Businesses are trying to achieve optimal efficiency and value within their different service categories. Unfortunately, this is far from easy. Especially in today’s business environment, where many organizations are shifting from the hiring of permanent employees to high-knowledge SOW workers (also known as Gig workers) on a project-by-project basis.
Services procurement is defined as the process of requisitioning people-based services in a strategic way to serve a specific purpose and can be broken down into five main categories, including travel & expenses, recurring services, services invoicing, contingent labour and professional Statement of Work (SOW) services. Each facet is essential and requires accurate management. However, one category has continued to prove itself the next major savings opportunity in enterprises. Professional SOW services.
SOW services can be defined as services that are based on project scope and estimate-based spend. In today’s workforce, these services are typically comprised of:
IT consulting
Advertising
Large IT projects
Finance
Legal services
SOW and services procurement “represent the biggest opportunity for the modern Contingent Workforce Management program, as it is the largest area of contingent labor spend and volume within most organizations,” according to Ardent Partners. SOW procurement management has since become so common that according to Randstad Sourceright, 46% of companies surveyed globally are already exploring ways that these services can be incorporated with the rest of their services procurement strategy.
In addition to keeping up with your competitors, SOW services procurement must be accurately managed against budgets within a department and across an organization to ensure no overages occur. This has become a greater concern during the COVID-19 pandemic in which businesses have begun to ask, “which suppliers are in the best position to deliver the services we need virtually?” and with changing circumstances “have any services been cancelled due to budget cuts?”
Some businesses have attempted to tackle these concerns by assuming that SOW services can be managed in the same way as the rest of their temporary workforce. However, unlike temporary workers that are tracked hourly and have predictable pricing, consultants' rates are typically not reusable as deliverables may be vastly different between projects. As a result, managing professional services typically requires more individualized contracting requirements, complex automation functionality and detailed reporting capabilities than a solution targeted at contingent workforce management. Therefore, a solution that centralizes the approach to professional SOW services procurement is necessary since these services need to be actively accounted for in corporate budgeting, planning or forecasting along with other forms of services spend.
Since this area of procurement is one of the most significant categories in terms of human-capital expenses, it is no wonder that businesses are quickly realizing savings when they put a strategy behind their management.
Centralized management provides your team with the opportunity to deliver value across your entire organization. In many cases, this is an elusive spend category with teams operating in silos when engaging with a supplier. Therefore, a more systematic approach is needed to understand how your team is currently using this group of non-permanent employees. Patterns can be identified by determining the type of work they are doing, any relevant engagement patterns, and how the suppliers are being managed.
Your Chief Human Resources Officer (CHRO) can likely breakdown SOW engagement types by:
Project-by-project: Focused on a predetermined deliverable that a team will work on and be paid by milestone, which may be withheld based on overall project completion
Independent contractor: Focused on a predetermined deliverable that an individual will work on for a set period
Offshore agreements: Resources are hired to work on a key deliverable and are tracked and managed by a separate organization
Business services: Hourly-based work that stakeholders are engaged with on an “as needed” basis
Managed program: An agreement for a supplier to provide a la carte services when needed
Business process outsourcing: Hiring or the expertise for an entire business function a business is not proficient in
Each business is unique and may require a different combination of these SOW service engagements. Determining which type of arrangements are used the most often will provide the basis for a services procurement strategy.
As previously mentioned, cost savings are one of the major reasons why any business would consider investing in a strategic procurement solution. But any smart Chief Procurement Officer (CPO) needs to know what factors will drive the ROI. Here are some of the key areas in which savings are introduced:
Procurement leaders gain a complete view of all SOW services (in addition to contingent workers) deployed on and offsite, what their roles are and what their labour is costing the business. Costs can be compared to ensure departments are paying the same rates for the same work completed and that the best contractors are being used for the job.
Insights into previous bids and comparative evaluations can ensure the best vendor is being used and a professional SOW worker that wasn’t a good fit isn’t used again.
A more cohesive data solution ensures decisions can be made quickly with real-time data. This is especially true when connected to an ERP system like SAP to provide all relevant information needed for accurate decision-making.
More transparency ensures teams can be held accountable to contract terms and payments will be as specified in initial budgeting. Well documented SOWs can also be easily referenced in alignment with delivery expectations at each interim milestone of the project to determine if a supplier is adhering to the success terms outlined in the initial documentation, which then can be validated and paid for
With these benefits in mind, what does implementing a solution look like for those who are already running SAP?
By implementing a third-party solution, businesses can benefit from simplified services procurement by tracking time, materials, and costs to verify that suppliers are meeting service-level agreements (SLAs). The ConvergentIS Services Procurement Portal solution is made up of several SAP certified applications that come out-of-the-box and can be easily deployed to a S/4HANA or ECC backend. Looking more closely at the ConvergentIS suite of solutions, the Services Receipt applications allow teams to speed up the process of recording and approving services and materials. These can be used in conjunction with Worker Profile Management applications to allow a manager to view all people on the project from a single view as a team – whether they are employees, SOW professionals or contingent workers.
Since minimal custom development is needed (add-ons are made to the base solution) costs are less and ROI can be achieved more quickly. Businesses can also continue to add additional procurement apps to build a full-fledged procurement solution under one launchpad.
To learn more about how the rest of your procure to pay process can be optimized we encourage you to download our free guide.