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THE ULTIMATE GUIDE TO SOW MANAGEMENT IN 2020

Discover how to create a services procurement strategy that will generate better outcomes, value and competitive advantage.

 

It’s no secret that the use of the contingent workforce has gone mainstream. Organisations across the world recognise the importance of contingent labour in accessing critical skills. Which is why more buyers have established contingent workforce programmes, often outsourced to Managed Service Providers to leverage this critical source of talent effectively.

Progressive organisations are now expanding their contingent workforce programmes to also incorporate Statement of Work based engagements. With several studies suggesting that indirect spend is more challenging to manage effectively than direct spend, these organisations have realised that many of the same principles and benefits outsourced expertise brings to their use of temporary labour can be applied to people-based SOW services too.

By strategically managing their SOW spend organisations can become more productive and potentially achieve double-digit savings.

Sound interesting? Keep reading to learn about the ways your business can implement services procurement best practices and most effectively manage Statement of Work projects.

   
 
 
 

What is services procurement?

What is services procurement?

Services procurement is the process of identifying and prioritising user requirements, identifying potential sources of supply, negotiating and contracting with selected service providers and then overseeing the delivery of agreed outcomes with the third parties engaged to deliver specific outcomes and milestones.

 
 

Why is services procurement important?

 

Why is services procurement important?

The global market for people-based SOW services is worth several $trillion and encompasses all types of non-permanent service providers, from the largest global players through to individual consultants and contractors. Many organisations are now concluding that a more integrated approach to the selection, engagement and output tracking of these services could increase their overall competitiveness. SOW management also provides a great opportunity for in-house procurement teams to positively influence best value and stakeholder experience. Specifically, by:

  • Helping budgets go further and minimising whole life costs
  • Introducing speed and simplicity to the engagement process
  • Assuring project outcomes
  • Leveraging new and innovative supply options
  • Becoming the client of choice
 
 

Services procurement examples

 
 
 

 

Services procurement examples

Every organisation will purchase some kind of services. These could include;

  • IT (Systems Integration, Support, Consultancy Services)
  • Market Insight (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, Cabs, Car Rental)
  • Marketing (Advertising, Creative, Digital, Print)
  • Facilities (Catering, Utilities, Fleet, Cleaning, Maintenance, Property Management)
  • Logistics (Storage, Mail Services)

services procurement strategy

Services procurement strategy

1. Enable the people with the need and the budget

  • Always start with the work
  • Embrace the nuances
  • Practically inform decision making
     

2. Write Statements of Work that are fit for purpose

  • Help both the buyer and supplier by including not only the commercial terms but clearly answering these six core questions; Why? What? Who? How? When? Where?
     

3. Don’t wait till you have all the data, but ensure you apply the right tools and levers

  • There is never a perfect time to start and no off the shelf solution. Procurement teams will add most value by streamlining processes and advising on commercial and contractual considerations
     

4. Become the client that every service provider wants in their portfolio

  • Driving the most value from a supplier depends on equitable relationships and forthright communication. It is also essential to introduce the right feedback loops and have all stakeholders invested in mutual success
     

1. Enable the people with the need and the budget

 

1. Enable the people with the need and the budget

The number one success factor for any services procurement solution is that it must be designed to support the work outputs an engagement manager is responsible for. They should not feel trapped in a one size fits-all SOW factory. Processes should not disproportionately focus on unit costs and worker types, and certainly supply choices should not be artificially constrained.

Always start with the work

An SOW management solution should clearly and practically enable a choice of service provision that can be relied upon to deliver perceived best value for the engagement managers and what they are trying to achieve.

Many people-based SOW needs arise situationally. Organisations can rarely predict the services they are going to need 12-24 months in advance. When it does happen, these needs tend to form part of a large and wide-ranging transformation programme. However even in these circumstances the precise timescales and scope of work will be refined much closer to the actual point of need.

This means that the SOW management solution must be designed with inherent flexibility, so it can adequately support evolving requirements and priorities. This flexibility also needs to be considered across the enterprise as engagement managers themselves do not all fit the same mould.

Embrace the nuances

As value means different things to people depending on their personal role in the SOW engagement decision, it is so important that any comparisons made between service providers, fees, timescales, expertise and deliverables are relative. This means that the buying terrain is very nuanced and needs to be properly understood.

The SOW landscape is going through a radical shift. For example:

  • Many SOW based workers now operate this way as a career and lifestyle choice. They would no longer consider taking a permanent role
  • Traditional services provision is becoming far more modularised – more and more companies see themselves as ‘solution providers’ and incorporate advice within their propositions. As a result, it is often a challenge to level set market offerings and attempting to do this can deter supplier innovation
  • Service providers themselves are going to market with a larger proportion of non-permanent workers. This can create a hidden ‘margin on margin’ situation. The best example of this lies in the strategic consultancy arena, where clients are often blind to how much of their project work is being performed by individuals who could be engaged directly and without the associated overhead
  • The boundaries between spend categories are far more fluid than ever before, and, in some cases, services can traverse these boundaries in one engagement. It wasn’t too long ago that text messaging was bought within the IT or telecoms category. Now it is part of a marketing services campaign. This means that procurement professionals must work together far more laterally across the enterprise if their organisation is going to take full advantage of an SOW management solution.
  • Finally, engaging resources via an SOW is a primary method of addressing legislative changes, such as IR35 in the UK, that focus on disguised employment
     

Practically inform decision making

A decision tree is an important element of a SOW management solution and it should inform engagement managers at the point that they first identify a need for SOW based support. Many decision trees, often delivered via a set of automated rules, merely represent ‘traffic management’ and they end up disproportionately focussed on enforcing procurement policy.

A best practice decision tree will offer genuine value within an enterprise and it will prompt engagement managers to consider their needs through the following lenses. Each of these lenses could represent a different type of SOW based resourcing solution:

  • “We don’t know where we are” your engagement managers will be looking for SOW based expertise to provide an objective assessment of their status, performance and prospects
  • “We don’t know what to do” your engagement managers will be looking for SOW based expertise to support them in developing direction and/or defining a strategy
  • “We know what to do but we don’t know how to do it” your engagement managers will be looking for SOW based expertise to support them in shaping an approach/defining and mobilising a change initiative of some sort
  • “We know what to do but we don’t have the capability to do it” your engagement managers will be looking for SOW based expertise who has the resources, skills or experience not readily available to them internally to deliver an agreed piece of work
  • “We know what to do but we want to assess the risk” your engagement managers have decided/embarked on a course of action but need SOW based expertise to provide additional validation or assurance
     

A well-designed decision tree will also take full and appropriate account of global differences. Countries and regions can apply different definitions, laws, policies and commercial guidelines around how organisations should engage and deploy SOW based workers. There may also be differences in how disputes can be resolved.