If you read the media and analyst headlines surrounding services procurement, it appears that statement-of-work (SOW) and project-based services spending program management has done more than capture the imagination of the profession -- it has become an all consuming focus for some. Yet media, analyst and even vendor claims, predictions and coverage to the contrary, most organizations (including those with more advanced VMS deployments) have weak to minimal actual penetration of project- and SOW-based capabilities of services procurement technology (not to mention associated MSP and third-party advisory services).
Throughout the course of recent interviews with a variety of practitioners and providers,
Spend Matters discovered a number of reasons for a surprisingly broad and divergent range of project and SOW-based capability inside procurement organizations, featured in our new Compass research paper: Overcoming Challenges of Project- and SOW-based Solution Adoption -- Part 1 (available for free to qualified practitioners in our Research Library). While some are clearly doing SOW right, pushing hundreds of millions of dollars in annual spend (or more) through VMS platforms that have been extended to manage all of the intricacies required for SOW enablement, the majority of companies do not find themselves as fortunate. Indeed, many are lagging behind in terms of implementation and even platform evaluation. The impact SOW enablement can have (relative to contingent workforce automation through the same VMS) can be highly, highly variable.
Yet based on the successes we see, it is our assessment that companies can often achieve results from SOW solution investments (for savings, compliance and risk reduction) that outshine the great majority of procurement technology programs. The greater savings, productivity improvements, and services results from project and SOW-based procurement initiatives that even core contingent workforce platform automation can sometimes deliver, especially in industries where SOW volume (managed or unmanaged) is increasing as a percentage of total services spend. This is for both the right and the wrong reasons, mind you. For example, using SOW to address worker classification issues is not an optimal strategy.
This Spend Matters Compass explores today's SOW-based adoption patterns, starting with how the environment is changing. In the research, we also tackle SOW suggestions for overcoming adoption, collaboration and process hurdles in adopting these services procurement platforms and enabling third-party management services. Among other investment recommendations we make in the analysis, we suggest considering the importance of contract creation, implementation, management and overall contract-based project management and audit as a core component of an overall SOW engagement model.
Contract management software as an extension or adjunct to core VMS capabilities, which includes the ability to manage clause libraries, terms, T&Cs, etc. and then ultimately ties back to project remuneration and supplier feedback to contract-based performance is an immensely powerful management tool. This approach linked to extended VMS capability to enable overall project oversight/budgeting and threshold/ milestone-based management and payment against deliveries (e.g., as one provider suggests, "tracking how much of a premium/discount organizations are paying with the fixed fee pricing...in other words, tracking vendor margins") -- is extremely valuable indeed.
This is but one of many observations in this latest Spend Matters Compass series analysis. On a more macro level, looking at the changing SOW adoption landscape, Spend Matters has observed a historic evolution of the recent market and certainly, the start of a new inflection point -- if not select rapid adoption in certain market segments. To learn more about SOW adoption trends, best practices and expectations for 2013 and beyond, read this research brief in our services procurement/SOW Compass series: Overcoming Challenges of Project- and SOW-based Solution Adoption -- Part 1.