Find Cost Savings in Your SOWs

Transcript:

Bruce Morton: Allegis Global Solutions presents the Subject to Talent podcast, a hub for global workforce leaders to unleash the power of human enterprise. Thank you for listening in as we explore the most innovative and transformational topics impacting business today.

Bruce Morton: Hi, I'm Bruce Morton, the host of the Subject to Talent podcast. Today I'm joined by Joe Davíd, a very good friend of mine who's Director of Service Excellence for Procurement Solutions here at Allegis Global Solutions (AGS). Joe has over 19 years of experience in service procurement and contingent workforce strategy and leads our procurement solutions service line. In his role he's accountable for product growth and strategy including consulted client leadership on the services procurement roadmap and implementing extended workforce programs. Joe, welcome, thank you for joining us today.

Joe Davíd: Thanks for having me, Bruce, excited to be here.

Bruce Morton: Great. Those regular listeners will know, we always ask our guests the very first same question. How did you get into the workforce industry? What was your journey to get you to where you are today?

Joe Davíd: It's a great question. I think like a lot of people in staffing and workforce industry, I never intended to get into it, I definitely fell into it, and it's a happy accident. I mean, the long story short is I graduated from the University of Maryland with an English degree. Actually, that's when I joined Allegis Group, our parent company, and another one of our operating companies Aerotek as actually a bids manager so I was actually helping to write business development proposals for staffing contracts. I had no idea really what AGS did. I was happy to get a job right out of college that was related to my degree, I focused more on technical writing and professional writing. That was really my exposure into what Allegis Group did, what staffing was overall by helping to secure these requests for proposals for staffing.

And then from there I then made my move onto the managed service provider (MSP) side of things. I had a stint recruiting with Aerotek for about two years. I recruited accounting finance, so I was able to get my feet wet, really understanding what recruiting is all about. But then in 2007, that's when I joined AGS to help launch, at that point in time, the largest MSP program we had in financial services, and it's just grown from there. Most of my career at AGS has been in operations starting off with that program, leading it eventually, and then going to quite a few other programs, standing [them] up, implementing them. In almost all of these programs, there was some sort of services procurement component. As I started developing this portfolio of experience implementing services programs and connected workforce programs, then I was able to move into this new role that I'm in right now as a product leader specifically for procurement solutions service line.

Bruce Morton: Great, thanks for that. And I guess one thing that hasn't changed in 19 years is that companies are looking for ways to cut costs.

Joe Davíd: Yes, especially now.

Bruce Morton: Especially in current times of economic uncertainty probably cutting costs quickly. Organizations still have to get work done so how can they look to services procurement or statement of work (SOW), as it's sometimes called, to identify those quick wins when it comes to cost saving?

Joe Davíd: Absolutely. I think first and foremost it's acknowledging that there is significant cost savings on the services side, right? And I say that because we have a lot of clients that we may be only running through a course program, but right now is only focused on staff augmentation or maybe is one of our RPO-only clients. And in those situations, obviously, we also are faced with the needs to do some sort of cost savings. In those type of programs, they're initially looking at just what they have immediate control over, or the staffing suppliers may be around RPO. But really just understanding that for these client organizations, they are getting work done and engaging talent under SOW that might not be managed in the program now but there's an opportunity to look at it and figure out are there are additional levers of cost savings so we can implement. And all the cases would have an even larger impact than let's say a generic application of a 10% rate reduction on the staff log side.

So first, just acknowledging there definitely is a lot of opportunity in SOW overall. And then really from that, especially this year, knowing where we're at economically, there's always the balance of what can you do quick wins for realizing cost savings, and then what are those more long-term like programmatic solutions that you can get in place to ensure long-term cost savings.

Talking about the quick wins first. I really think at this point pragmatically if you're looking to implement really quick wins for cost savings, there's probably three main areas.

