Indirect procurement
Indirect procurement purchases goods and services that support business operations but are not incorporated into end products. It includes categories like IT, facilities, travel, professional services, marketing, and office supplies.
Examples
IT services sourcing: Procurement manages contracts for cloud computing, software licenses, telecommunications, and IT support services that enable business operations across the organization.
Facilities management: Sourcing cleaning, security, maintenance, and utilities contracts for office buildings—essential services that keep operations running but don't appear in product cost structures.
Professional services: Managing relationships with consulting firms, legal advisors, and temporary staffing agencies through master agreements that standardize rates and terms across the organization.
Definition
Indirect procurement typically accounts for 15-30% of revenue across industries. While individual categories may be smaller than direct materials, the aggregate represents significant spend that often receives less strategic attention.
The characteristics that distinguish indirect include: diverse stakeholders across the organization, service-oriented categories that are harder to specify, consumption patterns driven by employee behavior rather than production schedules, and fragmented spend across many suppliers and transactions.
Common challenges include: maverick spending by stakeholders who don't see value in using procurement, difficulty demonstrating savings in categories where demand fluctuates, and managing large numbers of relatively small suppliers.
Tail spend—the long tail of low-value, high-volume transactions—is predominantly indirect and represents a significant efficiency opportunity for automation and consolidation.
Previous
*GARTNER is a registered trademark and service mark of Gartner, Inc. and/or its affiliates in the U.S. and internationally, and COOL VENDORS is a registered trademark of Gartner, Inc. and/or its affiliates and are used herein with permission. All rights reserved. Gartner does not endorse any vendor, product or service depicted in its research publications, and does not advise technology users to select only those vendors with the highest ratings or other designation. Gartner research publications consist of the opinions of Gartner’s research organization and should not be construed as statements of fact. Gartner disclaims all warranties, expressed or implied, with respect to this research, including any warranties of merchantability or fitness for a particular purpose.