WHITE PAPER. Emerging Trends to Manage your Indirect and Services Procurement Spend

Transcription

1 WHITE PAPER TM Emerging Trends to Manage your Indirect and Services Procurement Spend

2 Leveraging Emerging Solutions and External Expertise to Deliver Value to Your Organization If you re reading this, you should know what Services Procurement is, also referred to as (SOW). But do you know what it really means to manage the spend categories that those SOWs fall under? And do you know the details of all the spend associated with those SOWs? A Statement of Work is a legal document that captures and defines the responsibilities, deliverables and timelines that a supplier will execute against in performance of a specific work project for a client. Detailed requirements and pricing are usually (should be) included in the SOW, along with standard regulatory and governance terms and conditions. The absence of any of these items, or an SOW in the first place, can introduce risk to your organization and lessen the impact that you re able to have on what could be significant spend. The market for a centralized services procurement/sow management program has rapidly matured driven in large part by advancement in technology capabilities. Companies that have already embraced the concept of a Managed Service Provider (MSP) for their traditional staff augmentation resources/spend are rapidly expanding their programs to include this critical and sizeable segment of spend. But it s not limited to just those now matured programs. Any company that does not have the desired level of visibility to and control over their services and indirect category spend profile has much to gain from such a solution! This paper will walk you through the specific components to consider when contemplating the implementation of a formally managed services procurement program, and what to expect in doing so, including: Defined Terms Value Proposition Services Procurement Spectrum Services Procurement Program Management Office Support Levels Program Funding Models Implementation Considerations Cost Savings Opportunities hard and soft dollar Business Case Drivers 2

3 Services Procurement Spectrum Services Procurement Program Management Office Support Levels Centralized management of the sourcing and engagement process for services and indirect spend categories affords companies the ability to gain deep insight into what s being spent, with who, and what for. This insight allows procurement organizations an ability to ensure that the greatest value is being derived from the money spent in this space, and that suppliers are being engaged in the most appropriate way and according to the organization s desires. It also allows procurement to interact with the business in a way that they may otherwise be unable, due to the insight that is gained. Implementing and managing a services procurement function comes with unique challenges compared to traditional contingent labor programs. Because the services space can be so complex, there are multiple levels of PMO support to choose from and organizations should ensure that they fully understand their options, and choose the program that is best suited to their organization s culture and objectives Program Funding Models MSP programs supporting the contingent space are most commonly supplier funded. The services procurement market historically has a higher mix of self- and supplierfunded solutions due to the sensitivity of the relationship dynamics between suppliers and users. While some choose to begin with self-funded programs to ease the suppliers to the idea of a management fee, today there is a shift to transition the suppliers to a funded model one to two years into the program. It is important to note that the client has the most to gain from this solution, which is why it is recommended to consider self-funding your program for the first few years. Implementation A services procurement solutions program typically has a longer timeline and is considered more complex. The many intricacies of varied spend categories in scope and different internal stakeholders, coupled with different workflows required in the technology, require a full implementation cycle inclusive of a significant level of discovery. 23

4 Value Proposition The value proposition associated with implementing a services procurement solutions program with a VMS tool can be categorized in both one-time and continuous benefits realized within the first year of implementing the program. Over time, more value is derived from the data that the MSP provider is able to gather and assimilate for you using the services procurement/sow functionality of the VMS tool. One time and continual benefits are described as follows: Immediate Gains: Visibility to details of significant spend areas Insight to supplier usage and platform for more rationalized supply base Standardized rate management Process standardization and efficiency gains across the source-to-pay process Reduced cycle times in SOW development and approval Standardized workflows Increase productivity and capacity of internal teams, including the ability to focus on stakeholder relationship development and up-front engagement Minimize costs associated with settlement One platform for data capture (VMS) Hiring/Project Manager Gains: One point of contact and standard process Efficient process for RFx Reduced procurement process cycle times Increased productivity Standardized SOW structure and criteria Compliance to corporate governance Increased visibility allows for improved decision making Access to market rates/data to ensure best value for money Management Gains: Compliance firewall for classification, tax and labor law issues Significantly increased visibility to spend and resources Uniform process and controls established Performance metrics in place across supply base Insight into labor utilization allows for better planning and forecasting Expanded capabilities around accessible business data and informed decision making Contract compliance Audit trail and adherence to established approval routing 64

