Employees account for just 58% of total workforce spend. What about the rest?
The labor market is undergoing huge shifts. In-demand skills are in increasingly short supply – particularly in the U.S., where Deloitte points out there are now more vacancies than job seekers. On top of that, many people are turning away from traditional employment and instead choosing to work on a flexible basis.
The result? Game-changing ramifications for the way work gets done.
Our new research study, Services Procurement Insights 2019: The Big Reveal, found that 42% of total workforce spend is on the external workforce, which comprises:
- non-payroll workers (also known as contingent labor), such as independent contractors, freelancers and temporary staff
- services providers (companies that supply services delivered by people), such as IT consultancies, marketing agencies and law firms
The external workforce works across the enterprise and is essential to core operations. Traditionally it was used mainly for staff augmentation and cost reduction, but its role has become much more strategic. To name just a few examples, think of:
- consultants helping companies transform to compete in the digital age
- IT services providers helping organizations launch new channels
- marketing agencies helping companies reach new audiences
- agents in call centers supporting customers
According to our research, 48% of executives say their company would be unable to conduct business as usual without an external workforce. 74% say the external workforce is important or extremely important to operating at full capacity/meeting market demands, and 59% say the external workforce helps them compete in a digital world. Clearly, the external workforce plays a pivotal role in organizations’ success.
Yet despite its immense size and strategic importance, the external workforce is under-managed at most organizations. Our report focuses on services providers, because they are a vital but often-overlooked part of the workforce. The findings were concerning. (We have also published a report with insights into contingent workers, which you can read here.)
Our research reveals that many organizations lack visibility of services providers. Less than half of executives are highly informed about the basics of services providers such as contract terms (48%), where they are located (44%) and who is doing the work (44%). Even fewer have clear insight into how those projects actually go. Roughly one in four (25%) executives is highly informed about services providers’ quality of work and progress against milestones/deliverables (27%).
You can’t manage what you can’t see. In the same way, lack of visibility of services providers
is closely linked to under-management. For instance, one in four projects done by services providers is not completed on time or on budget. Another example: 44% of executives report digital security breaches with services providers sometimes, frequently or nearly every engagement. Think about that for a moment.
A small group of organizations stand out from other respondents. These leaders – we call them “Pacesetters” – outshine others in their visibility and management of services providers and their competitiveness in a digital world. Pacesetters’ superior management pays off, as they achieve much better business results from their services providers.
Want to emulate the Pacesetters’ success? Our research presents four key actions organizations can take to improve management of services providers, helping them reap more value from these engagements, maximize ROI and mitigate risk. To find out more, read the report.