Making a Statement of Work: Why SOW Management Isn’t Working
What’s the second largest spend category in your company? If your company is like most companies, the answer will be “Statements of Work,” otherwise known as SOWs or Outsourced Services Spend. And SOW spend is on the rise.
In today’s uncertain world, employers are frequently turning to flexible labor options. While temporary “contingent” labor is an ideal solution, it is common that non permanent labor is often hired via SOWs. Hiring managers who have available budget for a specific project—but not for temporary labor—often hide temporary workers inside an SOW budget, leaving your organization at risk.
Fortunately, modern spend management solutions offer budget visibility for Procurement and Finance across SOW spend while offering tighter milestone management via guided buying and appropriate vendor selection. Get in control of your SOW spend to protect your business, brand, and your bottom line.
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Why Managing Contingent Labor Isn’t Enough
While you may have already invested—or plan to invest—in digital transformation of your P2P process to increase visibility and control of spend, if you haven’t added SOW management to your digital transformation initiatives you are not fully achieving either of those goals.
Today, many companies have a Vendor Management System (VMS) to manage contingent labor. These solutions, like Coupa Contingent Workforce (CCW), make it easy for businesses to oversee temporary employees, from onboarding to performance management to safely offboarding temporary labor when their job is complete.
When engaging a staff aug person through a VMS system, this person is typically hired for a detailed job description and associated bill rate, and timesheets are the primary method of gauging their work effort. Budgets are more easily managed with staff aug because of this correlation. However, SOW spend is actually larger than contingent labor spend in most medium- and large-sized businesses. This represents both a huge opportunity to better manage that spend and mitigate risks associated with outdated MSA, agreement language for IP, data security, and worker’s system access.
SOW spend is typically managed by the business, not finance or HR. These well-meaning employees do not have the best tools to efficiently engage suppliers, competitively source, and then manage tasks and milestones. Business users don’t typically have access to the tools used for contingent workforce management, and must manage worker time and billing using emails and spreadsheets. These lead to many problems, including:
- Rates may be inflated and time-and materials billing may lead to budget overruns.
- For Outsourced Services, especially those associated with large projects, companies are hired often without the customer zeroing in on the specific people who are doing the work and hitting the milestones which would trigger the payments to them. Often companies can get paid before the work is completed, and in some cases the work does not get completed at all.
- SOW workers may not be properly vetted prior to engagement, and/or may not be properly off-boarded. This leads to added risk.
How to Tackle Rogue SOW Spend: Increase Visibility & Reduce Risk with BSM
Fortunately, there are ways to manage out-of-control SOW spend. Business Spend Management (BSM) technology offers managers the opportunity to benefit from a simplified user experience including all aspects of spend—from contracting to invoicing to payments—for all goods and services spend.
With BSM, managers and executives can have improved visibility into spend, including total cost and status of projects. They can answer questions such as what does my relationship with my partner really encompass? What is the total cost of developing a new distribution center? Is there a risk from a vendor perspective?
BSM technology improves control, avoids mismanaged spend, and enhances supplier performance management and mitigates risk.
Whether through competitive bidding on hourly rates or fixed-bid contracts, competitive sourcing and procurement of services can yield big savings while reducing risk. Proper risk management, including supplier health-checks, ensures vetting and off-boarding at both the provider and worker levels. This helps to avoid unexpected risk such as:
- Key suppliers going out of business
- Outdated data security contractual language
- Intellectual property breaches
- Access to internal IT systems
Having a strong guided buying template as part of a BSM solution ensures that hiring managers are led down the appropriate pathways, first between staff aug vs. SOW, and then, if SOW, to approved suppliers, then to a health check on those suppliers.
Increase Visibility & Control of Outsourced Services Spend with Coupa
With Coupa Contingent Workforce (CCW), a fully integrated part of Coupa’s Business Spend Management (BSM) platform, the tools of contracting, supplier management, time and materials, deliverables and milestones for contingent workers are now available to managers across the company for SOW spend.
Coupa BSM manages all types of spend including SOW, easily guiding users to the right tools to source and manage all types of spend. Savings typically range between 30%–70% for each SOW dollar spent. With SOW spend in a fixed-bid model, companies are able to unlock more value by closely managing consulting spend across the entire Source-to-Pay process. Community-powered capabilities offer prescriptive insights for managers to improve.
Hear more from experts in the field in the One-Vision webinar, “Community Insights: Solving for SOW.” You can view the webinar recording here.
Maria DeJong is a Coupa Contingent Workforce (CCW) Director, responsible for highlighting the differentiation and capabilities of CCW. Maria has enjoyed over 10 years in the contingent workforce management space and resides in Denver, CO.