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A Statement of Work (SOW) Backdrop – The Foundation of a Business Case

Spend Matters and Fieldglass have observed a significant ramping up of many contingent workforce and services procurement programs within Global 2000 organizations over the past few years. For companies serious about general procurement programs and enablement through technology, the additional investment in a VMS (vendor management system) to tackle contingent spending is a logical extension to core capabilities in the indirect purchase-to-pay arena. It also enables additional spend analysis, e-sourcing, contract management and supplier management capabilities.

Yet few organizations making a concerted effort to pursue contingent spending have made a similar investment in their statement of work (SOW) initiatives, at least to date. This is unfortunate, as the capabilities enabling SOW control, compliance, and negotiated and implemented savings often differ from VMS automation platforms that only support contingent labor spend today.

Technology enablement around SOW spend management often comes with the belief that an organization already has a good handle and definition on what the opportunity entails. For some, the fundamental question remains whether or not managing SOW spend involves going after all time and materials services billing as an extension of current programs or if this spend area presents a fundamentally different business challenge entirely. Undoubtedly, semantics matter less than clearly defining the opportunity in a specific business case context to maximize the capture of SOW spend.

Our research suggests that procurement and HR may frame the SOW spend business case differently. From the procurement vantage point, the broad opportunity to better tackle and manage general services categories ranges from the strategic (systems integrator (SI), management consulting, legal, accounting, etc.) to the operational (including facilities, janitorial, targeted IT, BPO). In most cases, procurement will justify SOW investment based on results of clear ROI-driven business cases. We have also seen revenue-driven cases, where SOW spend acts as pass-through expense, and cases where more rapid execution and better management of SOW agreements can quickly drive new revenue (or revenue generation opportunities).

This analysis profiles three different organizations in their SOW journey and how they constructed business cases to support their initiatives. We also provide an analysis of approaching consulting services as a key complex category to tackle in an SOW model.