What are the benefits of using statement of work as part of an MSP?

While Statement of Work (SOW) engagements can allow employers to hire the best contingent talent to complete a project, the approach you take to building SOW into your talent strategy can vastly impact the end results.

In this article, we look at how implementing SOW as part of a Managed Service Programme (MSP), and using the expertise of a Managed Service Provider, can realise far greater cost savings than simply managing current supplier relationships within a Vendor Management System (VMS) alone.

The rise of Statement of Work services procurement

Increasingly, companies are moving away from input-focused time and materials services contracts to outcome-led SOWs in an effort to generate cost savings, as suppliers are paid based on agreed deliverables and milestones.

But research by VMS software provider SAP Fieldglass found that a staggering 1 in 4 projects weren’t completed on time or to budget with just over a third (36%) not meeting objectives. And 41% reported ‘maverick’ spend on service providers.

So what can organisations do to maximise statement of work ROI by controlling costs and maintaining full visibility of their spend?

The most important thing is to engage with the right Managed Service Provider (also referred to as an MSP) who can help them achieve value for money by treating SOW as part of their existing Managed Service Programme - and not something that exists outside of it.

By engaging with the right MSP, businesses can draw on years’ worth of knowledge and experience of managing and negotiating with suppliers – and can start to benefit from more favourable terms and conditions. An MSP will also typically assist in supplier onboarding and VMS training, to ensure that processes are optimised just as much as terms.

But the important point about drawing on the expertise of a reputable MSP is that its experts will make a big difference to organisational spend at the source-to-contract stage of an SOW transaction – also known as the ‘upstream’ stage – when pricing, scope of work and contract negotiations take place.

This is where the biggest statement of work gains are to be found and, because many organisations lack specialist supplier negotiation skills and labour market intelligence, upstream optimisation is arguably the biggest benefit of managing SOW within an MSP.

How does SOW work within a Managed Service Programme?

In practical terms, an MSP will help shortlist suppliers and their Request for Proposal (RFP) responses, which provide details of timelines and project pricing, and they will also identify the most suitable candidates with the appropriate skills for the work.

Another critical element of an MSP’s upstream SOW support is compliance, ensuring that workers are classified correctly. This is vitally important, as misclassification can result in fines and even legal action.

By using a VMS to manage the project brief creation and distribution, as well as the analysis and selection of suppliers, and not just the progress and completion of the project itself, organisations start to achieve real benefits around standardisation of terms and supplier performance evaluation.

This is the difference between treating SOW services procurement as part of your wider MSP and keeping it separate – one approach leads to greater visibility, control and cost savings, whereas the other leads to inconsistency, greater risk, and higher costs.

Want to know more? Get the guide

To summarise then, a reputable MSP will bring the knowledge and expertise to add rigour to the buying process, so that procurement leaders can get maximum ROI from every supplier. The right MSP partner will also have the market insight and technical capability to achieve greater external workforce efficiencies while driving down costs, reducing risk and standardising processes.

If you’d like to know more about this topic, get your copy of our guide ‘Services Procurement: How to boost ROI from your hidden workforce’. Download here.