June 24, 2021

A Three-Step Process for Navigating the Stormy Seas of SOW

Jack Quarles
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Enterprise buyers are facing the proverbial perfect storm in services procurement.  Especially in IT, demand for consulting services (and, by the way contingent labor, too) remained steady throughout the pandemic, as companies that were otherwise willing to let go of certain speculative growth initiatives clung with determination to their digital transformation efforts.  Now, as the economy is emerging from the pandemic recession, competition for project teams to support growth is becoming much more intense, driving up both the costs of services in general and, at the same time, increasing the likelihood of overpayment in SOWs.  Compounding the problem, sub-optimized services agreements often contain inherent but not easily identifiable risks, due to their complex, technical and often bespoke, purpose-driven nature.  

At the same time that companies are feeling pressure to address these challenges to services supply, in most cases they are doing so without the proper instruments of navigation, as they have very little clarity on the efficiency or effectiveness of their SOW spend across the organization—especially where purchasing decisions are distributed across multiple business units and out to front-line managers.  The result is that most companies are paying above- (or well above-) market rate overall and, as part of that, are failing to optimize each service need specifically for right supplier, right location, right role or right level of worker seniority.  

At Brightfield, we enable customers to make sense of the costly messiness of the current market for services procurement.  Make no mistake, most buying organizations are very aware that they are overpaying and assuming undesired risk; they just don’t possess all the tools to determine exactly where and to what magnitude these issues exists, what the specific drivers of the problems are, and what the best alternatives might be.      

Customers use our TDX platform and support to identify, eliminate and capture return on extended workforce inefficiency.  In the case of SOW assessment and issue resolution specifically, our process is to help sourcing organizations:

1. Validate the opportunity
2. Quantify the benefits
3. Drive for results

As example, highlights from a recent Brightfield project:

Achieving 30% Reduction in Cost:  A major media company needed help evaluating their SOW spending, seeking to reduce costs fairly significantly in order to fuel growth elsewhere in the business.  Using our technology to review hundreds of agreements across the enterprise, we identified numerous opportunities in support of a 30% cost reduction target.

Validating the Opportunity:  The potential to reduce cost by changing worker location was not a new idea, but we validated the specific opportunity by analyzing internal and market data.  We were able to show that the incumbent supplier for the project was also providing, but not pro-actively offering, offshore labor for the company.  As further validation, we looked at the content of the SOW scope and activities and found several other projects where different business units in the company were doing highly similar work in the recommended offshore location.

Quantifying the Benefit:  We quantified the opportunity by demonstrating that savings of over $1M were available on a $3M project, calculated by comparing current SOW US pay rates to Brightfield’s TDX market benchmarks. This was the inherent savings potential for just one of the customer’s projects; and, by extension, if they were to apply this same approach to the rest of their portfolio, where appropriate, the savings would quickly stack up.

Driving for Results: Having demonstrated that the savings potential was both real and of a magnitude worth pursuing, we next worked with the customer to lay out a plan for action.  Too often the pathway between identified and realized returns is blocked by organizational process or political challenges, and so it is critical to define next steps that are convincing and manageable.  In this case, we worked with the customer to:

1. Schedule a summit between our primary contacts in sourcing, the functional owners of the project in question, and the business leads who were already doing similar work offshore, to gain buy-in and resolve and potential concerns around moving the project offshore.
2. Confirm with senior leadership the plan to move the project offshore, sharing a highly-detailed business case enabled by TDX, demonstrating the financial impact of the move and highlighting any relevant operational considerations.
3. Create an action plan for re-negotiating with the vendor in question, setting timelines and expectations about the process, and tracking and quantifying returns.

Effecting change often comes down to a cost-benefit analysis.  It’s one thing to be 90% sure (100% even) that a project costs more than it should; it’s another to definitively quantify the premium using market data and then spell out the required steps to drive to the right mix of supplier, location, worker and work that will yield both competitive rates and better outcomes.  At Brightfield we are extremely proud of our unmatched global data set and automated extended workforce management support, and prouder still that our platform helps clients achieve real impact.  Calmer waters with the wind in their sails.

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