One is first and foremost implementing what I call quick bids so trying to advocate for more competitive sourcing. And when I say quick bids, it's just the concept that in a lot of organizations we, obviously, already have existing approved suppliers and services. It's just getting more of that cultural movement of bidding out opportunities to at least figure out what's in the market. As opposed to what I do think happens with a lot of our companies or our clients, where they already have an existing relationship with a service supplier and they just keep on going to them without really testing the market. So that's one thing you can really implement quickly. Obviously, there are more complex ways that you can implement it down the road. But you can literally just start doing quick bids by just reaching out to your other suppliers, that you're working with, within that one organization and just asking them for a quick quote, right, on similar steps of work. And then just using that [bid] as leverage when you're trying to negotiate an opportunity.

Two other ways [to reduce spend] that I think you can definitely do this year that are feasible are also looking at reclassification. That is a big area that a lot of our customers are interested in now. And really just restate what that means. It's just this idea, that under the SOW, a lot of our customers, especially our customers that don't have a formally managed program on the SOW side, it is likely that some of that work whether, even though it is under SOW, is likely just misclassified staff augmentation spend. Really where that comes into play is that knowing that the work is actually just staff augmentation meaning the client's still owning the outputs, they're managing the workers.

In a lot of cases, there's no need for our clients to pay a consulting rate premium on top of that if the supplier themselves really aren't taking any type of accountability. So there are ways that we can look at that SOW spend, analyze it, figure out if there's risk for misclassification, and then in turn move that work into a staff augmentation model leveraging staff augmentation rate. Especially if it's an SOW that's a simple T&M, time and material-based engagement, you can typically move that fairly efficiently into a staff augmentation model and then getting those rate negotiations and realizing cost savings immediately.

Bruce Morton: Great. Three quick ways there. Quick bids, don’t just stick, and send to one, right? Give some choice, send it out to three different bidders.

Joe Davíd: That’s right.

Bruce Morton: Second one was to look at their misclassification or reclassification, making sure people are in the right bucket, the staff fold that they should be. And then the third we’re going to talk about.

Joe Davíd: The third one … Again, this is thinking about things you can do now is just looking at SOW extensions and negotiations. ’We're coming from the middle of the year, we have a lot of companies that they do some sort of midyear budget review on their services work, or maybe they’re starting to do planning for 2024. This is the opportunity when you are now looking to extend an SOW is really questioning, as you're doing an extension with that incumbent supplier, is there an opportunity to do some sort of negotiation?

Again, if ’it's a high-performing supplier‘ we are not advocating you disrupt the business and change suppliers just haphazardly. But even in an extension, there’s always potentially some opportunity to look about, look at the reason for the extension. So for example, if the SOW had to be extended because maybe the supplier couldn’t meet their milestones on the deliverables on time and they needed to ask for three more months to get the work done, there's definitely, in those situations, an opportunity to negotiate that extension. So maybe it's a no-cost extension instead of just assuming that we have to give the supplier additional funds, especially if it's something that's determined to be the supplier fault.

But even in those cases, knowing that everybody's working through ways to leverage additional cost savings, it's just an opportunity to ask suppliers like "Hey, we're looking to continue to work with you and do business but we're in a tough time ourselves, we need to realize some additional cost savings. Is there anything we can do as a condition of giving you more business that you could maybe lower the total price of what you originally quoted out to us?" That's another immediate way to start doing this.

Bruce Morton: Great, thank you, that's three great tips there. On a more long-term or perhaps more strategic long-term savings, what would your recommendation be there?

Joe Davíd: When you really look at these levers we talked about, misclassification, negotiation, doing competitive bids, really when you try to think of a long-term solution it's really now starting to think about a programmatic solution, what we call an actual service procurement solution, or for AGS we call our spend in sourcing insights programs. And really what that means is now creating or enabling, let's say if you're using a VMS, that technology or that SOW module. They'll start managing the SOW outside of just the front-end classification, now actually managing the SOWs within a technology.

And getting the actual data and KPIs to really prove that yes, in fact you did negotiate a really great deal with a supplier, and you realized some great initial cost savings but that those cost savings actually come to fruition throughout the entire life of the projects. Meaning, after you negotiated that great rate, are we sure that the SOW didn't actually just start getting extended over and over and over again and those initial cost savings that you thought you realized have now gone out the window, right? You really only start realizing that if you start implementing a program that manages the full life of that project from start to end.

