Capturing market potential in SOW spend management

How can the market get a better understanding of the huge savings that can be made?

With Eric Osterhout

00;16;30;20 - How has this market evolved and is it still immature?

00;25;26;14 - Missclassification

00;33;03;05 - What are the barriers?

00;42;27;22 - Who owns the problem?

00;49;41;19 - Understanding the huge savings that can be made

01;00;18;00 - What factors would accelerate adoption?

01;08;02;14 - The potential of the SOW management market?

Episode Highlights

Transcript

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00;03;32;25 - 00;03;48;14

Jonny Dunning

Okay, so I'm delighted to go transatlantic with today's podcast episode. very pleased to have Eric also joining me to talk about SOW spend management and how that market potential in that area can be captured. Eric, thank you very much for joining me. How are you doing?

00;03;48;16 - 00;04;00;19

Eric Osterhout

Doing great. Johnnie, thank you for inviting me. I'm very excited about this podcast today. I think this is a topic that's real relevant, and I think it's a huge area of growth for for not only programs, but also category teams in procurement.

00;04;00;22 - 00;04;13;25

Jonny Dunning

Excellent stuff. So you're coming live and direct from, Texas. And I've seen a few the kind of views around where you live and it looks pretty stunning. I imagine it's a nice place to be today.

00;04;13;27 - 00;04;38;01

Eric Osterhout

Absolutely. It's, probably in, it's going to be in the 80s, which I think would be probably close to, what, 2829 Celsius somewhere around there. and it's just a gorgeous area. I live about 45 minutes outside of Houston, Texas, and, it's kind of like, being Batman, right? I like to go into the city and fight contingent labor and crime, and then I want to head back to the Batcave out here, 45 miles out of town.

00;04;38;01 - 00;04;49;29

Eric Osterhout

And, where I have 12 acres around me and my secret compound. So, all good, all good. I don't have a butler, though. I'm working on that. I need an Alfred. That would just totally round out the effect, for sure.

00;04;50;02 - 00;05;07;14

Jonny Dunning

Yeah, a secret compound is pretty good. You know, Butler's button's the next step, but, yeah, like an excellent, okay, so before we get started, would you be able to just give a little bit of introduction, not just to what you're doing now, but also kind of what your journey has been so far because you've got a lot of great experience in this market.

00;05;07;16 - 00;05;13;00

Jonny Dunning

You've covered some really interesting areas. Would you be able to just kind of like summarize that journey?

00;05;13;02 - 00;05;35;05

Eric Osterhout

Absolutely. it has been an interesting ride. I started out on the supplier side, or working for a staffing company way back in the 90s. I know I've for an 80 year old guy, I look pretty good, right? So, I think it's sunscreen. Sunscreen helps a lot. But, no, I started out on the supplier side and staffing world before I knew what that really was about.

00;05;35;05 - 00;06;01;01

Eric Osterhout

And my job initially was as an account manager, sell products we had. I went to work for a small boutique integrator, and they were putting in place methodologies to control projects. They knew it was a great way to increase headcount very rapidly, and this kind of ties into the whole. So part of our conversation today, because that history to me is important because I cut my teeth on, the little black book of project management to be able to understand it, to be able to sell those types of projects.

00;06;01;04 - 00;06;25;20

Eric Osterhout

And when we couldn't sell a project, we begrudgingly sold staffing services, staff augmentation around it. I was very successful at it. And, because maybe I didn't have any preconceived notions. my, the company I had worked for before where I was a pre-sales engineer on a product that, linked up to financial systems, that company got sold to a larger company, and they had no need for me anymore.

00;06;25;20 - 00;06;47;09

Eric Osterhout

So when I actually got into the staffing world, I really didn't understand what what it was about at the time. Like many people I think that have had that journey. And when I came on board, it just kind of made sense that it felt natural to me. I understood once I started doing it, I sold the first project that, they had they didn't expect me to sell one so quickly.

00;06;47;11 - 00;07;17;07

Eric Osterhout

and so I also had to learn to become a recruiter because they only had two recruiters in this small firm. And so I had to learn the entire business, from both sides of the desk. And I think that served me very well. Later on that journey at another company, as I grew in the industry, a few years later, I saw the value coming down from MSP and vendor management system VMs driven programs and realized that if I did things right, I could increase headcount.

