A s I suggested in the introductory post for this series, getting our collective heads around all the change that is taking place in our industry and making sense of it all can be a challenge.
Part 1: The Services Portfolio View
In this first post of this series on SOW-driven changes, we focus on a seminal change in our core beliefs about the contingent labor program that has been brought about by the ability and the demand to manage SOW-based spend within the program model:
THE PROGRAM SCOPE HAS SHIFTED FROM MANAGEMENT OF A SINGLE SPEND CATEGORY, TEMPORARY LABOR, TO A SERVICES PORTFOLIO SCOPE THAT INCLUDES MULTIPLE SOW-BASED SERVICE TYPES OF SPEND IN ADDITION TO TEMPORARY LABOR.
We start the series here because of the significant pressure this expansion of program scope has exerted (and continues to exert) on industry participants. In other words, this one change is driving much more change. (Let’s save the chicken or egg analysis for another time, though.) We will get into much of the reactive or secondary changes caused by the portfolio effect in later posts. For now we want to focus on the important task of validating the existence of the new services portfolio view and provide some suggestions on how we got here.
Have you ever noticed how we tend to refer to SOW spend as if it were a single category? Have you ever heard someone try to explain our industry expansion by saying “there’s always been temp labor, and now there’s SOW spend, too”?
The reality is that what we affectionately refer to as SOW actually refers to many different types of spend. The term originated some 10 years ago not as a spend reference per se, but more as a singular reference to the new workflow automation that started emerging in vendor management systems. Over time the term took on dual meaning. IQNavigator prefers the term SOW-based services as the spend reference. Not only does the term help distinguish SOW from temporary labor (which is indeed a service offering itself) it also has a built-in descriptor that explicitly identifies the kind of services we are referring to.
SOW-based Services: Those services or any service engagement that requires or otherwise utilizes a statement of work form of contract to facilitate the transacting (buying, selling) of the underlying service, as well as for the governance over service delivery and acceptance.
Dealing with this terminology may seem mundane or trivial, but it is necessary to drive home the point that many different types of spend have been brought under management by the program model; not just a single, generic type of spend unartfully referred to as “SOW.” To that point, let’s acknowledge – in a more segmented spend vernacular – some of the various types of SOW-based services spend that are emerging in today’s contingent labor* programs, some of which have already become commonplace:
- IT Services
- Consulting / Offshore
- Support / Help Desk
- Network / Data Centers / Infrastructure
- Application, Development & Maintenance
- Consulting Services
- IT, Management, Ops, Strategy, etc
- Managed Services / BPOs
- Professional Services
- Audit / Accounting
- Tax Advisory
- Healthcare, etc
- Facilities Management
- Maintenance, Security, Real Estate Services, etc
Program Functional Scope
Again, chicken or egg aside, you can’t just add all this new and vastly different spend to a program model originally designed to manage temporary labor spend without a commensurate adjustment in the operational aspects of the program. In other words, the new portfolio of SOW-based services requires new and differently skilled management functions (i.e. functional scope impacts). The expansion of program functional scope has been quite successful, as evidenced by the significant growth we have seen and continue to see in SOW. Here are some noteworthy advances in what today’s programs can do or offer:
- New VMS functionality and features to support more complex sourcing and contracting of SOW-based services
- Category specific configurations
- Multiple entry points into workflow
- Engagement model support of all Services
- Enhanced portfolio reporting
- Expansion of externally provided MSP service layer
- Extension of program support to cover SOW
- Deepening of the procurement skillset
- Category and functional specialists
- Client side functional leverage of and integration with expanded program capabilities
- Engagement model automation intelligence supports sourcing, contract review, policy compliance, and much more
- Better integration with and support of other functions/systems
- Supplier performance management
- Contracts management
- Strategic sourcing
- Project management
To be clear, these are all works in progress and there is still much refining and maturing to come. That said, with SOW being roughly 50% of total program spend under management today and future industry growth targets in the 10-20X range that of temp labor, more transformative MSP, VMS and client side changes are simply a matter of time.
Is the shift from a single temp labor category view to a portfolio of services view really the seminal change in our industry? Yep. Tune in to the rest of this series to see all the downstream impacts of this single SOW-driven change in our industry.
*A later post in this series will address more terminology at which time we will confront the challenging and confusing industry nomenclature that is contingent labor – hint: it may be time for some more change!