5 Cost saving - Hard and Soft Opportunities Cost savings is a major focus in the daily operations of a program and are available in both hard and soft savings. Savings can be identified and reported with a frequency that is best suited to the client i.e., monthly, quarterly, etc. As the contingent MSP markets have matured, hard dollar cost savings have been delivered in the 5%-15% range, while soft savings continue to be somewhat subjective and are largely dependent upon an organization s own method for determining the cost of doing business. Savings available through a services procurement program are largely dependent upon the current state of spend management, compliance to sourcing policies and existence of preferred suppliers and their utilization. That said, in a largely unmanaged environment, available savings opportunities could easily surpass those in the contingent MSP space. Services Procurement Hard and Soft Savings Assumed When Implementing a Managed Program with a PMO Actively Managing the Services Procurement Engagement Process Hard Dollar Savings Soft Dollar Savings Category of Savings Pricing/Financial Demand Management Administration Process Improvements Primary Savings Drivers Market rate analysis Active cost management Worker classification RFx process for spot buys Decreased time to engage Side by side selection process Supplier leverage opportunities driven by improved insight and detailed data Accounts payable invoicing and payment Supplier administration and management Contract and compliance auditing and management Increased internal capacity Reduction in accrual and payment timing Reporting and analytics delivery to stakeholders and executive leadership Reduction in risk and legal exposure through program management process and policy Performance efficiencies and quality improvements through supplier management 5

6 Business Case Drivers Process Efficiencies Standardize workflow and single intake system for all labor and services requirements Reduce business owner involvement in back office activities Streamline SOW hand off, approvals and on/off-boarding Simplify review and approval of invoices Decreased cycle time Reporting & Analytics Allow for tracking of time by worker and project Simplified view to expenses Simplify accruals management Significantly enhanced business level reporting Insight into rate alternatives for like skill sets Comprehensive data to feed category strategies and spend analytics requirements Transparency Insight into spend details beyond aggregate supplier spend resource rates across suppliers and their projects Improved insight into supplier performance Eliminate double-billing of consultants on multiple engagements Controls & Compliance Reduce after-the-fact engagement Automate/improve controls for on-/off-boarding Easy reconciliation of time, expenses and deliverables to invoice Performance management of suppliers Robust and efficient approvals in one place Standardization of fees and rates across suppliers/ categories 6

7 In Summary To build a comprehensive services procurement program, it is necessary to make an educated decision and fully consider the following: 1. Creating a program that is right for your culture. 2. Leveraging a solution to maximize the capacity of your internal organization. By understanding how each of these components impacts your organization, and by making strategic decisions accordingly, you can build a services procurement program that drives significant value to your business, maximizes the overall productivity and efficiency of your workforce and delivers real business results in line with your organizational objectives 3. Understanding the various program management support options that best fit your organization. 4. Giving thorough consideration to the funding model. 5. Ensuring a comprehensive and tested implementation plan. 6. Level of maturity of the procurement function and supply base relationships. 7

8 About the Authors Paul Gartland Executive Director, Services Procurement Allegis Global Solutions Paul has 22 years of experience in the staffing and workforce management solutions industry. As Executive Director of Services Procurement for Allegis Global Solutions (AGS), Paul drives and evolves our full service solution in North America while partnering with regional leadership to expand the Services Procurement Solution in EMEA and APAC. He is also heavily focused on improving our Services Procurement reporting and analytics capabilities while training and developing global Services Procurement teams. Paul oversees 50 program resources dedicated to more than 30 services procurement engagements. He is particularly successful in building flexible program solutions that meet client needs and ensure supplier adoption, as well as bringing Big 4 consulting firms and large off-shore providers into our programs. Under Paul s direction, AGS has achieved substantial growth in our services procurement offering and has been named as a leader in Services Procurement services across the globe. In his previous role as Director of Services Procurement, Paul was responsible for building and delivering Services Procurement solutions to allow companies to better manage their projectbased and outsourced workers Jon Kesman Global Procurement Director Allegis Global Solutions With more than 20 years of procurement experience across various organizations and industries, Jon Kesman, Global Procurement Director for Allegis Global Solutions (AGS), serves as part of our Center of Excellence for Services Procurement. Working to continually expand this offering, Jon helps to ensure that AGS clients enjoy the full extent of benefits available through their programs. Over the course of his career, Jon has delivered outstanding results in both advisory and consulting roles, as well as in steady-state procurement organizations. The vast majority of his procurement category expertise lies in contingent workforce and professional services categories. Prior to joining AGS, Jon was an executive procurement sponsor for one of AGS MSP clients, and spent eight years partnered with AGS to expand that program across the US and into the UK, including incorporating an independent contractor compliance solution to mitigate risk. Additionally, as a consultant, Jon spent more than three years working with clients to develop and implement strategic sourcing and category management plans as a part of significant procurement transformation programs. Jon also spent more than five years in the procurement BPO space working with clients on contingent labor and professional services category strategy development and execution. 8

