities involving such a
purchase involve some sort of human-to-human (H2H)
communication; either via telephone or email, in the future
these communications may be fully handled by machine-to-
machine (M2M) communication. The sophisticated web of
sensors, actuators and computer communications hardware
and software on the industrial buyer firm will communicate
with the same amalgamation of machines on the seller side.
E-business technologies improved the transactional aspects of
these type purchases considerably, making them much more
efficient (Osmonbekov et al., 2002). Currently, a purchase
manager is still very much involved in the transaction, although
the manager uses powerful time-saving e-business tools. The
purchasing manager is operating in a computer-mediated
environment where human-to-machine (H2M) communication
is prevalent. However, with adoption of IoT, the whole
transaction may happen without any human intervention. Once
sensors on the buying side recognize the shortage of product,
Journal of Business & Industrial Marketing
they will automatically communicate with the fulfillment
computers that consult existing replenishment contracts for
price and delivery details, then calculate the most efficient order
size and automatically send a replenishment order to the
computer on the supplier side. The supplier computer data from
a warehouse or a manufacturing facility provided by a multitude
of sensors at those facilities clear the sale and order a shipment
from the warehouse or the manufacturing facility. As there is no
human intervention involved, the whole transaction could be
considered to be a M2M transaction. This type of routine
ordering and order fulfillment has been a mainstay of financial
markets for more than a decade. For example, computers trade
stocks on major stock exchanges based on preprogrammed
algorithms, and this type of trading now account for most of the
trading volume (Strumpf, 2015). As the technology for this
automation already exists, it will just be extended from financial
markets to physical markets. Many supermarkets are already
experimenting with automatic product replenishment. For
example, Tesco (a major British grocery store chain) is using a
camera pointed on produce crates and notifies the stocking room
when the crates need replenishment. Tesco calls it a “broccoli
cam” (Lopez, 2014). However, the produce is still replenished
by a worker, although with the advances in robotics, the stock
room person could be replaced by restocking robots in the
future, to make the transaction completely M2M.
The more complex buying situations of modified rebuy and
especially new task would still probably require human
interactions in both transactions and communications
aspects. As buying situations move from the routine decision-
making of straight rebuy toward more complex decision
making of new task, more people from many parts of the
organization get involved and it takes much longer to make
decisions and consummate a transaction. With both modified
rebuy and new task, it may be necessary to contact new
suppliers of products, solicit proposals and evaluate sales
presentations. These activities are impossible without H2H
communications, even with the technologies of IoT. More
importantly, the nature of making new (in the case of new
task) or modified (in the case of modified rebuy) decisions
presents decision-makers with more than in the straight rebuy
situations. In situations of uncertain outcomes, decision-
makers often rely on trust to deal with the uncertainty (Gao
et al., 2005; Morgan and Hunt, 1994) and nothing builds
trust better than a H2H communication (Nicholson et al.,
2001). With the wide adoption of e-business technologies, even
these H2H communications are computer mediated. Both sales
presentations and proposal submissions and evaluations could
be via the Web technologies, such as videoconferencing and
document digitization. So even with the IoT adoption in the
industrial buying, the communications aspect of buying in
modified rebuy and new task situations may remain a mix of
H2H and H2M communications. H2H communications is
going to be used to build necessary trust, and H2M
communication would be used to pull information from
suppliers’ websites on product specifications, product reviews
and other product specific information.
In terms of transactional aspects, in both modified rebuy and
new task situations, it may be a mix of H2H and H2M
transactions. In terms of signing an important new contract, it
is possible that the decision-makers would still prefer to meet in
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
person and sign contract in each other’s presence. Delivery of
new machinery would be supervised and inspected with human
participation, although embedded sensors in the new
machinery would be constantly transmitting information on the
status of the machinery to the receiving stations, both at the
seller and buyer locations.
