While companies grapple with a weak economy, smart businesses are thinking less
about the types of workers with which to staff their organizations and more
about the mix of solutions needed to meet business objectives. After addressing
this question, heads of organizations can determine the right mix of permanent,
contract, or offshore workers, or other project-based support to meet their
goals, whether they're building a software platform or getting their buildings
cleaned.The pool of talent is deeper and broader than ever, due in large part to layoffs. To find the right mix and track hundreds or thousands of workers who may or may not be permanently employed, leading companies take a strategic view toward workforce planning. In doing so, they save money and increase productivity.
Thoughtful businesses that have used the Internet to electronically procure materials to build their products now are doing likewise with workforce planning or services. These companies are using Web-based applications, known as “services procurement” solutions, to create private marketplaces with staffing agencies for sourcing, delivering, and managing outsourced services, such as contract labor, consultants, and fixed-price projects. The results have been impressive; some companies have saved as much as 25 percent of their annual budget for these kinds of services.
CAPS Research estimates that 54 percent of corporate procurement spending is for services; the balance goes toward direct and indirect materials. For many Fortune 500 companies, that’s nearly $2 billion in services.
In a private electronic marketplace, staffing agencies bid competitively on positions and projects distributed to them online by an organization’s hiring managers. This competition at the transaction level produces quicker responses, better rates, and higher quality candidates for the company buying services. While services outsourcing and contingent labor are not new, the “Webification” of such tasks is.
Another recent phenomenon worth noting is the upskilling of the services mix. I mentioned that a “clean building” was a goal, not who was doing the work or perhaps even how it was being done. But equally compelling is that contract positions are not just for secretaries and administrative assistants anymore. Highly skilled positions such as professional services consultants from the Big 5, IT workers, and scientists have entered the mix. The dramatic rise in the skill level required of contingent workers and the scope of assignments has driven the need for a collaborative platform to ensure that companies are saving money and capturing knowledge while continuing to attract the best talent.
Current challenges
Most companies try to manage services procurement through an inefficient combination of labor-intensive, manual processes, including paper-based record keeping, phone calls, and faxes. This time-consuming approach leads to other problems, such as limited financial reporting, lack of easily accessible information, low-level vendor compliance, and frequent unauthorized spending.
In addition, organizations typically have no convenient way to collect and share information regarding the performance of the workers. This can allow a worker who is “below par” to leave one department and get rehired in another. Equally troubling, a company may miss an opportunity to retain a high performing contractor. Sometimes, workers may fill out timecards incorrectly because they misunderstand rules regarding holiday pay, lunch hours, or overtime. In a manual system, these kinds of errors may not be easily caught and can be costly to correct.
For these reasons and others, market researcher Gartner Group foresees growing demand for services procurement applications, with 30 percent of Fortune 1000 enterprises using a services procurement solution by 2007. Furthermore, the Bureau of Labor Statistics predicts that the number of temporary workers will increase by 49 percent from 2000 to 2010, compared to a 15 percent increase expected in permanent workers during that time.
Companies in many industries, including telecommunications, financial services, and pharmaceuticals, are deriving benefits from implementing services procurement applications. For example, prior to deploying a software solution, a hiring manager at a leading telecommunications provider would call one or two suppliers when trying to fill a position. After selecting a candidate from the few submitted by the agency, the hiring manager would try to get budget approval for the position by e-mail or phone. Filling a position typically took three to four weeks, and, because it was impossible to enforce existing business rules, “maverick” spending was a major problem.
When workers were assigned to projects, they would fill out paper time sheets. The company audited these time sheets to make sure it was billed correctly, but the paper-based process was cumbersome, making it difficult to determine the total cost of a contract position.
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