And then, obviously, for sourcing as well too. Like I said, quick bids. You can really do that pretty quickly; it could be a manual effort. One of the things we're certainly advocating is then using enabling technologies to make sourcing easier. One of the reasons why I feel like a lot of our customers, from a cultural perspective, haven't been able to push a lot of competitive sourcing is that a lot of our procurement sponsors themselves, they're not engaged early enough in certain opportunities to really advise in a timely manner that hey if there's an opportunity to get some sourcing done typically they're just being asked to really redline and rubber stamp until that's already been inked between the business and the suppliers. So, the element of time has been lost. We've been partnering with platforms like Globality, Bruce, as you know where there's an opportunity to talk about enacting some sort of competitive sourcing activity using generative AI to really help sourcing go quickly and at the speed the business needs to actually get these competitive sourcing opportunities without really interfering with the business need to still get work done quickly.

Bruce Morton: Right. Great. Thank you for that. A lot to do there and some great ideas, I really appreciate it. People, when they follow up on these podcasts some will say, "But where do I start?" Let me ask that question to you. There's a lot to do there. What's your pearl of wisdom there? Where do organizations start?

Joe Davíd: Well, I think first and foremost you need to get the data, right, and build the business case. We have clients that are in a variety of stages of maturity, and service and procurement for our customers that maybe there's nothing that their contingent workforce partners are managing on the services side maybe it's just staff augmentation or just recruitment process outsourcing (RPO). There are those initial steps of at least getting the basic spend reports, right, and you can work with organizations like us or within your own organization internally. They start looking at that out-of-program spend and start targeting subs of that for analysis. It's like we said, maybe doing a misclassification analysis might be a good way to look at it as a first go, right? Out of all that spend you're analyzing there's likely some percentage of that that very clearly, without a lot of scrutiny, it can be seen as actually being staff augmentation in T&M, and then you can focus on that.

And the other thing when you think about doing those analyses, it then helps start proving maybe your suspicions on the reasons why this is happening. So for example, you start looking at all these SOWs and oh, the reason why we have so much misclassification is that maybe as a business process, you're allowing a lot of those SOWs to be created on supplier paper. Maybe your organization doesn't actually have pre-built templates that your business managers are mandated to use and so in turn all of the things you'd like to control are actually out of your control because it's actually all being inked on another organization's paper. And again, by the time our procurement sponsors get that in those situations, it's really hard to correct that without interfering with the business needs to just get work done.

Bruce Morton: Right. So it's visibility, visibility, and visibility both sides of it.

Joe Davíd: That's right.

Bruce Morton: Thanks for that. Talking of which, how does this differ when organizations need to look or can look through a global lens? How does that impact the strategy?

Joe Davíd: If we think about services, right, that use [outsourcing]. There are big IT outsourcers as an example. All these organizations, one of their value props is the ability to deliver IT services potentially at a more effective cost model because they have an offshore component, right? And we have a lot of our clients where there's several of those big IT suppliers that are in our programs, they have some component of work that's being done onshore, and then they're able to get more specific IT talent maybe in an offshore model to get more productivity on behalf of their customers. The lever or the methodology certainly can work, and it makes sense. I'm certainly not saying that it's a bad way to go. I think where services procurement solutions can really help verify if it's actually working, it's like we talked about before, as soon as you've inked over this on-offshore delivery model with these big IT suppliers, now you can actually start measuring okay the mix of on and offshore workers by managing their statements work and their projects within a contingent workforce program.

So now you can really figure out hey, when we started working with IT outsourcer A, they committed that 75% of their workers would be, or the work would be deployed offshore to better cost savings. When we start now managing multiple projects under these suppliers is it actually happening? Or actually, you're seeing some scope creep where more of that work is actually in onshore locations maybe more so than you anticipated. So again, to your point, it's about the visibility piece of it, especially when you think about offshore models to just make sure that you're really getting what you expected and there's not this opportunity for this cost creep in other situations where you just have no idea after you set up the infrastructure and you're not really sure if you're getting the right quality or the right mix of on and offshore workers.