00;07;17;07 - 00;07;39;06

Eric Osterhout

At this time, I was, you know, branch manager type capacity. And I realized that if I restructured my teams, I didn't hire more account managers that were fairly expensive. And business development people at that time, and just loaded up the team with recruiters, I could actually go after that business very effectively, and I learned a lot of tips and tricks about how to work with MSP driven programs.

00;07;39;06 - 00;08;04;23

Eric Osterhout

As they became. You continued to gain steam in the marketplace. my leadership, above me was not exactly pleased when they first saw how the numbers were looking when it came to margins and markups, but when I asked them to pull my pencil statements and look at exactly how profitable my branch was, they had to begrudgingly admit that, yeah, I may have had something there.

00;08;04;23 - 00;08;28;28

Eric Osterhout

And of course, now, you know, you go ten, 15, 20 years later, the market, that's where it's at. Right? so in 2008, I had the opportunity to jump the fence and go to work on the buyer side under an mssp, managing a program out of an oil field services company that many people would know their French, their uniforms are kind of royal blue, really pretty.

00;08;29;00 - 00;09;06;01

Eric Osterhout

and I got a chance to take over a program for a major VMs player. that's really what spawned the other side of the table. In my stint there, I was able to do some pretty unique things in capturing the Wild West and getting that program under control from a contingent service delivery perspective. under under IQ navigator at the time, which is now be like, and one of the things that we deployed was early on, I realized the value, thanks to one of our partner accounts over at shell, where they had recently kicked off the statement of work module.

00;09;06;04 - 00;09;29;20

Eric Osterhout

And to me, it just made absolute sense because I could see how much misclassified spend was really going through the program where I was at. And also, Nam supply chain at the time had some unique requirements that they were interested in being able to do piecework and, and things that were truly fixed, deliverables based, engagements where it was fixed fee model.

00;09;29;20 - 00;09;54;29

Eric Osterhout

And that was a way that we could incorporate that into the program and also save the client some money and also increase our spend through our program. So that's where I kind of cut my teeth on the statement of work side of the house. And then from there I went on, I have done everything from deploying program sourcing, selecting VMs and MSP type, page and programs and then deploying those.

00;09;55;01 - 00;10;25;13

Eric Osterhout

And so that kind of made me a kind of a unique and unique, you know, cat in the, in the house, because I've done everything from deploying systems, deploying programs. I've done integrations. I've also added on, SSW modules and also direct sourcing and other advanced modalities into programs. And then the other thing that I've done in my career since, 2008, when I jumped the fence, is also getting programs back on track.

00;10;25;13 - 00;10;44;26

Eric Osterhout

So if a program is dysfunctional, I'm really good at coming in and identifying where the problems are, working with the stakeholders and getting those back on track, and then also taking programs to the next level is another thing I do really well. Back to advanced modalities like statement of work, direct sourcing, and other types of initiatives that are very strategic and important to an organization.

00;10;44;26 - 00;11;07;06

Eric Osterhout

So that's probably more than you wanted to know about my, my lifetime history. But, anyway, that's that's kind of where I'm at today. Today, I am currently a free agent at this time, after five and a half years in my last role, which I'm actually really excited about because it gives me the opportunity to do more things like these types of podcasts and also share the knowledge that I've accumulated over the last, since 1996.

00;11;07;06 - 00;11;09;12

Eric Osterhout

We'll put it that way. How's that?

00;11;09;15 - 00;11;27;15

Jonny Dunning

That's brilliant. Perfect. And and in terms of kind of likely plans moving forward, what's the kind of, what's the kind of ideal scenario for you over the next kind of like 5 to 10 years? What's that where what's going to kind of really get your juices flowing in that you, you know, put that interest.

00;11;27;18 - 00;11;46;02

Eric Osterhout

For the next five years. We'll focus on that. I mean, ten years from now, I'm hoping that I'll be sitting, on my back patio overlooking the pool and the cows and drinking mai tais and just playing guitar. But for the next five years, I would say what really gets my juices flowing is again, going back to where programs really need help.