To summarize our previous discussion, we advance the
following proposition:
P1. With the adoption of the Internet of Things technologies:
 In straight rebuy situations, both communicational and
transactional aspects of buying will become more M2M,
because firms will use their technological capabilities to
make these transactions more efficient.
 In modified rebuy and new task situations, the amount of
M2M communications will increase, but H2H and H2M
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will still be important because building trust via H2H and
obtaining information via H2M will reduce uncertainty of
these type of transactions.
It is important to understand that the impact of IoT will not
be limited to changes in communications and transactions.
It is likely that the structure and processes of the buying
center itself will be altered under the influence of this
technological trend. The impact is discussed in the next two
sections.
Internet of Things and buying center structure
As this research addresses the impact of IoT technologies on
procurement, we emphasize buying center members’ ability to
gather, evaluate and exchange information pertinent to buying
decisions at various stages of procurement process. In this
regard, information processing view may provide a useful
perspective in evaluating the influence of technology on ability
to process information within buying centers. Organizational
theorists posit that an organization could change its design to
match a given level of uncertainty it faces to achieve optimal
performance (Galbraith, 1974). Galbraith (1974) proposed
that organizations could either preplan all activity to reduce
uncertainty or be ready to adapt quickly to changing conditions
in the environment. For the first strategy, decision-makers need
to obtain sufficient amount of information so that they could
plan in advance of task execution (Wang et al., 2013). For the
second strategy, decision-makers should be flexible and be
prepared to process information quickly and act quickly on that
new information. Previous research suggests that internet
applications may enable companies to pursue both of these
strategies in a more efficient manner because they help
decision-makers to gather sufficient amount information in a
timelier manner than older technologies (Saeed et al., 2005).
According to Porter and Heppelmann (2014), the IoT is the
third wave of IT-driven competition, where information
gathering is wider in scope, larger in scale and not limited to
human reporting of data. If deployed correctly, it has the
potential to improve organizational information processing
capabilities further, and enhance the ability of decision-makers
to cope with uncertainty.
The buying center has been defined as a group of
organizational actors that initiates, considers and completes
Journal of Business & Industrial Marketing
purchases in a firm (Webster and Wind, 1972). The structure
of the buying center under varying conditions has been a topic
of previous research in industrial marketing (Moriarty, 1983;
Johnston and Bonoma, 1981). Researchers found that greater
environmental uncertainty surrounding a decision increases the
amount of information the buying center needs and encourages
sharing of the information in the buying center (Spekman and
Stern, 1979). Buying center behavior also changes depending
on the decision stage, type of product and companies
idiosyncratic characteristics (Lilien and Wong 1984; Johnston
and Bonoma, 1981). As mentioned before, the type of buying
situation is a critical factor in the structure of the buying center
(Johnston and Bonoma, 1981). The buying center literature
cited suggests that the key structural characteristics include:
 size (number of members in the buying center);
 participation (individual members’ level of involvement in
different stages of industrial buying); and
 hierarchical level (authority levels of managers in the
buying center).
Buying center size
Previous research suggests that the primary drivers of the
buying center size are the complexity of the purchase process
(Johnston and Bonoma, 1981) and levels of formalization
(Dawes et al., 1998). If the decision is complex and requires a
lot of information gathering, evaluation and analysis the size of
the buying center tend to increase, as more personnel is needed
to perform communicational and transactional tasks (Johnston
and Bonoma, 1981). Formalization is the extent to which rules
and procedures governing the activities of the buying center are
rigidly prescribed (Johnston and Bonoma, 1981). Rigid rules
and procedures require more paperwork, which again increases
the number of personnel that will be involved in the buying
decision (Dawes et al., 1998). Adoption of IoT technologies
will likely affect both the complexity and formalization drivers
of the size of the buying center.
