If you are a HR or procurement professional in charge of contingent workforce and services (CW/S) spend, then you’ll already know how complex a subject it can be. Visibility into these costs is crucial to your company’s bottom line.
CW/s spend has only become more complicated with the growth of statement of work (SOW) spend.
SOW spend is very different to traditional contingent labor spend, which looks at time and material. Statement of work also differs hugely from this traditional temporary labor spend in that there are a vast number of different types of SOW spend, with many different responsibilities across different departments.
So, what exactly is SOW?
SOW is a formal document that is used by an employer to explain the expectations of a service provider, including the deliverables, timelines, work activities and projects, as well as payment for the work being performed.
It is used for a group of established, and emerging, outsourced solutions that address your company’s needs to source and manage services from a range of different suppliers and vendors.
These services could include anything from marketing, advertising, IT infrastructure management, call center solutions and staffing agencies.
SOW spend dwarfs traditional contingent labor spend significantly, with experts claiming that an enterprise’s spend on services may range from two to six times that of contingent workforce spend.
Despite the sheer scale of this spend, the procurement of services is still a new discipline for most organizations today - and many struggle as a result. These services are not exclusively sourced under the time and material engagements of traditional contingent labor spend, meaning SOW spend is often hidden and fragmented.
Why is managing SOW spend such a problem for companies?
The sourcing and management of services is more often than not split across multiple departments, all of which have varying processes and management techniques.
Not only that, but SOW spend is typically managed by ad hoc tools and spreadsheets, rather than one company-wide solution that gives full visibility into spend. These inefficient practices mean most organizations do not have a SOW management software implemented, and even if they do it’s ineffective and costly.
An efficient management strategy should be implemented across your entire company, and include steps such as; identifying and selecting appropriate service providers where needed; supplier on-boarding; tracking supplier performance; invoicing and payments; spend analysis and much more.
What is the solution?
Traditionally, the use of ad hoc tools came largely down to a gap in the software available - there has simply been no fit-for-purpose technology solutions that help enterprise firms manage SOW.
However, this has changed within the past couple of years and now some vendor management systems (VMS) have expanded their functionality to source suppliers and manage SOW spend.
When it comes to SOW, a VMS can help your business:
- Source, onboard and manage service providers.
- Develop, negotiate, execute and manage SOW contracts.
- Monitor and manage every aspect of a service providers lifecycle, from the overall project to the delivery.
- Process invoices and payments to service providers.
- Track and analyze overall SOW spend to ensure you cut costs and improve your bottom line.
- Receive important data, metrics, report to analyze service provider performance.
An efficient SOW management program will help your company cuts costs, optimize the efficiency of SOW and improve employee visibility. Organization, automation and the use of innovative new technologies, however, is essential.
If this is an area of your business that you are struggling with - or perhaps if you are unaware if it’s a problem or not and want to find out - a vendor and technology-neutral managed service provider (MSP), such as HCMWorks, can help.
Want to find out how we can create a tailor-made SOW management strategy that is specifically designed to meet the goals of your business? Contact our team of experts today to find out more.