Continuing on with our exploration of lessons learned from statement of work (SOW) program management and platform implementations courtesy of IQNavigator's customer conference, it's important to step back for a minute to understand what services spend is, and more importantly, what it is not. Simply put, "projects is all other services spending" besides contingent labor paid on a time and materials basis (or hourly). This includes both company-to-company arrangements as well as those involving one or many individual workers.
According to IQNavigator's own estimates, up to 35% of all spend in a typical organization is SOW or project-based. And it's largely under managed. Some companies mistakenly go down the path of trying to manage project based spending with purchase orders. But as IQNavigator puts it, "POs just have issues when it comes to SOW." These include the fact that most PO systems:
- Do not track deliverables or quality
- Have one budget limit, at the end of budgeted billings
- Have difficulty to keep track of contract change orders
- Do not enable historical tracking of supplier performance
Moreover, IQNavigator suggests that too much SOW spend is lumped and billed in the class of time and materials, which is "not always appropriate." This is because companies often do a poor job at defining up-front requirements and when they do so, they're often not specific enough. One of the fundamental problems with this catch-all classification is that time and materials based engagements make it difficult to track and capture detailed information. Moreover, they force the buying organization to often take on unnecessary project-based risk (when delivery risk should rest with the vendor). Above all, T&M based assignments make it "much harder to hold suppliers accountable."
What is it like to put an SOW program into practice and overcome confining time and materials based approaches? Stay tuned as our reporting continues.