Bruce Morton: Got it. And with it and the pressure that's, obviously, on organizations right now, cost pressures, what's your advice in terms of ensuring that organizations, while they're thinking about cost, are not also decreasing the focus on diversity equity and inclusion?

Joe Davíd: I love that question. The whole concept of diversity and inclusion, it's always been a passion of mine period and during my time at AGS, but it's also something that I think we need to talk about more specifically in services. I think for most contingent workforce practitioners, the concept of diversity spend, diversity candidates, it's pretty well established on the staff augmentation side of things. Obviously, in RPO and full-time recruiting the concept of diversity is at the forefront. But I think, to this day, we still have a lot of our clients and organizations when they think about spend, services spend specifically, they're still really thinking about this whole idea of let me just aggregate as much spend with one diverse supplier, right? It's more like a tier one, tier two play of just getting as much spend as you can.

And again, there's nothing inherently wrong with it. But the thing that I talk about with our clients is challenging the assumption of ‘I wouldn't over-index or just trying to funnel, or just looking at diversity spend.’ There's another aspect of really thinking about how you are creating additional opportunities for diverse suppliers in the services space. Really what that means is, we’re now at this point where we have a lot of different companies, especially companies that maybe started off in staffing, that are starting to develop true services capabilities as well. And it's important to really talk about that because I think, in the past, there was still maybe this old-school mentality of ‘in a contingent workforce program you have your supply chain, and your suppliers had to pick one way or the other.’ They either had to be your staffing supplier or maybe they could be services, but they couldn't do both.

I do think it's a little bit antiquated at this point. It also doesn't acknowledge that, just like our client organizations have evolved, our service providers or staffing companies and service providers have evolved themselves, right? A lot of these companies have started developing real services capability and the ability to deliver a milestone. The global-based engagements have a bench that we can hold them accountable for and then use that as an opportunity to really mentor diverse staffing companies to become diverse services companies. And now they can really be a really great competitor to say, a big global IT outsourcing organization.

If you look at what I'd say the more traditional services supplier community, a lot of the companies that our clients deal with are just these large, the big four, the big six, these big IT outsourcers. They, obviously, don't meet a lot of diversity criteria in most organizations. But then being able to mentor these potentially smaller but these businesses around developing real services capability is a great way to drive more competition in that space and really create more diverse opportunity in addition to creating more diverse spend on our management.

Bruce Morton: Right. And probably getting a great deal as well. Those smaller organizations, if they want the opportunity to show what they can do, right?

Joe Davíd: Exactly. They're hungry for it. They want to be able to prove themselves in this space.

Bruce Morton: Right. Great, great commentary. We've touched on tech, touched on data. Obviously, here we are, AGS, the human enterprise so we should talk about the human elements of this. Can you perhaps just bring all of this to life with an example of where the human interaction has made a big difference?

Joe Davíd: Absolutely. I mean, that's the core of, right, of our organization. I think it's really a great topic to talk about, especially as it relates to procurement solutions. Again, especially this year with all the economic pressures that our clients are facing, it's very easy when we think about trying to leverage cost savings to take a very cold, just purely numbers-driven view and really just maybe over-index on one or two different cost savings levers without leveraging relationships to really get a more meaningful outcome. So still getting cost savings but maybe in a more meaningful way, a more precise way.

So an example of this. We have one of our technology customers out here in the West Coast where cost savings is actually really important. Just they're part of that big Silicon Valley area, a collection of IT companies that have had cost reductions on the full-time side and now they're having a lot of pressure to make sure they're having cost reductions in services as well too. This particular company is probably not ready yet to do full competitive sourcing but we do have an opportunity now, because they're doing a lot of extensions of their existing SOWs, to do outreach to individual business managers and really talk to them about their SOWs, the extensions, the reasons behind it, and then start figuring out if there's an opportunity to actually leverage some sort of cost savings in these negotiations. And that's really where that human element has come into play.

