Spend Matters would like to welcome a guest post from Mark Schaffner, VP of Marketing at Verian.
As I sit down after the holidays to write about services spend, in-laws come to mind. Managing services spend is a lot like dealing with in-laws -- complicated. For example, dealing with the alienated cousin is pretty easy, like consolidating spend on contingent general labor. However, saying no to a mother-in-law is like suggesting the CFO switch law firms -- fraught with danger.
We all know that in-laws can be difficult, but why is managing services spend so hard? Well, the spend is highly fragmented and rarely PO driven, making it difficult to track, control and analyze. In addition to flying under the spend radar, each service comes with its own unique set of availability, quality and political issues.
However, just like with in-laws, with great challenge comes great opportunity. Because of the savings potential (listed below), more and more organizations are dealing with the relationship issues in order to get a better handle on services spend. According to industry analysts, the savings opportunities include:
Getting services under control is no different from managing other major categories of spend -- it comes down to evaluation, screening and execution. We've included some general guidelines for each step below:
Before you do anything, you need to know what you're dealing with. The Rosetta Stone for spend evaluation is in the vendor master. Evaluating the vendor master will help you create a map of your services spend: where is it, who's using it and what are they paying. It will make your improvement strategy much easier when you see it all in front of you. Make a spreadsheet of your services suppliers and include: unit price and volume by supplier; category of worker; and employees/departments requesting services. Make sure to identify any contracts that are in place along with expiration dates.
With services now parsed out in categories, give them a priority based on financial impact and difficulty in achieving success. But before you select a service to bring under management, you'll need to do a temperature check on market conditions. If you find out that it's a skill in short supply, move onto the next service -- you'll have difficulty generating huge savings in that area.
Group services categories into a series of phases for bringing under management. Don't try to do it all at once! We suggest grouping them based on upon business impact vs. ease of implementation. Many times, we see the three phases shake out like this:
- Phase 1 -- Simple Services (contingent labor like temporary staffing)
- Phase 2 -- Advanced Services (scope-of-work like IT contractors)
- Phase 3 -- Complex Services (hybrid like legal services)
Within each wave, we suggest that you begin a cycle of tracking, automating, and managing that category. Leverage the success you mine in the first wave to gain political buy-in for the more complicated phases that follow. Of course, purchase-to-pay automation technology can make all this faster, easier and more structured.
Whether you want to start big or take baby steps, you'll find significant savings by better managing your services spend. And I promise you, it will be much easier than getting your mother-in-law to stop giving you unsolicited advice.