SoW – How much have you really got?
On Average, 44% of an organisations workforce is external.
While I’ve been working with global organisations, picking on the ones that have a strong IT focus, I’ve seen an average external workforce split of around 90% SoW (Statement of Work) - 10% Contingent. ???
When you start drilling further into the reality and start getting the visibility of how a customer manages their external workforce, this is where the fun begins (Me, being a procurement guy, I geek out ?? €$￡ + risk)
Misclassification of workers is one of the greatest opportunity areas to reduce risk and make savings. ???
My explanation of misclassification is: “as soon as the Customer provides direct work instructions to an external worker that is provided through a SoW, it is deemed as supervision”.
What this can mean contractually and commercially to a SoW:
·???????Liability - the delivery and liability clauses that you spent weeks negotiating are out the window, and the responsibility can transfer back to the Customer
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·???????Risk – If anything happens to the worker or if the worker does fraudulent activities, the responsibility can move back to the Customer
·???????Legislation – This can be Country dependant, but there are cases where the Customers become liable for the Workers tax payments and in some cases had to hire the worker (deemed employed)
·???????Cost – Potentially you could be paying SoW delivery prices for a supervised worker.
On SoWs, I have seen mark-ups between 20 to +40% applied
Imagine this. You had 100m of Spend on SoWs. Suppliers on average were applying a 40% delivery / at risk mark-up. But you found 20% of the SoWs were misclassified and should be sitting within the Contingent Workforce Category.
Do the math. There is your business case for change.?
Advisor & Program/Interim Manager. Non-exec and advisory board member. Strategic Sourcing for People, Services, IT and Technology.
2 年Scott I fully recognize the SoW business case. My observation or even fear is that the industry has been “admiring the opportunity” for too long, but very few are really grabbing it.