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Services procurement insights 2019: The big reveal, a study by Oxford Economics which was sponsored by Fieldglass, reported that 44% of workforce spending is external to the organisation, going to service providers (18.2%) or external contractors (23.9%).
But there is a lack of visibility of this external workforce, according to Fieldglass.
In a keynote presentation, Molly Spatara, global vice-president for brand experience at SAP Fieldglass, said: “We determined that many organisations are not fully aware of all the services procurement work flowing through their organisations and are not always thinking of these individuals as extensions of the workforce. You bring on service providers for their expertise, but they are being managed more like materials, which means you can’t get the most value from them.”
Verizon has been an SAP customer since 2001. Speaking at the event, Amar Nathwani, global sourcing manager at Verizon, said: “If you are going to manage your business, you need to manage your workforce.”
Describing the challenge Verizon faced in managing this invisible workforce, Nathwani said he would get frustrated if he spent “hours, weeks or months negotiating terms and it didn’t flow through”.
Molly Spatara, SAP Fieldglass
Having the right data to make decisions is key, he said. “Not having the right data flow is a lie, leading to brand reputational and financial risk.”
Discussing these risks, Brian Cicirello, senior consultant for strategic consulting services at SAP Fieldglass, said: “Organisations take out large segments of their core business to outsourcers.”
In a business-to-consumer organisation, this contract often means the outsourcer deals directly with customers, said Cicirello, warning that “if you can’t see how the supplier is delivering the right messaging, it can damage your business”.
There is also the security risk that can creep in if contractors and service providers are not managed closely. Digital security breaches may grab headlines, but Cicirello gave an example of how hidden risk could creep in.
He described how a bank realised it needed to replace a contractor that had gained access to sensitive data shortly after it had gained visibility of the contractors and service providers working at the organisation. However, after a few months, the contractor went back into the contracting market and was eventually rehired by the same bank.
For Spatara, the fact that such people can slip through the net and gain access to sensitive data behind company firewalls illustrates the risks posed by a lack of visibility into the extended workforce. “If you don’t have this visibility, it sets you up for bigger challenges,” she warned.
Link HR and procurement
Beyond security, a close link between human capital management and procurement can enable businesses to execute new projects more effectively, said Cicirello.
“The relationship between HR and procurement is special, given the amount spent to manage external talent,” he said. “Yes, you need the invoices and purchase orders to match, but also look at how to help HR execute on their talent strategy.”
According to Spatara, most organisations do not have the data that can enable them to ascertain the value of work being conducted by contractors and service providers.
Fieldglass sees an opportunity to link spending on external skills with internal employee costs, where intelligent spending management is used to inform the decision-making process.
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Verizon’s Nathwani said that since procuring service providers and contractors represents a big piece of human capital, it is imperative to work with HR to provide data to the business. For example, he said a company that wanted to conduct an artificial intelligence (AI) project could use full-time employees or hire contractors with AI development expertise, or it could bring in a service provider to develop a pilot project.
According to Nathwani, without the data on the various costs shared between HR and procurement to provide intelligent spend management, it was not possible for the business to decide whether it should develop skills internally, use specialist AI contractors or take the service provider route.
Changing nature of work
Fieldglass also recognises that the workplace is changing. “People in the digital age don’t want to be on your payroll,” said Spatara. “They don’t feel compelled to be full-time employees. But they are needed to operate the organisation.”
Supporting new working practices requires a rethink of collaboration across HR and procurement, she added.
Speaking to Computer Weekly recently, Ken Charman, CEO of Unilever spin-out enterprise software business uFlexRewards, said: “In the new economy, companies want to be more dynamic. Many areas of work are team-based, bringing people together who have the skills to achieve a particular task. We don’t need a whole accountant – just a few hours of their time.”
Spatara said organisations should assess how they manage their labour pool budget alongside human capital management. This requires both the skills that organisations have internally and the skills that can be acquired externally from specialist contractors, or via a service provider.
Such insight enables the right mix of internal staff, service providers and contractors to be assigned to business projects, she said.