The way work gets done is changing. To tap into specialized talent, organizations increasingly rely on the external workforce, which includes contingent workers such as freelancers and independent contractors, and services providers such as IT consultancies and marketing agencies.
In fact, according to new research conducted by SAP Fieldglass in collaboration with Oxford Economics, some 42% of workforce spend is on the external workforce. Yet, the study also found that many companies are not managing the external workforce effectively. Management of services providers is particularly weak.
According to the study, nearly half (48%) of executives say their company would be unable to conduct business as usual without an external workforce, and 59% state that the external workforce helps them compete in a digital world. Many executives believe the external workforce is important or extremely important for achieving business goals such as increasing speed to market (61%) and improving the customer experience/client satisfaction (67%).
The invisible workforce
The research reveals that services providers perform vital work across the enterprise. In particular, they are a valuable source of the specialized skills companies need to compete in today’s digital economy, such as artificial intelligence, machine learning, blockchain, data science, robotics and the Internet of Things.
And yet, while many organizations excel in managing the financial side of their contracts with services providers, they fall short when it comes to managing the “people” aspects of these engagements. These include who is doing the work, their certifications and training, their access to systems and facilities, the quality of their work, their progress against milestones and deliverables, and more.
The core issue is that many organizations do not view services providers as a workforce. Under-management of this “invisible workforce” can lead to unsatisfactory project outcomes and creates risk. The study reveals many staggering statistics, including:
- One in four projects by services providers is not completed on time or on budget.
- 44% of respondents experience digital security breaches with services providers sometimes, frequently or nearly every engagement.
- Only 27% of executives are highly informed about services providers’ progress against milestones and/or deliverables, and 25% are highly informed about the quality of work at the supplier level. This limited visibility makes it difficult to determine return on investment.
Pacesetters reveal best practices
Approximately 11% of respondents take much more rigorous approaches to managing and extracting value from their services providers. These Pacesetters outshine others in three ways: they have greater visibility of services providers; they apply more management rigor to these engagements; and their services providers help them compete in a digital world.
Molly Spatara, Global Vice President of Brand Experience at SAP Ariba & SAP Fieldglass, explains, “Pacesetters’ qualities help them thrive in today’s fast-paced economy. Given the high stakes and potential gains in services procurement, every company should strive to emulate or surpass the Pacesetters and manage services providers as effectively as possible.”
Four key actions
The research presents four key actions organizations can take to improve management of services providers, unlock greater value, boost return on investment and mitigate risk. These actions empower organizations to manage services providers with the same rigor used to manage employees, enabling them to reap far greater rewards from this workforce.