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What is Services Procurement?

Organisations procure a variety of external “Services” to keep their day to day business alive. Also referred to as “Indirect” spend, these are typically people-based purchases that are often intangible and do not directly add to the bottom line. These items are characterised by having multiple stakeholders and individuals are likely to perceive differing levels of value depending on the services that they consume and their personal involvement in the buying process.

These are the typical areas of indirect spend:

  • IT (Systems Integration, Support, Consultancy Services)
  • Market Insights (Information or Data supplied by Analysts and News Media)
  • HR (Recruitment Agencies, Employee Benefits, Training & Development)
  • Professional Services (Legal, Insurance, Tax, Audit, Management Consulting)
  • Travel (Air, Rail, Hotels, Car Rental)
  • Marketing (Advertising, Creative, Digital, Print)
  • Facilities (Catering, Utilities, Fleet, Cleaning, Maintenance, Property Management)
  • Logistics (Storage, Mail Services)

In contrast “Direct” procurement is the act of acquiring raw materials and goods for production or onward resale. These purchases are generally done in large quantities and acquired from a pre-determined pool of suppliers at the best possible cost, quality and reliability.

The term “Services Procurement” refers to the collection of processes and interventions that identifies and prioritises user requirements, locates potential sources of supply, negotiates and contracts with selected service providers and then oversees the delivery of agreed outcomes. These processes and interventions will vary depending on the specifics of the service being procured.

What are the key challenges of Services Procurement?

The changeability of needs, budgets and perceived value across an enterprise means that indirect business services are often procured in an inconsistent and fragmented way. In-house procurement professionals will try to exert as much oversight on this spend as possible and they will deploy an array of strategies, policies, tools and governance to achieve this – but it is not easy to get their arms around everything. Organisations without an in-house procurement function will typically see their approach driven by the most influential budget holders and service users.

In either circumstance there are two principle challenges to overcome. The first is being able to access historical spend in sufficient detail to identify where you could/should focus strategic attention. The second is to be sufficiently aware of future requirements so you can maximise any competitive and commercial buying leverage that your organisation may have.

What is a Statement of Work (SOW)?

An SOW is a document that details project/engagement specific activities, pricing, deliverables and timelines for a supplier providing an outcome-based service to their client. During the past few years the expression ‘SOW’ has evolved from its origins as a project management term to becoming misused as the catch all descriptor for a particular type of resource.

The broadening of the term in this way has muddied the waters somewhat within the staffing and workforce solutions industry BUT to keep things simple it should just be remembered that organisations do not buy an SOW, they buy the services covered by the SOW.

You will never find a single business owner for SOW spend within an organisation because as you can see above there are so many different types of services covered by this type of contracting mechanism. For the same reason you will never find a single procurement category owner for SOW spend.

Where should I choose to invest?

The most successful organisations will take a holistic view of their approach to Services Procurement. They will:

  • Implement strategies, policies, tools and governance that are designed to achieve best value benefits and outcomes, rather than rooting their decision making on whatever might represent the lowest price
  • Consider all potential sources of supply and proactively encourage supplier innovation. The business services ecosystem is expanding at a rapid rate and encompasses independent contractors, niche consultancies, project management firms, digital service providers, business process outsourcing firms, mid-large consulting firms, system integrators and technology vendors. Too many organisations  just default to hiring the service providers they have already heard of or previously used. As a result, they barely scratch the surface of their true supply options
  • Take a business centric view of their planned and future expenditure and consolidate requirements wherever it is practical to do so.
  • Optimise the role and contribution of anyone who is involved in procurement activities across the enterprise
  • Fully leverage technology and automation

Successful organisations will invest in a blend of expertise. They will ensure they have sufficient internal capability in those areas which are core to their enterprise and then supplement these resources whenever there is a situational need to do so. Where their needs are not core to the enterprise they may decide to outsource some (or all) of their Services procurement activities.

Why Hays Services Procurement?

Our vision is simple – we want to increase your competitiveness by helping you to better manage your SOW based workforce.

Instead of viewing SOW based services as purely a ‘block of spend to manage’ and narrowly focusing on visibility, control and cost reduction, we concentrate on helping SOW engagement managers to get work done.

Working collaboratively with our client’s procurement function we will make sure that the people with the need and the budget for SOW based services achieve overall best value.

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