The complexity of many industrial buying decisions may be
reduced by the vast amount of data provided by sensors,
communications technologies and analytical software tools and
algorithms that enable the IoT. As discussed in the previous
section, M2M communication and M2M transactions may
reduce the size of the buying center for the routine repurchases
to zero. The conditions are set for the repurchases ahead of
time and transactions occur automatically, without a human
intervention. In these situations, the complexity is simplified to
a maximum and programmed into the algorithms that are
executed by the machines. For more complex situations, the
data automatically gathered by sensors, downloaded and
sometimes pre-analyzed by computers provide for much easier
and simpler decision-making process. For example, if the buyer
is considering purchasing packaging equipment for a factory,
the sensors embedded into the different parts of the equipment
will gather precise diagnostic information on failure rates, speed
of the line, defect rates and other pertinent information that the
engineers could examine easily and objectively. Previous, labor-
intensive data gathering procedures are eliminated in this
instance, making decision-making process simpler.
As for the formalization of the buying process, the IoT
technologies are highly computerized and certainly reduce the
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
amount of paperwork that should be gathered and compiled.
Even with the existing e-business tools, formalization levels
have been reduced in industrial buying (Osmonbekov et al.,
2002). Armed with information gathered by the machines and
being able to compare side-by-side all the performance
information from different suppliers would enable decision-
makers to consider purchases more objectively, as all
influencers in the buying center are considering the same data.
Because of the digital nature of the information gathered,
including various forms and approvals, the formalization levels
are likely to be reduced in the procurement process that uses
IoT technologies.
From the information processing view, the deployment of
technology to gather and analyze data pertaining to purchasing
criteria enhances information processing capability of the
buying center. It is important to note that the analytical
software that analyzes the vast amount of information from the
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connected IoT devices and presents that information in easy to
understand reports is a critical piece of IoT. Humans would
suffer from information overload if they were bombarded by
raw data of this magnitude. For example, GE developed Predix
and Predictivity analytical software tools to analyze and make
sense of the vast amounts of data that the GE smart devices are
gathering around the clock (Iansiti and Lakhani, 2014).
Without this information processing capabilities, GE would not
be able to provide increased level of service to its customers’
purchasing decisions. These software tools are able to present
decision-makers with information in a format that is easy to
digest and use in a meaningful way. Such increased information
processing capabilities of the buying center may lead to
shrinking of the buying center, as lower number of people is
able to analyze and process more information. To sum up our
discussion regarding buying center size, as the complexity of
the purchase process and formalization decreases and
information processing capabilities are increased in the IoT
enabled procurement process, the number of people that need
to be involved in the buying decision decreases.
Participation
Participation has been defined in previous research as the
amount of communication expended by an individual in its
interactions with the members of the buying center during the
course of the procurement process (McQuiston, 1989).
Participation is thought to predict the amount of influence that
the individual member wields (McQuiston, 1989). Previous
research suggests that the more individual members have at
stake in a given purchasing decision, the more they are likely to
participate in that decision (Patchen, 1974; McQuiston and
Dickson, 1991). As discussed above, adoption of IoT
technologies is likely to reduce the size of the buying center. If
the size of the buying center is smaller, the individual stake and
personal responsibility for the purchase decisions will likely
increase. If we use previous research as a guide, we can
conclude that the participation in the buying center discussions
will be increased due to higher personal stakes. Another
argument for the increased participation is the increased
amount of information to be considered. Information from
sensors, previously unavailable, even in the form of analyzed
reports, has to be shared among the members of the buying
center, thus increasing the amount of participation. So, the
Journal of Business & Industrial Marketing
reduced size of the buying center will increase participation
because of the increased personal stakes and the increase in
information available to the decision-makers will increase
participation because they will have to share and discuss this
information.
Hierarchical level
The formal rank of an employee plays a great role in her
acquisition and usage of procurement information (Ronchetto
et al., 1989). Members of the buying center typically belong to
various departments and functional areas and may be
compensated differently, thus driving their varying roles in the
buying center (Anderson and Chambers, 1985). The
hierarchical and functional level of the members may vary from
very senior managers to plant managers and production and
maintenance technicians to clerks. Researchers found that
buying center members participate in different number of
procurement stages depending on their hierarchical level
(Choffray and Lilien, 1978).
