Contingent Spending — On the Up and Up (and We Mean It)

Even for those coming from a broad and often direct materials-based sourcing background like many of the folks working at Spend Matters/MetalMiner, contingent labor is historically seen as a less-than-interesting services category to be handled by HR converts who worked their way into our function, the buying and management of contingent labor has become increasingly important in recent quarters. And we mean it. A recent MarketWatch article highlights the magnitude with which US companies are ramping up contingent hiring. To wit, "temporary-help services employment increased to about 2.3 million in March from a recent trough of about 1.7 million in mid-2009, according to the Labor Department." Try showing me any other category growing at roughly 25% year over year at the typical company.

Furthermore, "several years ago, the GAO, using Labor Department data, found that contingent workers constituted 31% of the total workforce in February 2005 -- about 43 million workers." That's a material percentage of the overall economy right there -- not to mention your company's services (and most likely non-services) spending budget. This week at Beeline's Customer Conference in Orlando, I'm presenting a presentation titled "Riding the Services Wave," where I posit that even in manufacturing industries, companies are investing and prioritizing larger-scale services procurement programs to drive savings and compliance across broad-ranging categories, from temporary labor and finance/legal to aftermarket support. In other words, the stealth category inside virtually every company today that is growing -- and growing in an often non- or under-managed way -- is contingent spending.

What explains the trend? It's simple. Companies aren't hiring full-time workers, and contingent workers and third-party firms that manage the hiring and administration of the casual workforce are picking up the slack. It's also our view that in a booming economy, many executives and shareholders did not look at managing SG&A expenses the same way as COGs -- but they certainly do now. Perhaps this explains the double-digit growth we're seeing in the uptick of the VMS market, growth that is materially outpacing other segments of the e-sourcing and P2P market environment. Interestingly, as we've pointed out before, much of this growth is coming from companies increasing their services spend under management internally rather than new software contract sales. As the typical organization ramps their services procurement programs, they simply put more contingent and non-contingent spending under the platform microscope.

If you're curious to read more about the subject from a procurement perspective (not just an HR one), we encourage you to download our recent services procurement research:

Getting the Most From Analytics and Benchmarking

Selecting Services Procurement Technology – Options, Approaches, and Philosophy

Services Spend -- Beyond Contingent Labor: Achieving And Implementing Savings Across Previously Unmanaged Categories

Making Procurement a Services Spend Ally: Tips and Tactics for Winning over Business Stakeholders and Spend Owners

The Managed Services Connection -- The Evolving Role of MSPs in Services Procurement

Jason Busch