Blog
Five market shifts reshaping SOW management in 2025 and beyond
November 12, 2024
According to Ardent Partners/Future of Work Exchange’s research, 40-60% of all contingent workforce spending is for professional services. These services – IT services, consulting services, marketing services, etc. – are increasingly crucial for achieving business strategies.
With the growth of external talent engagement via statement of work (SOW)-based contracts, contingent workforce programs must manage the shifting services procurement landscape.
Market shift #1: the rise of new talent acquisition categories/models
Contingent staffing models are evolving. According to industry research and consultants at Everest Group, enterprises are looking beyond staff augmentation and increasing their adoption of innovative talent acquisition options such as direct sourcing, independent contractors (ICs), and SOWs.
In their 2024 survey of 150 senior HR and procurement executives:
- 80% of organizations plan to increase their contingent workforce in the next 12-18 months
- 64% of organizations are considering adding temporary workers, independent contractors, and SOWs
- 30% of organizations believe their measures for addressing the contingent workforce are ineffective
Everest Group reports strong double-digit post-pandemic growth of services procurement spend and anticipates compound annual growth of over 20% between 2023 and 2028.
These statistics were presented in a recent webinar with panelists from Everest Group, Beeline, and Mastercard.
To view the webinar, click here.
Market shift #2: compliance complexity in a global market
By using more and varied categories of external labor, companies expose themselves to growing risks of misclassification. At the same time, governments are creating and enforcing new laws and regulations to control misclassification of non-employee workers.
In one case, a California court ruled that a US technology firm owed $5.5 million in back pay to contractors who were co-employed by the hiring company and the staffing agency that supplied them. In the UK, a personal service company (PSC) contractor recently lost a four-year battle with His Majesty’s Revenue and Customs (HMRC), the government’s tax, payments, and customs authority, over unpaid taxes and national insurance contributions (NIC) associated with services performed for a large multinational financial services provider.
There is also the issue of staff augmentation assignments misclassified as SOW engagements. A SOW is a legitimate and effective engagement mechanism, especially when work is deliverable- or milestone-based. However, too many managers simply create SOWs to avoid staff augmentation controls. In many cases the SOW only contains named workers or job titles at hourly rates, a telltale sign of a staff augmentation engagement. Worse yet, these SOWs frequently specify rates up to 70% higher than might have been negotiated for the same roles via contingent staffing.
Ensuring compliance with laws, regulations, and company policies has become a critical responsibility for contingent workforce program managers since failure to comply can result in severe financial and reputational damage.
View Staffing Industry Analysts’ webinar, “Risk is Growing in Contingent Workforce Programs.”
Market shift #3: AI and automation reshaping SOW management
In the future, industry analysts anticipate artificial intelligence (AI), and analytics will significantly impact services procurement. They note that AI-driven solutions can streamline processes, enhance decision-making, and improve supplier matching.
In the Everest Group/Beeline/Mastercard webinar, panelists discussed five areas where AI is already being used to streamline services procurement processes:
- AI-based sourcing platforms that match an organization’s requirements or specifications with suppliers’ capabilities
- SOW authoring to automate the creation of statements of work
- Price benchmarking
- Risk analysis of existing SOW-based projects
- Buyer profiling to analyze buyer behavior, detect weaknesses, and provide guidance to improve buying performance
According to the webinar panelists, some AI functionality is being built directly into VMS platforms. Additional AI-powered solutions are offered by specialists within the contingent workforce sourcing and management ecosystem. One such is Brightfield, a Beeline partner. Everest Group noted that managed service providers (MSPs) and VMS providers are partnering with third-party providers to bring more digitization and automation to the services procurement spend category.
For more information, read Ardent Partners’ “Solution Spotlight on Beeline” or watch the services procurement webinar.
Market shift #4: integrating services procurement with total workforce strategy
Everest Group’s research report "Contingent Workforce Management (CWM) and Vendor Management System (VMS) State of the Market 2023” noted growing strategic alignment between permanent and contingent workforce strategies as organizations increase their emphasis on achieving total talent visibility and management.
In Everest Group’s research, 73% of respondents highlighted active HR involvement in contingent hiring, and 48% cited the involvement of the procurement function in permanent hiring.
Collaboration between HR, procurement, and technology providers for more strategic management of services procurement was discussed in the Everest/Beeline/Mastercard webinar. Panelists noted the importance of holistic workforce visibility in making better-informed staffing decisions.
Mastercard’s representative on the panel said that his company views staffing through the lens of “Build, Buy, Borrow, and Bot,” with “build” representing existing staff, “buy” meaning hiring permanent employees, “borrow” representing external talent, including service providers, and “bot” standing for automation initiatives. He noted that HR and procurement are both actively involved in that strategic staffing process.
View the webinar.
Market shift #5: real-time analytics and business intelligence
Data and analytics are becoming increasingly crucial in services procurement. It is not enough to contract for professional services, receive the services, and pay the service provider. It is vital for future decision-making and strategic planning to analyze the results of each project to determine what went right, what went wrong, and what should be improved. It is also critical to evaluate the performance of each service provider to decide if they should be used again in the future.
This could be tedious, but it doesn’t have to be. Extended workforce technology can automatically track the lifecycle of services procurement projects, from competitive bidding and vendor selection, through SOW creation and approval, onboarding and provisioning, to project completion, and offboarding, capturing essential data all along the way.
With its analytic and visualization tools, this technology goes beyond reports, dashboards, and statistical analysis to deliver detailed insights into complex problems. This allows contingent workforce program managers to understand current issues, predict future outcomes based on current actions, and propose data-supported workforce optimization tactics.
For more information, read Ardent Partners’ “Solution Spotlight on Beeline” or watch the services procurement webinar.
Preparing for the future
With services procurement growing more than 20% per year, contingent workforce programs need to eliminate rogue spend, control costs, mitigate risks, and ensure a high level of service provider performance. This requires strategic management, comprehensive data analytics, and effective collaboration to optimize services procurement and navigate the challenges of the evolving workforce landscape.
For detailed information about how to optimize services procurement, read our blog.
Watch the Everest Group/Beeline/Mastercard services procurement webinar for deeper insights.
Read Ardent Partners’ “Solution Spotlight on Beeline” to learn more about Beeline’s comprehensive contingent workforce management automation capabilities.
For a demonstration or consultation, contact Beeline.