As companies adopt IoT technologies, the amount of
information available to the decision-makers and the ability to
analyze that data increase substantially. This will enable
companies fine-tune their purchasing processes to minimize the
amount of time that senior managers, whose time is arguably
most valuable, are involved in the purchasing decisions. As
discussed before, the routine buying may be performed by the
M2M communication and M2M transactions, where there is
arguably no managerial hierarchy. For more complex
decisions, standardized data reports make it simple for senior
managers to pre-authorize certain purchases to lower level
managers. Steps such vendor evaluation, proposal analysis and
pricing approvals become more data-driven and less judgment
driven, therefore driving the decision-making toward lower
echelons of organization. Previously, for major decisions,
buying centers tended to involve higher-level executives into
the procurement process for political reasons, as the highest-
ranking manager would take the responsibility for the ultimate
purchase. As more product relevant data are readily available
with the IoT technologies, decisions could be data-driven,
making the highly ranked executive “backup” less relevant.
Therefore, the simplification of the process and more data-
driven procurement may lead to flatter hierarchical structure of
the buying center.
To summarize our previous discussion, we advance the
following proposition:
P2. Adoption of Internet of Things will affect buying center
structure in the following way:
 decrease the size of the buying center because of the
reduced complexity of buying, reduced formalization and
increase in information processing capabilities of the
buying center;
 increase the participation because of the reduced size of
the buying center and consequent increase in personal
stake of the members, and more information that need to
be shared among members of the buying center; and
 flatten the hierarchical level because more reliance on
objective information obtained via information technology
and less reliance on authority.
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
Internet of Things and buying center processes
Prior research suggests that the behavioral and attitudinal facets
of the buying center change in response to change in the
business environment (Moriarty, 1983). Adoption of IoT could
become an impetus not only to changes in buying center
structure but also the underlying processes. We propose that
the changes will primarily on coordination and conflict aspects
in the buying center interactions.
Coordination
Coordination is all about managing interdependencies among
various resources and activities (Malone and Crowston, 1994).
Depending on the size of the buying center, the
interdependencies and complex interactions among the
members of the buying center have to be properly managed
(Johnston and Bonoma, 1981). Although different members of
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the buying center could be responsible for different tasks,
invariably and inevitably, they need to coordinate their
disparate activities and tasks (communicational and
transactional) to come to a decision as a DMU. For example, if
a purchasing manager is tasked with comparing prices across
different suppliers, an engineer may be tasked with checking
and comparing technical specifications, etc. While there is a lot
of information processing going on, this information needs to
be shared and communicated with other members of the
buying center. This sharing and communications often does
not occur simultaneously among all buying center members,
but happens in interpersonal dyads (Johnston and Bonoma,
1981).
From the information processing perspective, advanced IT
improves organizational information processing capabilities
(Want et al., 2013) and improves coordination processes within
and between organizations (Malone and Crowston, 1994).
Similarly, the adoption of IoT technologies may help to manage
the complex web of communication and information sharing.
The vast amount of information gathered via sensors, for
example on the performance of the piece of machinery, may be
shared among all the members of the buying simultaneously via
a database. Everyone in the buying center would have access to
the same data and would be able to compare the requirements
for the purchase with the actual performance of that machine.
Coordination is improved because purchasing and other
functions receive engineer’s report in real time, as the
technology makes it faster and easier for the engineer to provide
feedback to the buying center. Purchasing manager would have
access to sensor inputs for the products in transit reporting on
the location of the shipment, as well as its condition. These data
relieve him/her from contacting the supplier or the logistical
function, improving coordination.
Conflict
As mentioned above, buying center is composed of members
that belong to various departments in the firm. In this situation,
due to divergent viewpoints and perspectives that members
bring to the discussion interdepartmental conflicts are often
inevitable (Barclay, 1991; Ding, 1997). In addition, approaches
to solving problems and differences in managing styles often
lead to misunderstandings, anxiety and mistrust (Ding, 1997).
