services procurement - sows best practices
TRANSCRIPT
© PeopleFluent 2014
Services Procurement – SOWsBest PracticesFebruary 2015
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2© 2014 PeopleFluent | Confidential Services Procurement
• Session Overview• Introductions• Presentation:• SOW Landscape• Best Practices• Getting Ready• Process
• Q & A
Agenda
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• Within VMS industry, SOW spend under management has grown 74% since 2012*
• Savings potential for SOW-based spend is 10 to 20 times higher than staff augmentation
The Growth of VMS/SOW
*Staffing Industry Analysts, 2014 VMS and MSP Landscape
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Why Manage Services?
VisibilityCost Savings
Risk Mitigation
Fiscal Controls
Operational Controls
Supplier Management
Supply Chain Optimization
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Visibility
Only 30% of enterprises currently have the ability to track performance of SOW based labor and services against predetermined and agreed-upon delivery dates and milestones.
Ardent Partners- State of CWM, 2014
SOWSOW
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• Cost savings• Risk mitigation• Fiscal and operational controls• Policy compliance• Supplier management• Supply chain optimization
With Visibility…
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SOW-basedSkill-based
Medium to high riskSpend management
Services
ConsultantsSpecific expertise
High riskCompliance
management
Independent Contractors
Staff AugmentationTransactional
Low riskSupplier management
Temporary
Broad View of Contingent Workforce
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• Complex Contingent Spend• Process outsourcing: application services, infrastructure management
and BPO• Consulting: IT and management• Professional services: tax, audit and legal, as well as various
specialized services projects.
• BPO and Consulting are the most common SOW-based services spend under management and have the highest levels of supplier and buyer adoption.
Services
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SOW Landscape
SUPPLIERS
$
10 to 15% of spendLargest number of transactions
75% of spend and upSmallest number of transactions
15 to 20% of spend
Strategic/Consulting ServicesIBM, Big 4, ERP
Tactical ServicesSupport & Operational Contracts
Discretionary ProjectsIT, Niche Suppliers, ICs
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Goals
Drive Projects
Recurring/Non-recurring activity
Utilize expertise
Capabilities
Single MSA
Tracking
Analytics
Compliance
Metrics
Milestones met
SOWs that are service-based
Projects budgeted
Index
Solutions
VMS
SMS
Integrations
Create a Foundation
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• Build a committee and educate/enlighten• Procurement – SOWs • Finance and AP– accruals, reconciliation, invoicing,
budgets and payment process• Legal – SOW standards mean less disputes• HR – tracking, compliance, quality• IT – both client and service provider• Business units – identify power users• Executive sponsorship
1. Enlist Support
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2. Know Your Business
Understand what your organization is using SOWs for todayand then design the tactical processes that will increase visibility, efficiency, and cost savings while reducing risk.
• Identify Projects, ICs and Services• Determine if there are (or should be)
deliverables• Determine if there are (or should be) SLAs• Identify recurring payment services
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1. Create SOW• Role/Permission Based• Configurable Approvals• Create SOW• Attach RFP & Support Docs
8. Off-Board Contractors• Finish Notifications• Reporting & Analytics• Security Badge Deactivation• System Logon Deactivation
2. Source Bids• Provider Distribution Controls• Budget / P.O. Controls• Time & Date Stamp
7. Billing and Invoicing• Pay Provider• ERP Feeds & Extracts• Audit & Adjustment Support
4. Engagement Management• Milestone/Deliverable Management• Cost Center, G/L, Project Code Support• Manage Change Requests• Manage Budgets / Burn Rate
3. Award Project• Review/Rank/Score Bids• Select Provider• Finalize Milestones• Create Payment Schedule• Define Payment Schedule
Analytics
6. Time & Expenses• Time & Expense Capture• Milestone Capture• Invoice Approval
5. On-Board Consultants• On-Board Consultants• Compliance Manager• Security Badges• System Provisioning
3. Work the Flow
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4. Design for Everyone
• End User• Business• Procurement • Audit• Executive• Policies and Processes• Risk Management
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• What are your costs?• % spend of SOW to staff augmentation• Average cost per SOW (normalized, per hour)• Cost Index (actual / awarded = index)• Spend per SOW vendor
• Soft costs• What is the process today?• How much management time does it take?
5. Set the Baseline
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• Revise internal purchasing policies, approval limits, processes
• Source labor categories to establish supplier base
• Create standards
6. Develop Standards
• Deliverables• Milestones• Pricing• Payment terms
• Requirements• Timelines• Change control• Governance
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7. Measure Everything
• Everything• From RFx to award• Measure cost (Total / time = hourly, overage) • Measure quality (change orders, rework)• Measure commitment (response to RFx, awards,
terms) • Achievement Index• Awards/RFx Responses = Index• Total $ Spent / Total $ Awarded = Index
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• Supplier Scorecards• Share all of your data• Select key performance indicators• Hold quarterly review meeting with supplier
• Invite only those who are accountable• Account manager, recruiters
• Review against previous quarter’s scorecard• Set action items over next quarter
• Hold an annual meeting with all suppliers• Share comparison data
What Should You Measure?
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Comparing Services Workers to Contractor bill rates on Case study top 5 roles
Business Ana-lyst
Sr Project Manager
Software Engineer
DBA Production Support Specialist
0
25
50
75
100
125
• Services Workers, those workers associated to statements of work on average had 44% high bill rates than their staff augmentation average• Specific examples of the same
worker transitioning from contractor to SOW were able to be cited and tracked for leadership and reclassification
• Eventual reclassification of staff augmentation on 15% of the statement of work, yielded $1.7M in savings
Spend Misclassification Example
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FinancialManagement
RiskMitigation
VendorOptimization
ProcessEfficiency
AdoptionManagement
Rate Intelligence
ProgramScalability
Managing the Process
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Compliance
Process Optimization
Visibility
Payment Management
Benchmarking
Bidding
Discounts
Performance Management
Review Process
Competition
Negotiation
Supplier Management
0 0.5 1 1.5 2 2.5 3
Savings Opportunities
SOW Process Savings
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According to recent research*, the vast majority (77%) of enterprises believe that total talent management will be a widely-adopted approach for managing all enterprise talent, both traditional and non-traditional under a centralized program.
One More Poll…
*Ardent Partners, State of Contingent Workforce Management 2014
Total Talent Vision for Tomorrow
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Questions…
TM
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ThankYou
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