00;11;46;04 - 00;12;05;06

Eric Osterhout

And that seems to be the thing that I enjoy the most. I don't mind it. I mean, I don't mind that sounds kind of cocky or arrogant. I'm good at deploying and getting programs into that Gen one phase, to be able to kick them off and start building the policies, procedures and processes behind that to make that happen and also bringing in the toolsets.

00;12;05;08 - 00;12;26;16

Eric Osterhout

But I think where my heart really lies, and I've often had a had a dream about being able to create like a small superhero band of contingent workforce nerds like myself, and then parachuting into where these accounts need help the most. Right back to my Batman thing. Right? but really, I think the programs that need help that are dysfunctional, that have just they're just kind of struggling.

00;12;26;23 - 00;12;50;09

Eric Osterhout

I'm really good at getting in there and being able, if I'm brought in at the right level, being able to get in there and make things happen through a combination of education, because I think that's where most of your gains can be made. And I really kind of fall back on the fact that if you can get your arms around it, if you can get the data behind it, to be able to demonstrate and build your business cases, that helps a lot, particularly with the business.

00;12;50;09 - 00;13;13;23

Eric Osterhout

And then you can start building change champions within the business as you win hearts and minds and expand. However, that said, it also does help to have a high enough level of sponsorship behind you because you can't win everything with education. Occasionally you do need, you know, some sort of, executive level mandate to help. The question is, or at least the the part where I'm really good at is understanding how to sparingly use that.

00;13;13;23 - 00;13;37;03

Eric Osterhout

Right. You don't want to overdo the stick. You always want to use carrot as much as possible. And then last case scenario, use your political capital wisely they say. And then to use the stick when you have to. But you know it's nice to know it's there. You want to have that respect when you're brought into the organization to fix things that you have somebody that is, you know, patting you on the shoulder and saying, hey, this is this is our person here.

00;13;37;03 - 00;13;58;07

Eric Osterhout

This is this is our person that can get this back in shape. and sometimes or most times that's usually enough. Just having that recognition in an organization politically that you do have some sway behind you helps you get things accomplished. But for the most part, education is the way to go. So I think to answer the question and not to belabor the point, I think what I really good at is fixing dysfunctional programs.

00;13;58;07 - 00;14;23;05

Eric Osterhout

And then secondly, going and taking those programs to the next level, how to make them cutting edge, how to how to really, use advanced modalities to increase the adoption of the programs through through wins, and also to be able to drive and show value. I'm a firm believer that you need to show value every day in an organization, whether you're an employee or a consultant.

00;14;23;08 - 00;14;27;27

Eric Osterhout

And if you do that, it tends to lengthen your your tenure considerably.

00;14;28;00 - 00;14;48;18

Jonny Dunning

I'd agree with you. I'd agree with you. I think it's interesting you talk about programs that might at this point be dysfunctional, or needing to go to the next level. That's in some ways, that's a fairly good description of the kind of set up you spend management market in the sense that it's it kind of should be further on that it is and we come on to kind of maybe why that is.

00;14;48;18 - 00;15;12;14

Jonny Dunning

But it's, it's quite I, we saw it quite interesting because if you, if you look break down, break it down into services given organizations buy goods and materials. They also buy services. Nowadays the balance is shifted from, you know, think of manufacturing when the ERP was the kind of the main, kind of system of record that organizations were using across the board wasn't really human technology.

00;15;12;16 - 00;15;45;15

Jonny Dunning

It was it was much more about goods, materials than it was about services. That balance is now shifted. And according to Kinney, it's like 5050 spend on goods versus services across the world on average globally. So that's a massive amount spend. But if you look at the specialization that's being put into, you know, chemical modifications, the way the roles are structured within procurement teams and the way that technology addresses it, services procurement is, is definitely the kind of like, the forgotten sibling, when it comes to, to procurement spend.

00;15;45;17 - 00;16;15;06

Jonny Dunning

The thing I find really interesting is where it's kind of, crossed over with the contingent workforce side in the sense the two very different in one is people, you know, utilizing people's time, and the other one is outsourcing a problem to a third party to deliver a solution. but this is definitely a kind of a bit of confluence around that contingent workforce management market, around this kind of enablement, where maybe it's in the too difficult to do bucket for an organization, and they need some help with it.

