better process rigor, transparency, and cost efficiency are just some of the reasons why organizations should look to incorporate SOW into programs
The marketplace for Managed Service Programs (MSPs) has come a long way since its early days. If you look at a number of current programs for managing contingent labor, the scope of service has radically expanded beyond the first-generation drivers that brought buyers and solutions providers together. The most mature MSPs now deliver a host of value-added services aimed at optimizing process efficiencies and spend, ensuring compliance at all levels, and delivering the kind of meaningful analytics and insights that help contingent workforce owners make a business impact.
integrating statement of work (SOW) into your managed service program (MSP)
One of the most exciting yet underdeveloped aspects of the market is the incorporation of statement of work (SOW) labor into MSPs. Traditionally managed outside of most programs, SOW represents an enormous opportunity to achieve cost savings and better accountability for this significant spend. According to Staffing Industry Analysts, SOW spend managed through MSPs rose from $7.3 billion in 2012 to $11.7 billion in 2013, a 61% increase; in North America, growth was even higher during this period and jumped 74% to $9.7 billion. An SIA survey of North America contingent labor buyers indicated that 54% now incorporate SOW in their contingent workforce (CW) programs.
With such a high percentage of companies reporting they now manage SOW through their CW programs, it’s surprising to see such robust growth, which typically indicates a less mature practice. Confounding? Not really. The truth is that the level of SOW integration varies greatly by program, which means the impact of “integration” fluctuates from minor to meaningful. Most companies have simply made cursory attempts to involve their MSPs; others have charged their service providers with taking a much more active role in defining, validating, and managing the deliverables.
Our experience shows that integrating SOW into the MSP can result in significant cost and efficiency gains. There are other key benefits as well; in fact, there are six great reasons why you should consider incorporating SOW arrangements into your MSP. They are:
- Ensuring selection of the best supplier
- Process control and lifecycle transparency
- Mitigation of contract leakage
- Better tracking of SOW worker compliance
- Holding suppliers accountable to result
- Potential savings of 10-20%
how are these benefits achieved through the MSP?
Because SOW spend is often decentralized, huge inefficiencies are created. The very nature of an MSP is to continually improve process rigor, increase transparency, and help program managers eliminate ad hoc and rogue spend. By enabling line managers to choose the best supplier for the project, track and measure the deliverables, and hold suppliers accountable for outcomes, MSPs drive excellence in the SOW relationship. Furthermore, more transparency also enables the organization to better conduct workforce planning.
Some of the key ways in which MSPs help clients accomplish better results is by:
- Collaborating on determining whether professional contractors or consultancies are most effective for the work
- Automating and standardizing SOW creation
- Securing contract terms and conditions
- Tracking resources, reviewing and approving project milestones, and managing budgets
- Executing project performance measurement
- Controlling on- and off-boarding protocols
The level of MSP involvement varies across the industry. Some service providers are simply asked to upload the document into the VMS after the line manager has defined the deliverables, chosen the supplier, and negotiated the terms. Other MSPs are brought into the process at an earlier point, perhaps playing a role in drafting the SOW, vetting suppliers, and tracking progress. How each organization involves its MSP depends on a number of factors including project type, complexity of deliverables, company culture, comfort level of line leaders working with a service provider, and others. However, one thing is clear: The more involved an MSP becomes, the greater the potential for savings and project success.
For contingent workforce managers, incorporating SOWs is not an easy task. Convincing hiring managers to use an MSP for their temp hires can be challenging by itself. When it comes to SOW labor, which typically involves professional, higher-skilled workers in a more complex relationship, line leaders may be even more hesitant to involve a third party. However, by clearly communicating the value to them and to the organization, program managers can build any SOW relationship on a more robust and accountable foundation, which will always lead to a better outcome.