Although many factors affect conflict, Barclay (1991) suggested
Journal of Business & Industrial Marketing
that the main reason for the interdepartmental conflict is
communications barriers between departments.
Adoption of IoT technologies may reduce conflict in the
buying center by improving communication among the
members of the buying center. Access to the same data that is
gathered objectively from the sensors embedded in the
products may reduce the divergent viewpoints in the
purchasing discussions. In addition, the discussions may be less
political and more objective, as the veracity of the data is less
likely to be questioned as it is coming from disinterested and
unbiased sensors and other inanimate and automatic data
gatherers. We would be amiss to suggest that social and
political factors in decision-making would disappear. Instead,
we suggest that the availability of objective data may increase its
use and make the process somewhat less political and therefore
incrementally reduce conflict.
To summarize our previous discussion we advance the
following proposition:
P3. Adoption of Internet of Things technologies in industrial
buying will affect buying center processes in the
following way:
 Incrementally improve coordination because IoT
technologies improve information processing of the
buying center.
 Incrementally reduce conflict because more objective
information is available to all decision-makers.
Industrial buying outcomes
Industrial buying outcomes are typically measured in terms of
efficiency and effectiveness (Osmonbekov et al., 2002).
Following previous research in industrial buying, by efficiency
we mean lower expenditures and faster cycle times in
procurement and effectiveness means higher-quality buying
decisions within organizations (Osmonbekov et al., 2002). The
adoption of IoT technology in industrial buying is likely to
improve both efficiency and effectiveness aspects of
procurement. Two main drivers may be behind these
improvements. First, the technological impact, as superior
technology typically improves efficiency and effectiveness of
firms. Second, the organizational changes in response to the
technology that will affect efficiency and effectiveness of
industrial buying decision-making.
In terms of efficiency, sensors and communications
technology that connect them to the decision-makers enable to,
automatically, gather vast amount of information that is useful
for the decision-makers. Previously, these information-
gathering activities required big expenditure in financial and
human resources. Research surveys, supplier visits, tests and
technical inspections were required that consumed both money
and time. With embedded chips, sensors and communications
technologies, these data gathering processes are automatic and
require little human intervention in the data-gathering process
itself. Although the expenses may occur upfront in embedding
physical objects with sensor and chips, these costs are falling
rapidly and will get more economical over time with inevitable
technological progress, unlike manual processes that get costly
over time. The streamlined structure of the buying center
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
(reduced size and flatter hierarchical level) would be also a
source for cost savings, as firms could employ workers in other
tasks in more efficient ways and the scarce resource of employee
and manager time is allocated more efficiently. Improved
coordination of the buying center activities will enable the
DMU to reach the decisions quicker, again resulting in
efficiency gains.
In terms of effectiveness, the access to more pertinent data
gathered by the sensors about the product/service in question
may enable the buying center to reach higher-quality decisions.
Partial or incomplete information often leads to haphazard
decisions that could be very costly down the road. With more
complete information, gathered through conventional sources
and from the physical devices embedded with sensors and
chips, the buying center will be in position to make higher-
quality decisions. In addition, the changes in the buying center
could also be sources of increased effectiveness. For example,
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lower level of conflict may lead to better purchasing decisions,
as the members of the buying center are working collaboratively
together to solve a purchasing problem. In addition, more
participation in the buying center may also increase the quality
of the decision-making.
Therefore we propose the following proposition to
summarize previous discussion:
P4. Adoption of Internet of Things by industrial buyers will
improve effectiveness and efficiency of procurement
because of reduced costs of information collection and
higher-quality decisions based on more information and
participation.