First and foremost, our procurement specialists, and that's like our line-level team that's supporting our customers in the day-to-day of managing SOWs, they're having a conversation, right? This isn't just a blanket email being sent that we're going to reduce the consulting bill, right, to a certain amount. They're actually reaching out to the business, they're seeking to understand why did you pick this company in the first place? How's the project going? Are you happy with the outcomes? And by teasing out that through a conversation and building a relationship we can really be more precise about, ‘Okay, hey, based on what you're telling me, there's a little bit of an opportunity for some performance management with the supplier. In that let's use that opportunity to leverage some cost savings in the negotiation of the extension of the SOW.’

What we found in those situations is that we can leverage some good soft cost savings for the business. We have an example this week with one of those negotiations where just by leveraging a move from SOW to staff augmentation, that project was able to reduce by about $50,000. Which in the big scheme of things at enterprise level might not seem like a lot but you've got to think about this procurement specialist now is having probably about a dozen of these conversations every day, and at least 25% of those is leading some similar type of outcome from that, right? These little moves start building into really material overall cost savings that is great to report out to our client. But then the bigger thing that we've seen that's coming out of it is that it's getting those individual managers realizing, ‘Oh wait, there's this program that we can go to next time proactively and they can actually help me with a full bid,’ and maybe they can help me with leveraging even better cost savings," right? And that's all just based off having that conversation and having a relationship with these stakeholders.

Bruce Morton: Great. That's fantastic. Thank you so much for that. Well, the time has flown by. We've been overloaded with some great ideas so I truly, truly appreciate that. We like to end our episodes looking a few years into the future. So here we go with the if you had a crystal ball question. If you had a crystal ball how will procurement solutions likely change smart spending practices, and ultimately how work gets done in the future?

Joe Davíd: I think, especially nowadays, this might seem like an easy answer, at this point, but I definitely do think the whole idea of generative AI is really going to help allow us, and allow our customers to focus on what's most important, right? We talked about partnership with Globality. They're using generative AI to help make sourcing easier from an end-user perspective. But it's also this idea of when we build SOWs there are technologies that we can do to enable the more administrative parts of this, like just filling out a template with basic information, something that can be automated. When we think about it, it's not to replace the human element of it, it's really just to supplement allow our people really to focus on that relationship piece of it, right?

To be really specific, right, in our service procurement programs we have procurement specialists, we have coordinators. For some of our programs, maybe 25% even in some cases 50% of what they do right now is a lot of manual follow up of SOW approvals. Transcribing and building SOWs in a VMS. A lot of that can be automated. And I think that a functionality is going to get to scale, it's going to get smarter and smarter so our teams can start focusing on just the relationship piece, right, and providing advice and consultation. And, obviously, our customers themselves can use these technologies as well too. But I think the goal of procurement is probably going to continue to be more timely and more relevant on the front end. And part of that is just using technologies to help take care of this administrative side so that's not something that's preventing us from being part of those upfront conversations, and having a seat at the table, and really providing some really great buying advice on the front end.

Bruce Morton: Great. Fantastic. Joe, thank you so much for your time and for joining me today. What should listeners do if they want to learn more about procurement solutions here at AGS?

Joe Davíd: So, if you're an existing AGS customer you have your program executives, your program leaders, reach out to them. My function in service excellence, we really are linked in with all our client delivery leaders. Reach out to them and just let them know that you want to learn about procurement solutions, and then that program leader will be able to engage with my team so that we can engage with you in turn and figure out if there's a consultation, if it's a workshop or if you need help building a business case on developing a service procurement offering. Really that's what the rule of my team is for. Really working through your program leader is the way to start and then we'll go from there.

Bruce Morton: Great. And if you're not an existing customer, obviously, check out our website AllegisGlobalSolutions.com. Joe, thank you so much great talking to you.

Joe Davíd: Thanks for having me, Bruce.

Bruce Morton: If you enjoy this episode please rate and review us on Apple Podcasts, Spotify, or wherever you get your podcasts. And if you have questions send them to SubjectToTalent@AllegisGlobalSolutions.com. Follow us on LinkedIn with the hashtag Subject to Talent and learn more about AGS at AllegisGlobalSolutions.com where you can subscribe to receive additional workforce insights. Until next time, cheers.