Services Procurement - SOWs Best Practices

© PeopleFluent 2014

Services Procurement – SOWsBest PracticesFebruary 2015

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2© 2014 PeopleFluent | Confidential Services Procurement

• Session Overview• Introductions• Presentation:• SOW Landscape• Best Practices• Getting Ready• Process

• Q & A

Agenda


• Within VMS industry, SOW spend under management has grown 74% since 2012*

• Savings potential for SOW-based spend is 10 to 20 times higher than staff augmentation

The Growth of VMS/SOW

*Staffing Industry Analysts, 2014 VMS and MSP Landscape


Why Manage Services?

VisibilityCost Savings

Risk Mitigation

Fiscal Controls

Operational Controls

Supplier Management

Supply Chain Optimization


Visibility

Only 30% of enterprises currently have the ability to track performance of SOW based labor and services against predetermined and agreed-upon delivery dates and milestones.

Ardent Partners- State of CWM, 2014

SOWSOW


• Cost savings• Risk mitigation• Fiscal and operational controls• Policy compliance• Supplier management• Supply chain optimization

With Visibility…


SOW-basedSkill-based

Medium to high riskSpend management

Services

ConsultantsSpecific expertise

High riskCompliance

management

Independent Contractors

Staff AugmentationTransactional

Low riskSupplier management

Temporary

Broad View of Contingent Workforce


• Complex Contingent Spend• Process outsourcing: application services, infrastructure management

and BPO• Consulting: IT and management• Professional services: tax, audit and legal, as well as various

specialized services projects.

• BPO and Consulting are the most common SOW-based services spend under management and have the highest levels of supplier and buyer adoption.

Services


SOW Landscape

SUPPLIERS

$

10 to 15% of spendLargest number of transactions

75% of spend and upSmallest number of transactions

15 to 20% of spend

Strategic/Consulting ServicesIBM, Big 4, ERP

Tactical ServicesSupport & Operational Contracts

Discretionary ProjectsIT, Niche Suppliers, ICs


Goals

Drive Projects

Recurring/Non-recurring activity

Utilize expertise

Capabilities

Single MSA

Tracking

Analytics

Compliance

Metrics

Milestones met

SOWs that are service-based

Projects budgeted

Index

Solutions

VMS

SMS

Integrations

Create a Foundation


• Build a committee and educate/enlighten• Procurement – SOWs • Finance and AP– accruals, reconciliation, invoicing,

budgets and payment process• Legal – SOW standards mean less disputes• HR – tracking, compliance, quality• IT – both client and service provider• Business units – identify power users• Executive sponsorship

1. Enlist Support


2. Know Your Business

Understand what your organization is using SOWs for todayand then design the tactical processes that will increase visibility, efficiency, and cost savings while reducing risk.

• Identify Projects, ICs and Services• Determine if there are (or should be)

deliverables• Determine if there are (or should be) SLAs• Identify recurring payment services


1. Create SOW• Role/Permission Based• Configurable Approvals• Create SOW• Attach RFP & Support Docs

8. Off-Board Contractors• Finish Notifications• Reporting & Analytics• Security Badge Deactivation• System Logon Deactivation

2. Source Bids• Provider Distribution Controls• Budget / P.O. Controls• Time & Date Stamp

7. Billing and Invoicing• Pay Provider• ERP Feeds & Extracts• Audit & Adjustment Support

4. Engagement Management• Milestone/Deliverable Management• Cost Center, G/L, Project Code Support• Manage Change Requests• Manage Budgets / Burn Rate

3. Award Project• Review/Rank/Score Bids• Select Provider• Finalize Milestones• Create Payment Schedule• Define Payment Schedule

Analytics

6. Time & Expenses• Time & Expense Capture• Milestone Capture• Invoice Approval

5. On-Board Consultants• On-Board Consultants• Compliance Manager• Security Badges• System Provisioning

3. Work the Flow


4. Design for Everyone

• End User• Business• Procurement • Audit• Executive• Policies and Processes• Risk Management


• What are your costs?• % spend of SOW to staff augmentation• Average cost per SOW (normalized, per hour)• Cost Index (actual / awarded = index)• Spend per SOW vendor

• Soft costs• What is the process today?• How much management time does it take?

5. Set the Baseline


• Revise internal purchasing policies, approval limits, processes

• Source labor categories to establish supplier base

• Create standards

6. Develop Standards

• Deliverables• Milestones• Pricing• Payment terms

• Requirements• Timelines• Change control• Governance


7. Measure Everything

• Everything• From RFx to award• Measure cost (Total / time = hourly, overage) • Measure quality (change orders, rework)• Measure commitment (response to RFx, awards,

terms) • Achievement Index• Awards/RFx Responses = Index• Total $ Spent / Total $ Awarded = Index


• Supplier Scorecards• Share all of your data• Select key performance indicators• Hold quarterly review meeting with supplier

• Invite only those who are accountable• Account manager, recruiters

• Review against previous quarter’s scorecard• Set action items over next quarter

• Hold an annual meeting with all suppliers• Share comparison data

What Should You Measure?


Comparing Services Workers to Contractor bill rates on Case study top 5 roles

Business Ana-lyst

Sr Project Manager

Software Engineer

DBA Production Support Specialist

0

25

50

75

100

125

• Services Workers, those workers associated to statements of work on average had 44% high bill rates than their staff augmentation average• Specific examples of the same

worker transitioning from contractor to SOW were able to be cited and tracked for leadership and reclassification

• Eventual reclassification of staff augmentation on 15% of the statement of work, yielded $1.7M in savings

Spend Misclassification Example


FinancialManagement

RiskMitigation

VendorOptimization

ProcessEfficiency

AdoptionManagement

Rate Intelligence

ProgramScalability

Managing the Process


Compliance

Process Optimization

Visibility

Payment Management

Benchmarking

Bidding

Discounts

Performance Management

Review Process

Competition

Negotiation

Supplier Management

0 0.5 1 1.5 2 2.5 3

Savings Opportunities

SOW Process Savings


According to recent research*, the vast majority (77%) of enterprises believe that total talent management will be a widely-adopted approach for managing all enterprise talent, both traditional and non-traditional under a centralized program.

One More Poll…

*Ardent Partners, State of Contingent Workforce Management 2014

Total Talent Vision for Tomorrow


Questions…

TM

© 2014 PeopleFluent | Confidential Talent Insights. Business Outcomes.TM

ThankYou

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