Improving public sector IT service procurement – A qualitative case study

Thumbnail Image
Journal Title
Journal ISSN
Volume Title
School of Business | Master's thesis
Degree programme
Information and Service Management (ISM)
This thesis aims to determine leading IT service purchasing practices for the public sector which can make the procurement selection process more efficient from a long-term value perspective. Services is the largest sector in the economy and its trade is growing rapidly especially in IT services. The public sector is a major procurer of services. Public organizations must comply with EU directives on public procurement which seek to ensure that goods and services are acquired at competitive prices. However, these directives make managing the public procurement selection process costly and inflexible. The most recent act on public procurement, the Act on Public Procurement and Concession Contacts (1397/2016) entered into force on January 1, 2017 and provides new possibilities for improving the public procurement selection process regarding IT services. These possibilities have not yet been studied. This thesis therefore studies these new possibilities enabled by the Act as a qualitative case study providing sufficiently detailed data for concrete actions for practical improvement in the selection process for the procurement of IT services. The thesis consists of a theoretical part, the findings of which create the background for the procurement document analysis of the case organization, and for the interviews of public procuring entities and IT suppliers in the empirical part, thereby enabling the empirical results to be compared to the wider context. The results of the theoretical and the empirical parts show that there is no single selection method that fits all IT service procurements. The most appropriate procurement procedure depends not only on the uniqueness and complexity of the information system or IT service, but also on the market situation and the public entity’s own preferences like supplier strategy. However, everything begins with studying the need and market knowledge. These are fundamental prerequisites for successful IT-procurement. The most recent act offers new procurement procedures for the public sector which allow closer cooperation with suppliers. The importance of co-operation is emphasized in the literature and in interviews in this thesis because it ensures higher long-term value. However, this study shows that public entities lack the practical knowledge of these new procurement possibilities. The thesis provides practical tips and a recommended tool for the selection of the appropriate IT-procurement method. Public entities can also improve IT procurement by sharing knowledge among each other. Furthermore, it is essential that there are specialists who focus on IT procurements. Otherwise, no special knowledge accumulates, and this would result in inefficient procurement. Public entities should also actively utilize feedback from different IT suppliers to improve IT procurement efficiency. To achieve the best results, sharing of sufficiently accurate information with IT suppliers and even advertising IT procurements are required. The dialogue with IT suppliers and the appropriate supplier strategy ensure the achievement of the most appropriate IT solution in the long-run. Successful IT service procurement must ultimately be a win-win situation for both sides in practice.
Thesis advisor
Kauppi, Katri
Rinta-Kahila, Tapani
public procurement, IT procurement, IT service procurement, ICT procurement, ICT service procurement
Other note