What is services procurement?
The external workforce, which includes non-payroll (i.e., contingent) workers and services providers, is essential to thriving in the digital age.
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Your Invisible Workforce? Let's Find Out.
The "invisible workforce" is vital to an organizations’ success, as a substantial investment is made each year on these outsourced services – consultancies, IT outsourcers, marketing agencies, law firms, facilities management companies, call center operators and accounting firms are just a few examples.
However, services providers are frequently under-managed – one in four projects is not completed on time or on budget – preventing organizations from maximizing value and exposing them to risk.
Businesses today must do better to compete in the digital age.
What is services procurement?
Services Procurement, or specifically services providers, are companies that deliver people-based services to an enterprise – technical consulting companies, specialty service agencies, or maintenance companies, for example. They are typically contracted to do project-based work via a Statement of Work (SOW.)
Services procurement makes up a large part of today’s external workforce, or services and labor engaged outside of standard full-time employee contracts.
From the Library: What is the external workforce?
Who are these services providers,
and what kinds of services are they providing?
Services providers play pivotal roles in getting work done, and they operate at the heart of the enterprise. For example, organizations rely on consulting firms to help them better compete in the digital era, IT services providers to run their IT operations, accounting firms to balance their books, law firms to protect their intellectual property, marketing agencies to shape their brands, call-center operators to assist their customers, and facilities management companies to maintain their buildings and equipment. These are just a few examples of the many important operational tasks administered by service providers on behalf of enterprise clients.
What’s the difference between “procurement”, “services procurement”, and “direct and indirect procurement”?
Procurement as a whole involves the practice of buying the goods and services that enable a business to operate efficiently and profitably. Procurement is the larger umbrella encompassing two distinct types:
These are engagements with people-delivered services. These workers are sourced outside of a firm’s permanent workforce from companies that specialize in the services they provide, such as brand strategy consultants or maintenance engineers.
Direct and Indirect Procurement
This type of procurement refers to the acquisition of materials and goods that keep a business in operation and includes all stages of end-to end supply chain management from source to procure to pay.
Both are important categories of spend within an enterprise but often split and managed by different departments with disparate technologies. But there is a way to gain one unified view of spend, across categories, using the best of intelligent technologies and data-driven insights to strategically manage total spend.
Learn more about Intelligent Spend Management
How does services procurement benefit the business?
Organizations today are looking for everything from specialized skills to efficient capacity, and they depend on the external workforce to get projects done faster and be flexible enough to adapt to changing conditions and requirements. SAP Fieldglass, in collaboration with Oxford Economics, conducted a global survey of 1,050 senior executives in 24 industries to understand the importance of services providers in getting work done and their impact on business performance. Download the full report here.
The results underscore how vital the external workforce has become in getting work done in a digital age for organizations of all sizes and within all industries, as shown in fig. 2 from the report.
As part of the report Services Procurement Insights: The Big Reveal, SAP Fieldglass identifies 11% of respondents that outshine others in their strategy and vision for managing their non-payroll workers and services providers.
Download the report to learn how other progressive companies excel in managing their external workforce.
While many organizations excel in managing the financial aspects of their arrangements with services providers, they fall short of managing the “people” aspects of these engagements – i.e., who is doing the work, their certifications and training, their access to systems and facilities, progress against milestones/deliverables, and more.
For example, a recent research survey of senior executives from SAP Fieldglass, in collaboration with Oxford Economics, unveiled some stunning statistics: Less than half of research participants say they are highly informed about the basics of services providers such as contract terms (48%), where they are located (44%), and who is doing the work (44%). Only one-fourth are highly informed about progress against milestones or deliverables (27%), the quality of the work at the supplier level (25%), and the quality of work of individual contributors (18%).
This under-management, or lack of visibility into engagements with services providers, can lead to unsatisfactory project outcomes, create security risk, and prevent companies from unlocking the maximum value from their services. After all, you can’t measure what you don’t see.
What’s at stake if businesses under-manage services providers?
A lot of wasted spend. Services providers account for roughly half of spend on the external workforce, or nearly one-fifth of total workforce spend. Yet, businesses often have limited visibility into their services providers, as one in four projects sourced from service providers is not completed on time or on budget.
If one-quarter of projects have gone rogue, a business is losing precious time and significant—if not astounding—amounts of spend.
“Many C-level executives don’t have the external workforce on their radar because they are not aware of the extent to which it comprises their total workforce mix and fuels growth and innovation of their business.”
- Lisa Zak, Director of Strategic Sourcing, Medtronic
How can enterprises improve engagements with services providers? What can they gain?
Poor visibility and lack of management rigor prevent companies from unlocking the maximum value from their services providers. Our research shines a light on this invisible workforce and examines how organizations can reap the full benefits of their services providers while also reducing risk. We recommend four key actions that organizations can take to manage service providers, effectively unlock greater value, and increase return on investment. In particular, organizations should view services providers as an extension of their workforce, and apply the same rigor to managing them as they do their employees.
Download the full report to learn more about the four key actions.
One key action to better manage services providers requires the implementation of intelligent technology with best-in-class features, such as a Vendor Management System (VMS).
Learn more about the key business benefits of a VMS