SOW is not the only big change underway in our industry – remember, folks, you heard it here first! If managing SOW-based spend were the only thing on the growth charts, then the technology and product roadmaps for VMS providers would be squarely aligned with supporting the broader Services Procurement market needs: SOW sourcing, contract authoring, dynamic funding and other SOW workflow related functionality and lots of general workflow integrations and improvements.

As it happens, there are groundswells of other interests vying for VMS innovation and investment dollars: talent pools, online markets, freelance management, worker tracking, industrial labor, etc. Supporting total workforce and talent management are arguably the more immediate, pressing needs facing VMS providers. But this focus on the labor or talent side of the contingent labor industry isn’t new in 2015. Indeed it is a carryover from 2014 where we saw the beginnings of innovation and M&A activity to support the blossoming labor / workforce management needs the market is calling for:

  • Merger of Beeline VMS (vendor management system) with OnForce FMS (freelance management system)
  • DCR Workforce’s release of Smart Track xCHANGE
  • IQNavigator’s launch of IQN Labs
  • PeopleFluent’s launch of The Mirror Suite for Talent Management

Doesn’t sound like much of a fork in the road?

SOW functionality has been a part of the VMS product suite for a number of years already. But I think the way SOW just appeared in our industry years ago has had a huge impact on how we collectively view SOW today. The origination of the SOW workflow concept as part of the contingent labor program was originally driven by a few big individual clients asking their VMS providers for special customizations – I know because I was one of those clients during my time at Capital One (Provade’s VMS). The way it happened was much more low-key and under the radar than if the VMS providers had proactively developed and executed against a new SOW product launch strategy. So I think it is fair to say that the introduction and evolution of SOW in our industry has been opportunistic at best, loosely defined and just plain squishy (that’s a technical term).

By coming onto the market in that fashion, very little attention has been paid to the plethora new spend types (beyond temp labor) that the SOW workflow functionality introduced to the program environment. This realization about the true impact of SOW workflow capabilities – ie access to and enablement of SOW-based services spend that is 10-20 times that of contingent labor alone – has been a slow developing message for most industry participants, including the procurement and sourcing leaders at client organizations. Even today a number of companies and program providers, in addition to a few industry analysts, refer to SOW first and foremost as just another labor channel. As shortsighted as that view is, that’s not the issue driving the fork in the road…

Ignoring SOW as the much bigger and broader channel source of non-temp labor spend is the issue facing our industry today.

To be clear, SOW always starts off as labor, but ultimately matures into more complex spend types.

So here you have it, the fork in the roadmap for VMS:

  • Focus on deepening the solution for managing the total workforce and talent management (a continuation of 2014)

OR 

  • Focus on broadening the solution to provide more apt, highly configurable, and tightly integrated automation to support their clients’ spend management needs across the broader Services spectrum.

Why in 2015 is this all of a sudden a fork in the road for VMS?

This fork in the VMS roadmap has not existed so prominently in years past for two key reasons:

  1. Most of the product investments and innovations prior to this past 6-9 months tended to serve the entire platform that runs both the labor and the SOW workflows (think reporting and analytics add-ons or graphical user interface enhancements, etc); and
  2. There has been little innovation in recent years that has materially disrupted the general dynamics of the temp labor market place.

In 2015 (including the carryover of activity started in 2014) both of these factors are effectively reversed:

  1. Significant talent and workforce innovations will be external to or will materially alter the core contingent labor workflow product; and
  2. The market dynamics for buying and selling and managing talent are already in the process of being disrupted.

The monolithic contingent labor workflow we have all become accustomed to over the years is coming to an end, especially as it relates to the relationship between talent and staffing firms. So the days of getting double duty out of technology and product innovation dollars (ie improvements that serve both temp labor and SOW functionality) appear also to be coming to an end. Going forward each dollar VMSs invest in product and technology will more likely than not have to be earmarked for either temp labor (total workforce, talent management, etc) OR for SOW workflow.

Of course it would be ideal to see VMS providers investing and innovating ample amounts on both fronts. VMSs that take such an approach will demonstrate their clear understanding of what Services Procurement truly is and what those Procurement practitioners (the emerging program stakeholder group, by the way) ultimately need to bring more Services spend under their management.

Final Takeaway

If you are in the market for a new or next generation VMS, then it is now more important than ever to think about your long term aspirations and to take a good, hard look at the VMS product and technology roadmaps. If you are expanding your program to include non-labor based, outcome oriented services procurement spend**, then major SOW functionality improvements, new features and possibly SOW sourcing and management practice disruption is what you should look for require of your VMS.

If you are not yet expanding your program to include non-labor based, outcome oriented services procurement spend, then it may well be you who is facing the fork in the road.

**To understand this important distinction between labor and non-labor based spend (aka outcome oriented), see prior post The New Spend-Labor Split Paradigm.

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