Optimizing indirect procurement in technology startups: The case for centralized indirect purchasing strategy
Gritcuk, Alesia (2024)
2024
All rights reserved. This publication is copyrighted. You may download, display and print it for Your own personal use. Commercial use is prohibited.
Julkaisun pysyvä osoite on
https://urn.fi/URN:NBN:fi:amk-2024051813174
https://urn.fi/URN:NBN:fi:amk-2024051813174
Tiivistelmä
To support daily operations of every company there is a need to engage in indirect purchasing activities. This research is a qualitative case study which focuses on the technology startups and their indirect procurement purchasing strategy. This research aimed to identify prospective benefits and overall fit of centralized indirect procurement strategy for technology startups. For this research, five companies and their representatives were interviewed. The constructive output of this research are empirical observations from the technology startups about which procurement approaches are in use and deep dive from the technology startups which have optimized indirect procurement through the centralized indirect purchasing strategy.
The theoretical framework of this thesis was created by studying relevant literature in the field of technology startups and indirect procurement, challenges and opportunities of centralized procurement including how indirect procurement function could become strategic. The theoretical part offers insight into the challenges of technology startups and relevance of the indirect procurement function.
The empirical part of this research was done during March 2024. The interviews were conducted using a semi-structured interview method. As a secondary data point has been used unstructured online observation. The approach for the primary data analysis was thematic, which aimed at identifying patterns and themes that could be recognized from the raw interview data.
The findings of this research shows that there are technology startups that have acknowledged benefits of the procurement department as a strategic advantage for the company and have adopted centralized procurement strategy to leverage economies of scale, benefit from the cost optimization, compliance and risk management, specialization and expertise. There are as well technology startups that are not having a dedicated indirect procurement function within organizational structure and responsibility for the purchasing of services and needed equipment/tools is staying decentralized across departments.
Overall centralized indirect procurement fits to the technology startup business development and brings a lot of competitive advantages and cost savings. It is still important to highlight that centralized indirect procurement is not a remedy and those startup companies have had to be prepared to invest funds in hiring professional procurement resources, getting procurement softwares, to enable procurement function to become a strategic business unit and provide most of its potential. If technology startups still do not feel ready for introduction of the full scope procurement function there are still measures that could be taken to partially obtain benefits of the procurement professional through engaging with a consultant for the negotiations of the big company deals (for example contracts for the infrastructure).
The theoretical framework of this thesis was created by studying relevant literature in the field of technology startups and indirect procurement, challenges and opportunities of centralized procurement including how indirect procurement function could become strategic. The theoretical part offers insight into the challenges of technology startups and relevance of the indirect procurement function.
The empirical part of this research was done during March 2024. The interviews were conducted using a semi-structured interview method. As a secondary data point has been used unstructured online observation. The approach for the primary data analysis was thematic, which aimed at identifying patterns and themes that could be recognized from the raw interview data.
The findings of this research shows that there are technology startups that have acknowledged benefits of the procurement department as a strategic advantage for the company and have adopted centralized procurement strategy to leverage economies of scale, benefit from the cost optimization, compliance and risk management, specialization and expertise. There are as well technology startups that are not having a dedicated indirect procurement function within organizational structure and responsibility for the purchasing of services and needed equipment/tools is staying decentralized across departments.
Overall centralized indirect procurement fits to the technology startup business development and brings a lot of competitive advantages and cost savings. It is still important to highlight that centralized indirect procurement is not a remedy and those startup companies have had to be prepared to invest funds in hiring professional procurement resources, getting procurement softwares, to enable procurement function to become a strategic business unit and provide most of its potential. If technology startups still do not feel ready for introduction of the full scope procurement function there are still measures that could be taken to partially obtain benefits of the procurement professional through engaging with a consultant for the negotiations of the big company deals (for example contracts for the infrastructure).