CWS 3.0: April 19, 2011 - Vol. 3.10

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Heard on the Street: SOW Market

"The SOW-based services market has its own unique characteristics. Recognizing these nuances and developing a structured approach for identifying the critical success factors is imperative to ensure internal adoption of a SOW management program."

-- Arun Srinivasan, VP of marketing & strategy at Fieldglass, a VMS provider

Statement of work consultants are all the rage. But for vendors to be effective and companies to be successful, SOW suppliers need to be managed appropriately. End users of contingent labor have to approach this talent segment with a certain mindset, while vendors have to realize that, contractually, they have a different relationship (from providing temp labor) with the customer in the SOW arena.

"The relationship is different in the sense that you are signing up to deliver a result. And you are going to be compensated based on the result that you deliver. It's not about providing a worker with a specific skill set that puts in eight hours," says Srinivasan.

CW managers can start off by building more of a collaborative ecosystem with SOW vendors and even their MSPs to deliver results. Change management is a significant barrier for successful adoption and it's important to work with the stakeholders to understand where these challenges lie within the organization and how best to address them.

The company using the SOW services is responsible for providing access to the tools, processes and resources that the vendor needs to succeed. SOW vendors may have to interact with varied business units within the company's organization, and it is important that the relationship is structured in a way that ensures the vendor's success in doing that.

Also, be aware that you can't simply apply the same yardstick that you've used in contingent workforce management. SOW management is a different space and has its own unique characteristics, Srinivasan warns.

Here are some key factors that companies using SOW services need to remember. The SOW and temp labor world are both members of the services procurement family, but there are differences. The first one is economics. The economics differ in the SOW space in terms of the funding model employed and the factors that influence the return on investment model. With SOWs, it's not just about managing cost but also about managing the deliverables. For buyers and suppliers alike, the risk of non-performance is much higher with SOW-based services.

Using SOWs also involves many more stakeholders. It is essential to understand each stakeholder group and document their needs. What are their benefits and what do they need to contribute? And last, the legal team is far more involved with regard to SOW usage. A standardized, streamlined SOW creation and enforcement process benefits end-users, the legal team, and the suppliers, says Srinivasan. With SOWs, customers can't be hands-off; failing to communicate and be involved can cause delays in the project and end up costing more than intended.

The SOW market is still in the early stages of growth. In fact, it's where the contingent workforce market was eight to 10 years ago. But the mainstream adoption of SOW-based services is likely to be much faster than the pace of growth seen in the CW arena.

"The onus is on our community to help educate the market on the nuances of managing SOW-based services. We need to help perform stakeholder analysis and define the business problem in very specific terms," Srinivasan says.

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