incorporating SOW into a MSP
In the first article of this series, we explored the growth in SOW procurement and why it makes sense to incorporate it into a managed services program (MSP). In this installment, we take a deeper look at the SOW strategic imperative, considering the different engagement models and focusing on the involvement of SOW suppliers in an MSP.
If your MSP currently has no integration with SOW talent acquisition and management in your organization, there’s potentially money left on the table. According to Everest Group Research, involving your MSP in the transactional elements of SOW management can net savings of an average 4% to 6% of spend. That’s no small sum for companies spending millions of dollars on projects every year. The savings are generated through an MSP’s ability to centralize and automate SOW administration activities, such as:
- requisition and approval workflows
- candidate tracking, interview scheduling and worker onboarding
- centralized billing and supplier payments
- offboarding activity
- headcount tracking
An MSP with the appropriate technology, specialized expertise and experience in holistic talent management can offer companies a much broader scope of service provision. Such a provider can manage the entire life cycle of multiple SOWs, serving in a more strategic capacity and mitigating much of the risk involved in SOW utilization.
generating greater gains.
Just how extensive is the value that MSP management of SOW can deliver? Consider the benefits of a specialist partner taking ownership of the following procurement and HR management roles:
- rationalization of demand
- sourcing strategy
- identification of providers
- RFx management
- 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
- broader 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 (SLAs), replete with key performance indicators (KPIs) and penalty processes. This helps to ensure adherence to program timelines and milestones, as well as 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%.
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
- ensuring the VMS solution is set up to streamline processes for suppliers, as well as clients
- remaining sensitive to existing relationships between suppliers and stakeholders in the client organization
Most importantly, MSPs and suppliers should recognize that total talent management will become a business imperative for any company utilizing a mix of internal staff and contingent workers. By working collaboratively to ensure programs add value for clients, suppliers will be able to attain growth in the volume of quality engagements and, ultimately, reduce their cost of doing business.
the influence of total talent management on the CPO role.
As an organization heads toward a holistic talent model, the CPO role will grow as it evolves into a procurer of talent rather than outsourced labor. The CPO will need a greater handle on the drivers of talent acquisition and management, in addition to the expected knowledge of spending mechanics and strategy.
An MSP’s success lies not only on the shoulders of the service provider, but also on internal leadership. As the service provider becomes more involved in SOW management, it will also require leaders to work more closely with the MSP to continually deliver greater value to their stakeholders and internal customers. Leaders should be prepared to address the following aspects of talent management strategy:
- change management (if you are a CPO, you understand suppliers, and that’s who will be influenced most strongly by the changes)
- targeting talent acquisition for overall value, rather than best price
- fostering greater alignment between the leadership function and others within the organization
- utilizing VMS data, and that of the MSP’s analytics tools, to drive decisions
In the final article of this series, you’ll find out more about how MSP management of the SOW strategy can impact the enterprise, as well as the steps to building a business case and facilitate a smooth implementation by steering clear of potential roadblocks.
Meanwhile, you can read some of our customer stories to learn how Randstad Sourceright has helped companies like yours improve their talent acquisition and management results.
> read the next SOW article: the business case for MSP control