Internet of Things and data security/privacy
IoT adoption for industrial purchasing will push the existing
standards of transparency in purchasing and supply chain
management. To fully use the advantages of IoT technologies
firms in the supply chain will have to share more information
about their operations with their partners. As discussed earlier,
this information sharing may happen without human
interaction most of the time. As happened with the internet
technologies, the privacy and security issues will be cited as
primary concerns by the early adopters of these new
technologies. As data from all the connected devices, sensors
and microcontrollers are gathered and disseminated across the
supply chain, the security of the data transmission, storage and
encoding protocols will be become a pressing issue for the top
management. Even with the internet data and so-called Big
Data major companies such as Home Depot, Target and Ebay
have had trouble keeping their data secure and private (Forbes,
2014). One can expect that Big Data becomes even bigger with
the adoption of the IoT technologies, as the data centers will
accumulate not only information on millions on customers but
also all the suppliers and every device, sensor and machine that
it connected to the IoT. Hacker groups, hostile governments
and even rival firms may access this information to use in
nefarious ways without proper super-secure infrastructure to
guard this sensitive information. Already, security startups such
as Fireeye and Palo Alto Networks are sporting multibillion
valuations (Forbes, 2014), in anticipation for increased
Journal of Business & Industrial Marketing
demand for security products that would guard IoT super
networks.
In the context of the buying center, firms will need to guard
the information exchanged among supply chain members
within a particular firm and across all firms engaged in
information exchange. Hackers and other nefarious actors find
weak spots in information infrastructure, and with the
increased connectivity may have more targets for attack than
before. The IoT technologies will bring more information to
bear in the decision-making of the buying center, therefore
increasing the information flow within and among many firms.
This increased information flow and exchange may increase the
probability of this information to be intercepted or revealed,
either for malicious purposes or inadvertently by neutral
parties. Such episodes of lack of security and privacy of the
exchanged information may heighten and intensify calls for
more secure communications protocols among IoT devices and
enabling software technologies.
To summarize our discussion we advance the following
proposition:
P5. Adoption of Internet of Things technologies in industrial
buying will intensify privacy and security concerns in
buyer–seller relationships because more information will
be exchanged.
Implications for managers
The long-term benefits of IoT technologies for the buying
organizations may not be completely clear but we could make a
number of preliminary projections. The technologies
may present them with opportunities to achieve cost efficiencies
and higher-quality purchasing decisions. First of all, in
many straight rebuy situations, both transactional and
communication aspects may become increasingly M2M, so
many of these transactions may occur without human
interaction. This transformation will probably increase both the
efficiency and effectiveness of industrial buying. In modified
rebuy and new task situations, the information processing
capabilities of the buying center may increase with the use of
sophisticated information technology, smart devices and
accompanying analytical software tools. However, the whole
idea of IoT rests on the assumption that firms will be able to
integrate many technologies into a sophisticated network of
devices with the accompanying array of analytical and
predictive software shared across buyer–seller networks. But if
the suppliers do not adopt this technology, the potential
benefits may not be fully realized. For example, Wal-Mart’s use
of RFIDs was stalled a while ago because its suppliers did not
wholeheartedly support the roll out of this, at that time, new
and expensive technology (O’Connor, 2014).
Security and privacy concerns always present a big barrier to
adoption of any new technology and IoT technologies will
magnify these concerns (Berinato and Pentland, 2014). As with
any new and emerging technologies, the security and privacy of
the data transmitted among sensors, chips, actuators and
computers are not fully protected yet, as technology standards
are still not fully worked out. Especially sensitive are M2M
transactions that are fully controlled by the machines, where
 Internet of Things
Talai Osmonbekov and Wesley J. Johnston
both communicational and transactional aspects of procurement
may be completed without human participation. If algorithms
are incomplete, not fully thought out, or tampered with by
unethical hackers, the outcomes may be very undesirable and
may wreak havoc in the extended industrial supply chains.
For firms who market to organizations that are integrating
IoT inputs into their purchasing processes, the implications are
threefold. First, because we anticipate the reduction in buying
center size, firms could implement more focused selling
strategies to address a smaller subset of actors than before.
