External Services Providers: A Flatter World

SAP | May 21, 2020 at 1:15 PM

The invisible workforce – specialists from consulting firms, marketing agencies, facilities management companies, and more – was hiding in plain sight long before COVID-19 emerged.

Now, organizations racing to keep operations going and employees healthy are rethinking how they manage external services providers in a radically unpredictable business environment.

“Many organizations understand the deep synergies their business has with certain services providers,” said Arun Srinivasan, general manager for SAP Fieldglass. “While these workers may not be employees, the capabilities they deliver can be essential to critical parts of the business. Organizations need to make sure that work gets done while controlling costs during these challenging times”.

COVID-19 is already forcing some companies to find more local services providers given travel restrictions and rapidly spreading outbreaks. Over time, Srinivasan said organizations may become more “glocal,” changing services provider populations to a mix of global and local sources.

“We knew the world was flat, and it just became flatter,” he said. “Looking ahead to economic recovery, employment will be a priority for every nation worldwide, and it may be more prudent and profitable for companies to engage with both local and global services providers”.

Gap in Worker Management

External services providers often support company strategy and digital initiatives, customer experience, and branding, along with daily business operations. Even so, organizations do not necessarily have a complete handle on who these providers are and their actual value relative to a company’s investment. During a video session of the virtual SAP Ariba Live 2020 event, Courtney Trask, solution architect for SAP Ariba and SAP Fieldglass, shared highlights from a recent Oxford Economics survey that revealed a significant gap between the high value executives place on external services providers versus how well they manage workers over time.

“Companies spend billions of dollars on services providers, yet these external workers are frequently undermanaged,” Trask said. “Who’s working for you is a very simple question, but many businesses can’t answer this as it relates to services procurement workers”.

The Oxford Economics study, which was conducted in collaboration with SAP Fieldglass, collected feedback from more than 1,000 senior executives in midsize and large organizations across 24 industries. Almost 60 percent of surveyed executives worldwide said that the external workforce helped their company compete in a digital world. However, when asked to rate how well their organization managed services providers, respondents indicated that management rigor declined as projects moved forward. Management was highest during the planning phase (64 percent), but steadily decreased through measuring performance against goals (55 percent), sourcing (54 percent), onboarding (47 percent), offboarding (30 percent), and re-engagement (25 percent).

Limited Project Visibility Has Business Risk

Respondents to the survey also had far less information than expected about projects that involved services providers, including knowledge of contract terms (48 percent), who was doing the work (44 percent), worker location (44 percent), and worker compliance with required licenses and certifications (36 percent). This lack of information has short- and long-term business risks.

“Organizations generally do a good job finding the right services providers and negotiating the contracts with them,” Srinivasan said. “Knowledge went downhill when it came to enforcing the contract and executing against it. Managers may not know where the statement of work exists so they can refer back to it. Making sure services providers are adhering to the agreed-upon contract is particularly important during a crisis”.

Conduct Frequent Workforce Pulse Checks

Companies need to track what is happening with their workforce, particularly in a fluid business environment where events move quickly with unexpected turns. This includes project status and what services providers are experiencing. Srinivasan said companies are gaining insights from weekly or even more frequent pulse checks to help make the right dynamic business decisions. Leaders in some regions are also thinking ahead.

“Depending on where they are, organizations are starting to plan for a post-COVID-19 business world,” Srinivasan explained. “This encompasses how they will do business, serve customers, and anticipate and react to changes”.

As some parts of the world slowly recover from this pandemic, leaders are asking profound questions about how business will function, including the best way to manage the important contribution of external services providers. In fact, this group of workers will likely grow as digital transformation continues.

In the Oxford Economics study, 65 percent of respondents ranked their external workforce important or extremely important in meeting business needs for specialized new IT and digital skills. Shining a light on their very visible contributions will no doubt help companies innovate in a post-pandemic world.

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