Services procurement, also known as statement of work, is a significant and growing spend area within enterprise organizations. According to a SIA, SOW spend exceeded US $500 billion in 2019 and is expected to grow 40% over the next five years.
This large and critical third-party talent spend often is not properly addressed, with companies continuing to allow poor practices and mismanagement. A vast opportunity to unleash both new commercial and strategic value awaits, yet it somehow is left mostly unregulated or at best given a quick cursory glance. Why so?
Most people in this space would like to address and action this lucrative and uncontrolled spend, with a common question thrown my way being “How can I go about this?”
From my experience in the SOW services procurement space, the failure to address this uncontrolled spend stems from these core issues:
1. A lack of a clear mandate and sponsorship from the C-suite. There is no clear procurement narrative that articulates a strong enough value proposition and a strategic game plan for the business to focus and understand. The voices of the technical leaders and the chief information officer (CIO) often oppose such programs, due to it not being focused and clearly understood. Additionally, and especially if the business environment is producing reasonable margins, executives feel no need to gain a unified consensus and see no fundamental need to change.
2. How it is framed. Many try to frame the need for services procurement in terms of the type of worker, trying to gain compliance, legal risk mitigation, etc., but these results are generated out of a successfully deployed and managed program at large and should not be the basis of an argument in favor of managing SOW. It is better to frame it as to the value and insight it provides, which leads to a better way for you to procure and deliver the work — and this resolves point one above.
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3. Behavior is a hard area to address. Fundamentally, you are seeking to change long-held behaviors and relationships that business leaders have across the organization and industry. We have all heard “I need to use such and such as they were great on the last project,” or, “I have used these resources/suppliers in my last project and need them as they are the only ones who will get this delivered.” You start to gain insight into this resistance. Key ways to address it are:
- Establishing a strong services procurement program via the appropriate technology,
- Strong leadership, governance and adherence in addressing the demand signals via the services procurement program, and
- Developing a close working relationship and aligning with the business stakeholder.
4. Who owns this space? Often services procurement and contingent labor do not have a “home” — it feels like an orphaned child. It may be buried in people and culture or talent management department, finance or even under a delivery lead in the CIO’s group. What works well is for services procurement to be within the procurement function, driven by strong, talented leadership coupled with a strong mandated C-Suite executive sponsor.
Services procurement typically lacks strong expert leadership and with no clearly defined strategy to address this valuable asset, it becomes a poor, distant third element to workforce and talent management. Behavioral change needs to be driven by strong and deep leadership expertise as well as investment in key talent and technology to allow for a constructive change to be made.
For those who have broken the resistance even partially, the benefits are great as this is an untapped commercial gold mine as well as extraordinarily rich source of talent data that delivers exponentially into the business’ whole human talent ecosystem.
I would like to hear your resistance stories as well as success stories. The more we can learn from each other, the greater the success of unleashing services procurement as a strategic weapon.