Second, seller firms should pay extra attention to the influence
dynamics within the smaller buying center and provide more
information to each member because of the increased
participation in the buying center and their increased influence
on the ultimate buying decision. Third, flatter hierarchical
structure of the buying center may imply that there is less
likelihood of having one single decider, a senior manager, in the
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buying center. Seller firms’ main priority in this situation may
be to make sure that all objective information derived via
connected devices is transmitted properly and without
interruption to the buyer side and pay equal attention to all the
members of the buying center.
Practitioner organizations such as Chartered Institute for
Procurement & Supply (CIPS) could play a role in discussing
and promoting the IoT technologies usage in the supply chains
to make supply chains more efficient and effective. According
to Cisco, the IoT technologies may produce over $8tn of value
over the next decade, as companies such as DHL and countries
around the world harness these technologies for better
connectedness, more efficient delivery and inventory
management systems (cips.org, 2015).
Implications for researchers
As this is one of the first attempts to examine the impact of IoT
on procurement process, it is intended to generate further
discussion and open many avenues for future research. We
would like to highlight three areas that may be particularly
attractive for business-to-business research. First of all, in P1,
we propose the impact of IoT on communicational and
transactional aspects of purchasing. Future research should test
this proposition using empirical observations, as firms start
adopting IoT and it becomes a way of doing business. In
particular, there may be more complexity and uncertainty in
the real-world application of technology than our proposition
implies. A question could arise as to what extent the companies
will be able/willing to move more transactions into fully M2M
mode? What sectors or industries this mode of transacting
would be more appropriate for? What type of organizations,
both buyer and supplier firms, would be more willing to
attempt to move straight rebuys into the M2M mode? We
could speculate that high-technology sectors may be more
inclined to this mode, as they are more familiar with the
technology and more comfortable relying on technological
solutions. We could also conjecture that larger companies with
higher volume of transactions may have higher incentives to
moving to M2M to gain efficiencies. Future research would be
able to test these conjectures using empirical data.
Another interesting topic to explore would be to see how
much of the available data would be actually accessed and
Journal of Business & Industrial Marketing
examined by the buying center members. This would be only
possible when IoT becomes a mainstay of industrial buying
process. Information processing literature suggests that
decision-makers could be overwhelmed by the amount of
information available and tend to use more shortcuts, such the
brand name or reputation of the supplier, or other information
they consider key, to avoid processing all the information from
various IoT sources. Sophisticated analytical software may
mitigate such avoidance and increase information processing
capabilities of organizations (Wang et al., 2013). In this paper,
we assume that higher amount of and timely information
provided by IoT technologies improves decision-making in the
buying center. However, management theorists suggest that
sometimes decision-makers may have difficulty understanding
information because they possess different cognitive maps to
make sense of information in the same way (Huber, 1991). In
other words, even presented with the same objective and factual
information, the decision-makers in the buying center may
reach different conclusions. It may be more likely to happen in
the context of the buying center where the participants
representing different departments are likely to possess
different frames of reference. We are not aware of research
examining this phenomenon in the context of internet
technologies, and expect that adoption of IoT technologies
would only expand the potential for this type of research.
Another question worth exploring is to what extent power
dynamics in the buying center may be influenced by the new
technology and increased information availability. We suggest
that conflict will decrease and coordination will improve with
the usage of more available and objective data from the IoT
devices. But would the technology and increased use of data
increase the influence of technical personnel (old and new, such
as data scientists), as the nature of the data may presumably be
more technical in nature and require skills that are more
technical in nature? Previous research in internet technology
and industrial buying suggested such an impact theoretically
(Osmonbekov et al., 2002) but it has never been tested using
empirical data. It remains to be an interesting question for
research in the context of IoT technologies of the future.
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Corresponding author
Talai Osmonbekov can be contacted at: Talai.Osmonbekov@
nau.edu