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Revisiting ‘SOW Lite’ (Part 2) — Changes in enterprise adoption, solutions, the law since 2017

02/28/2020 By

In Part 1 of this series, we revisited the problems that SOW management technology faced in 2017. Today, it’s time to catch up on the current state of SOW Lite, a conceptual model that we defined this way:

“While we use the term SOW Lite, we are not simply referring to contracting. Contracting is a kind of linchpin in a whole lifecycle process that is analogous to that of large-scale SOW management. As such, we are really talking about a lifecycle process — call it SOW Lite management — which runs from sourcing, through contracting, onboarding, project management, and all the way to invoicing and payment. Moreover, this process, and the technology that supports it, must be fit-for-purpose.”

Here we are in early 2020. So, what has changed?

Enterprise Adoption

No data is available that can tell us if more enterprises are establishing something like an SOW Lite process. But there does seem to be much evidence of increasing interest and new activity in direct sourcing and engagement of non-staffing workforce in enterprises and MSPs. According to Hays (citing SIA), “one-third of companies are already using direct sourcing as part of their contingent hiring, and another 28% expect to add it to their programs in the next two years.”

Still, while direct sourcing is a means of talent acquisition/engagement and management (using talent pools, etc.), SOW Lite goes quite a way beyond. By our definition above, SOW Lite means a special fit-for-purpose, full-lifecycle and digitally enabled process, that stretches from classification screening to invoicing/payments — a process that includes robust contracting and work order as well as engagement-tracking capabilities.

Once again, we don’t have any empirical insight into whether organizations are establishing SOW Lite processes at some positive rate or not at all.

Technology Solutions

Since the fall of 2017, some technology providers have fielded solutions that are coming closer to providing solutions that could be enablers of an organization’s SOW Lite processes. While we are aware of at least one VMS provider (Beeline) and several other non-VMS platforms moving in this direction (as a part of its direct sourcing offering), there are two pure-play solution providers (San Francisco-based Shortlist and UK-based Talon) that have made a speciality of it. Note: Along with Shortlist and Talon, Beeline, Field Nation, Upwork Enterprise and WorkMarket are covered in Spend Matters’ enterprise technology SolutionMap, Direct Sourcing of Workforce/Services.

Shortlist and Talon were both founded in 2015 and initially pursued an FMS (freelancer management system) solution model. That’s a solution supporting management of individual independent workers via talent pools, self-sourcing, etc. Over the past two years, both solution providers have expanded their solutions to encompass small incorporated service providers and have further developed SOW capabilities. For example, Talon, which describes itself as a solution for statement of work (SOW), tail spend management, direct sourcing and FMS, now offers two integrated modules TalonFMS and TalonSOW. Today, clients of these providers process single SOW engagements with values that range into the hundreds of thousands of dollars.

While there are differences in what Shortlist and Talon have developed, they offer a superset of functionality areas (i.e., addressed in one or the other, or both, of the solutions):

  • Supplier entity for small services providers
  • Ability for clients to onboard service providers into their own select supplier database and with supplier pools, with supplier profiles (clients can configure these workflows/profiles)
  • A supplier portal that can be used throughout the supplier lifecycle
  • Ability to vet service providers when onboarded — or later — with respect to classification, background checks, credentialing, etc. Note: Classification determination is provided by third parties.
  • Ability to store various vetting information and documents in the supplier’s profile. This can include a supplier MSA.
  • Ability to create a requisition that can be released to one or more suppliers to solicit proposals (effectively an RFX process that results in bid submissions and side-by-side comparisons and communications with bidders).
  • Ability to award a project, with a work order/SOW (which — at least for one of the providers — can be auto-generated into client-specific Word document templates from the original requisition). Clients can maintain their own SOW/contract templates, which can be linked to specific types of projects or suppliers.
  • Ability to track supplier progress against SOW milestones
  • Ability to process and approve solution-generated invoices (including interim ones at milestones) with a client-configurable approval workflow
  • Ability to release approved invoices (across an integration with clients’ financial systems) for payments
  • BI dashboards and reports

Effectively, these solutions are at a point where they are ready to at least begin to enable organizations that want to establish their own SOW Lite processes.

NOTE: We plan to do deep dives on these types of solution capabilities at a later time.

Legal Changes

In addition to the availability of fit-for purpose technology solutions, changes in legal regimes, such as California’s AB-5, IR35, et al, may positively impact enterprise adoption of SOW Lite processes. Amid other impacts (which may be perceived favorably or unfavorably by different parties), these laws definitely impose the need for organizations to become crystal clear, systematic and rigorous in their engagements of independent contract workers and small solution providers!

In the UK in recent years, IR35 reform has basically shifted the responsibility of determining classification status from workers and small service providers to the organizations that engage them commercially. The reform was imposed on the public sector about two years before it was imposed on parts of the private sector in 2020. During that period of time, UK-based Talon’s development of new solution capabilities (along the lines above) was being driven demand from an increasing number of public sector clients that were dealing with IR35 reform and in need of supporting technology capabilities. Recognizing the impact of IR35 on its solution development path, TalonFMS, two years later, is determining if private sector organizations — new to IR35 reform — will have the same or similar requirements as public sector organizations.

In the U.S., since the passing of laws like AB-5 are just now going on the books in some states, it’s going to take time to see if those legal regimes motivate U.S. companies to adopt more SOW Lite processes and enabling technology.

SOW Lite — Conclusion

In 2017, we began to see requirements for something we called SOW Lite (described in the first section of this brief). In early 2020, we still lack data that indicates a significant trend of organizations adopting/establishing SOW Lite process models. On the other hand, we found that some technology providers have been pursuing SOW Lite-enabling capabilities in their solutions (presumably following demand signals, whether weak or strong).

Trends in how organizations and work/service providers arrange commercial relationships with one another (e.g., gig economy), new technology and new legal regimes may drive more adoption by organizations. But the jury appears to be still out, and we’ll have to wait and see.

Let us know what you think by responding anonymously to our four-question, multiple-choice flash survey here. If there are enough responses, we’ll tabulate and report back.