2
In another case, a manufacturing organization was
challenged with a high proportion of single-sourced
SOW projects, leading to pricing inconsistencies
as a result of vendor-developed contracts. The
manufacturer then shifted SOW management to
its MSP. The MSP partner took a collaborative and
consultative approach with stakeholders to create
standardized SOW templates, provided a customized
real-time reporting solution and succeeded in ensuring
85% of contracts were competitively bid.
Such successes don't come easily. Effective
management of SOWs by an MSP requires the
willingness of suppliers to get on board. Certainly
one of the biggest challenges is engaging these SOW
vendors and getting them to see how they, as well as
the buyers, can benefit from a new governance model.
managing SOW suppliers
When you start talking with your MSP about
managing SOW suppliers, make sure you assess the
MSP's real readiness to take on this type of talent
management, especially if you are planning to put the
entire SOW lifecycle into the program.
Many MSPs have experience with the transactional
aspects of SOW management. Far fewer are
accustomed to the more value-added, upstream
activities and relationship management elements.
For example, the skills, tools and acumen for building
harmonious relationships with suppliers (that will
likely be paying a fee to get involved in the program)
are essential in an MSP that will implement a service
procurement, full lifecycle model. SOW suppliers,
even the big four consulting firms, are likely to
see MSP-managed SOWs as a threat, given the
transparency inherent in such a relationship. Certainly
these suppliers will have to accept some changes to
what may be longstanding, direct relationships with
hiring managers.
Some steps that MSPs can take to smooth the
transition for suppliers include:
• Taking care to approach discussions in a spirit of
partnership
• Working together with suppliers on SOW template
drafts
• Selling the benefits suppliers can gain from joining
the program, which include:
– Faster approval processes
– Increased opportunities for suppliers to be
involved in future projects
– More accuracy in invoicing and payment
– Access to actionable sales data
• Selection of providers
• Negotiation and drafting of contracts
• Development of statements of work
• Supplier performance and relationship management
When your MSP takes care of all these functions, aided
by a portfolio of spend management and e-sourcing
technology, including a Vendor Management System
(VMS), your company may reap savings of up to 10%
of spend. And that's not all. Along with reduced
procurement costs, an MSP program can deliver a
number of additional proven benefits, demonstrated
by firms that have already taken these next steps in
talent management. Areas of value include:
• Improved transparency and control over SOW
procurement and management
• Greater pricing clarity and a reduction in cost
overruns
• Greater visibility of demand
• Higher quality talent and improved service from
suppliers
With core experience in managing vendor
relationships, MSPs can create tailored service level
agreements, replete with Key Performance Indicators
(KPIs) and penalty processes. This helps to ensure
adherence to program timelines and milestones, as
well as to ensure quality deliverables. By creating these
KPIs before commencement of a project, an MSP can
secure supplier buy-in and clarity of expectations.
Statements of work can be tricky to develop, with
many pitfalls for unwary hiring managers. MSPs
know how to use appropriate terminology when
writing SOWs to avoid confusion. This is an important
aspect of risk management, which can keep customers
from running afoul of misclassification issues.
In one example, a large telecommunications
corporation was struggling with these very issues on
worker misclassification as staff bypassed the company
procurement protocols to engage SOWs. The Chief
Procurement Officer (CPO) had limited visibility
of expenditure, and the company was exposed to
substantial compliance risks.
By integrating SOW procurement into its program,
the company's MSP was able to put $16 million in SOW
spend – with more than 200 engagements – under
management in the first year of the new program's
implementation. Within two years, the company
had gained full visibility into $80 million of annual
expenditures on service procurement, eliminated
misclassification issues for a savings of $350,000 per
year, and decreased the number of vendors by 27%.
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