Whose services are your really procuring?

The workforce is fundamentally changing and it’s increasingly important that you can access the skills you need when, where and how you need them. But with the increase in corporate usage of external workers comes additional challenges and risks. Toni Jackson, Director of APAC at Fieldglass, an SAP company, in Sydney, unpacks the implications.

Driven by the digital age, we’re seeing a shift in the way work gets done. Globalisation and new ways of working are rapidly changing how talent interacts with companies, making it increasingly likely that the top talent needed by a business might not be – and might not want to be – on their payroll.

As a result, organisations increasingly rely on the external workforce – including contingent worker, Statement of Work (SOW)-based consultants, freelancers, specialised talent pools and more. In fact, these resources now account for nearly 40 percent of the average company’s workforce.

Why is this happening?

There are four factors impacting the way work gets done:

1. Data: Data is the currency of the digital economy and we hear a lot about it these days. Big data is powering new insights and enabling better business decisions and outcomes.

2. Digital technologies: Advancements such as artificial intelligence and machine learning are speeding processes and increasing efficiency. Looking forward, technologies such as blockchain will disrupt industries by facilitating the exchange of goods and services.

3. Design-thinking or user-centred design: This is driving better experiences by putting people at the centre of technology, not the process or the product.

4. People: Perhaps the most profound change we are seeing in how work gets done is with people. Many of today’s workers – millennials, in particular – are looking for different experiences rather than spending decades with one company. As technology has enabled people to be untethered, the external workforce has boomed.

The result is that a significant portion of the external workforce is now comprised of service providers. To stay ahead of the competition, you need to be able to easily access this specialised talent pool and you need to be able to manage it effectively.

Challenges in services procurement

With more and more companies using external resources to fill vacancies, compensating for skills gaps and staffing ad-hoc projects, how do you know you’re getting the best talent at the best price?

With products, it’s relatively straightforward – prices are fixed and margins are small for suppliers. When it comes to services procurement, the situation is very different. Margins vary hugely and tend to be relatively high for the supplier.

For example: you’re looking for a plumber to work onsite at your facility for a specific time. Rates will vary depending on their experience and grade. When engaging your suppliers, how can you ensure that the person they send isn’t someone with little work experience who is charging a premium rate? Without insight into who is actually working for you at any given time and confirming that they are providing the level of service you expect, how can you ensure you’re not overpaying?

Organisations need a single place to go to source, engage and manage service providers. But many are managing this key labour segment with fragmented systems and processes, which puts them at risk for excess spend, compliance issues and decreased quality.

A lifecycle approach

A solution lies in an external workforce management model. This model should include:

Visibility across multiple service providers and headcount tracking so you know who is working for you across your entire enterprise.

True demand management to enable the correct buying channels for each category of service.

Financial control, operational efficiency and collaboration, both internally and with suppliers.

Risk mitigation and compliance to rates and budgeting against contracts, along with the ability to discover how much a service cost on the previous occasion to better forecast.

Enabling a services procurement solution to drive better operational control and rigor around services engagements not only enables cost saving opportunities, but enables key value levers including compliance, cost, visibility, efficiency and quality.

Procurement plays a strategic role in helping their organisations gain workforce visibility, be more agile and derive more value from their services procurement management. But executing the service only gets you halfway there – full potential is reached with management of the entire lifecycle.