9 TM About Us Allegis Global Solutions is a leader in global talent solutions. To date, we support clients in more than 60 countries both on-site and through regional hubs, matching our great people with companies seeking to augment their permanent and contingent workforce. We deliver scalable, flexible and tailored solutions, shaped around our clients unique business requirements and culture. We draw upon decades of industry expertise and market insight to design strategies that work. We develop innovative tools, products and processes that deliver results. Our passion for talent is the driving force behind everything we do. We live to match exceptional companies with outstanding people. By creating a culture devoted to great talent, we can deliver client-focused solutions that make a difference for businesses across the globe.

10 Emerging Trends to Manage Indirect and Services Procurement Spend Presented by: Neil McGrail Director, Operations Jon Kesman Director, Global Procurement September 29, 2016 A Culture for Talent

11 Agenda Ø A common problem Ø Trends Ø Value drivers Ø Evolutions of solutions Ø Success factors 2

12 A Common Problem Sample Client Spend Data Insurance Accounting Pension Support M&A Support Credit and Collections Insurance/Risk Mitigation Audit Services Services Prof Svcs Fin / Accounting Recruitment Svcs Payroll Svcs Mgt Consulting Training Contingent Labor Ø Only 35% of total services spend considered managed. Ø Excluding contingent labor/ MSP, only 3% of spend is managed! Ø ERP spend data (source) contains significant amount of misclassification 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% = Managed = Addressed = Unaddressed/Unmanaged Percentage of Total Spend ($350M total profile)* A Culture for Talent * Not indicative of relative size of spend

13 The Balloon Effect A Culture for Talent

14 Trending 2016 SOW Global Market Size* and Predicted Growth of SUM ($B)** $50.0 $40.0 $30.0 $20.0 $10.0 $ Ø Services category spend can be more than 3x to 6x the size of a company s contingent labor spend Ø According to SIA, SOW SUM in MSP Programs has grown 74% since 2012! Ø A 2014 Everest report suggests that SUM by procurement outsource providers was in excess of $240B Ø SIA has estimated the global SOW market at $1.1T * Based on SIA-reported global SOW spend under management of $12.4B ** Assumes 36% annual market growth as predicted by Nelson Hall A Culture for Talent

15 Evolution Drivers Areas of Growth Increased functionality and VMS technology improvement focused on services complexities Increase in percentage of workforce going contingent Anticipated increase in SOW-based engagements Focus on total talent management Success in MSP 1.0 and increased SUM on staff augmentation Peer pressure A Culture for Talent

16 Globalization A Culture for Talent

17 Strategic Value Drivers Ø Better visibility and control for all services categories Ø Increased cost savings through competitive bidding, rate management and elimination of rogue spend via SOW Ø Improved governance and risk management Ø Expanded operational capacity for sourcing and/or procurement teams Ø Higher value to business stakeholders through business analytics Ø Faster SOW cycle times increase value for business stakeholders and suppliers Ø Improved supplier performance management capabilities Ø Proven risk and cost reductions through accurate worker classification A Culture for Talent

18 Benefits of a Managed SOW Solution A Culture for Talent

19 Functional Procurement View S2P strategy 1. Spend data management 2. Strategic sourcing 3. Vendor management 4. Requisition to PO 5. Invoice processing 6. Accounts payable and travel & expense (T&E) 7. Procurement systems 8. Performance management A Culture for Talent

20 Services Procurement Service Models A Culture for Talent

21 Critical Factors for Success Tactical Takeaways Ensure alignment with core business objectives and strategy Obtain stakeholder buy in at an executive level Don t forget about the users Determine model for program management MSP or self-managed Make decisions on funding model Message appropriately with suppliers early on in the process A Culture for Talent

22 Thank you! Neil McGrail Director, Operations Jon Kesman Director, Global Procurement