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HCMWorks Insights

How to Better Manage SOW Spend and Improve Employee Visibility

Posted by Julia Fournier on 12 Oct 2018

In one of our recent blogs, titled “What is SOW and How can Sow Management Benefit my Contingent Workforce Program”, we explained exactly what statement of work (SOW) is and how it can benefit your company’s contingent workforce program.

Simply put, SOW is a formal document that is used by an employer for outsourced services. It explains the expectations of a contractor, including the deliverables, timelines, work activities and projects, as well as payment for the work being performed. 

This is not a legal contract. A SOW is created simply to ensure non-permanent workers understand the exact needs and expectations of the work they are undertaking.

This may sound fairly straightforward, and really creating a SOW is. However, managing your SOW spend and creating an efficient SOW management program that cuts costs, optimizes efficiency and improves employee visibility is a completely different ball game. It requires organization, automation and innovative new technologies.

Managing SOW spend is different to traditional contingent labor spend

SOW spend is very different to traditional contingent labor spend, which looks at time and material. Statement of work differs hugely from this traditional temporary labor in that there are a vast number of different types of SOW spend, with many different responsibilities across different departments.

To make it even more complex, when it comes to Services procurement, a large portion of your company’s total external human capital expenditures comes under the form of SOW spend. When it comes to Services procurement, SOW spend dwarfs traditional contingent labor spend significantly. It can represent as much as 80 per cent of an organization’s total human capital spend (compared to contingent’s 20 per cent).

Organizations, however, often forget that these workers are not exclusively sourced under the time and material engagements of traditional contingent labor spend. As a result, SOW spend is often hidden and fragmented.

It’s an essential part of any contingent workforce management program that all non-employee workers are visible, managed and accounted for. If not, an organization could be wasting significant money on rogue spend.

Full visibility cuts costs and improves productivity

SOW spend has become complex, and now includes everything from tactical services vendors such as facilities support and maintenance, to highly strategic agreements with partner suppliers such as consultancies and outsourced vendors, to staffing firms and managed services providers (MSPs).

Unfortunately, many organizations are failing to gain the visibility needed for strategic services spend as they are using fragmented technologies and processes to enable SOW management. This results in lost profits, unorganized management systems, employee misclassifications and reduced efficiencies.

It’s often the case that managers of large organizations will use SOW to bypass the formal contingent workforce program policies in place, but this can result in higher bills and increased risk.

SOW spend needs to differ from traditional labor spend, and combining technology with a company-wide strategy is really the only way for this to be truly effective.

What technology will help?

So, how do you actually achieve the proper management of SOW spend? A vendor management system (VMS) offers the foundation your company needs to support the successful management of SOW spend.

A VMS with specialized SOW capability will help your company create a strategic plan that makes your spend on practices, workers, processes and software clearly visible. In turn, this will help you to make strategic decisions on where your company can be more efficient, where you can save money and where you can spend more money for optimum return on investment (ROI).

This isn’t an easy task. Planning, selecting, designing and implementing a successful SOW management program requires a knowledgeable partner who has past experience of successfully setting up SOW management processes.

Some managed service providers (MSPs), such as HCMWorks, offer a 100 per cent vendor and technology-neutral service. This means that the company will tailor-make a SOW management strategy that is 100 percent geared towards your goals and expectations, with no hidden agenda on which service providers you choose.

The benefits of a formal SOW management program are great. Your company will be empowered to hire top talent on a project-by-project basis, giving you access to specialized skills when needed and allowing you to create an agile workplace to fulfill your overall objectives.

However, SOW has a growing influence across procurement and as a result is becoming increasingly complex. Without a well-thought-out strategy, you could soon find your SOW spend is undermining its benefits.

Want to learn more about managing your SOW spend for cost savings and optimum efficiency? Contact HCMWorks today.

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Tags: Rogue Spend

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