Don’t Overlook the Soft Cost Savings from SOW Management

A recent article in the SIG Newsletter on the best practices for managing and analyzing statement of work spend that described the rapidly maturing market for centralized SOW (Statement of Work) management programs and the usefulness of a modern VMS (Vendor Management System) also described the one-time and continous benefits of managed SOW programs (under the guidance of a PMO – Program Management Office) and the hard and soft cost savings that resulted. While many organizations move to managed SOW programs, often through a MSP (Managed Services Provider), in pursuit of the hard dollar cost savings, that are often in the 10% to 15% range when done properly, the long term soft cost savings will often be more valuable.

In particular, the following benefits are invaluable to an average organization:

  • single point of contact for contingent labor needs
    no need to contact, and manage, multiple providers to fill different labor needs
  • reduced cycle times
    one call and the PMO or MSP uses a process already in place to locate and onboard your contingent labor
  • standardized criteria
    every department uses the same definition, and the company pays one rate for one type of resource
  • increased visibility
    one report shows the total spend on contingent / managed labour by type, department, provider, etc.
  • compliance firewall for classification, tax, and labor law issues
    which significantly decreases the risk of a massive fine when the same contingent workers are repeatedly rehired (and the government decides they are now employees and you owe more taxes and benefits)
  • standardized performance metrics
    and managed suppliers who know what is expected of them
  • better labor needs forecasting
    from complete and accurate contingent workforce data
  • payment management
    no interest from late payments, no overpayments, and, most importantly, no double payments

All of these benefits reduce complexity, increase reliability, and reduce risk — which keeps costs down in the long run as complexity, risk, and uncertainty only serve to drive up cost.