00;16;15;08 - 00;16;36;22

Jonny Dunning

But it's it's interesting that some of the roots of this kind of services management, industry have come out of the contingent workforce sector. but but that potentially only accounts for quite a small amount of what's actually out there. so one of the things I'll be interested in is you've obviously seen this from early days of people addressing the services spend side of things.

00;16;36;25 - 00;16;50;14

Jonny Dunning

How would you say you've seen the market evolved and where do you see it right now in terms of where it is on the maturity curve, in terms of organizations adopting it and and all the rest of the stuff that goes around it?

00;16;50;16 - 00;17;19;24

Eric Osterhout

That's a great question. Yeah. I think, I think it's one of the greatest areas of our particularly particular industrial niche is a mid to that overlap between contingent work and, and so for services. Right. I think the I think the biggest problem that there is out there is that there are a lot of misunderstandings, as you mentioned, there's a there's a great amount of tools and there's a great amount of certifications and trainings for these things.

00;17;19;27 - 00;17;55;28

Eric Osterhout

But one of the things you can't train out of people or you can't administer a tool, a tool to limit or fix is human nature, right? And as contingent labor programs have gained traction and support from the sea level and above, because it is a, a large area of an organization's spend that they can capture savings off of if it's managed correctly and also, gain compliance, right, and limit risk to the organization.

00;17;56;00 - 00;18;26;11

Eric Osterhout

It's there's that old feeling out there that like when we began with, with MSP programs and contingent labor, that fear of visibility by hiring leaders not to be able to get work done or having to have someone tell them how they're going to get work done and having to follow these rules. It has driven depending on the policies within an organization, it it drives hiring leaders to be able to try and figure out ways to subvert that in.

00;18;26;11 - 00;19;05;08

Eric Osterhout

One of the easiest ways is in a lot of organization. So I can name two, but I'm not going to. But I've seen two organizations where it's actually easier to get a statement of work approved up to a certain level. Approved spending limits, outside of the contingent labor program, by creating some very soft and mushy deliverables. And most people don't recognize that are processing these these types of statements of work for the business that this is actually contingent labor hiding under statement of work, so that the hiring leader can work with who they want to work with, whether it's the company that brings them donuts or takes them to lunch all the time, or

00;19;05;08 - 00;19;26;27

Eric Osterhout

it's a buddy or whatnot. I'm not saying it's always nefarious. In many cases, it's because of the restrictions that are placed on contingent labor are higher and create more visibility then on the statement of work side. So naturally, human nature is you're going to go the path of least resistance to get what you want many times. And I think that's part of the problem.

00;19;26;27 - 00;19;55;13

Eric Osterhout

I think it's a huge market. I think it's probably the largest area of untapped savings out there. in the workforce management arena of of organizations. It's it's really what it's out there. But again, there's that human nature. I think the key is also a lot of programs, when they start exploring and trying to rein in statement of work, they haven't really gotten just plain contingent workforce services delivery nailed down right.

00;19;55;13 - 00;20;22;23

Eric Osterhout

And I think some of it goes back, I wrote an article about this, I don't know, about a year or so, it was on LinkedIn, but it was about building foundations. And it talks about you have to understand. And this is where I go back to my start in the in this world back in the 90s where I started selling projects, you have to understand the differences between what contingent work is and what statement work and services are, because they're actually two quite different things.

00;20;22;23 - 00;20;49;06

Eric Osterhout

Although they can be very, very similar, they are different. And what I mean by that is contingent work, obviously more task based. Yes, you can arguably say that there are deliverables under that, but they're more task based deliverables. Right? The worker is at the control of whoever the client manager is for the most part, and there's no risk other than employment risk being absorbed by the company providing that worker.

00;20;49;07 - 00;21;09;18

Eric Osterhout

That's what contingent work is all about on the services side of the House and statement of work. Your deliverables can be it can be six bit milestone, which is very easy to pick out. And those are definitely legitimate or in many cases it's it's quote unquote time and expense or time and material with no materials. It's just time and expense.

00;21;09;18 - 00;21;45;18

Eric Osterhout

In many cases, you'll see an organization's under the SSW side where you've got named resources doing work. And these people, there's no risk really being absorbed by that supplier. Take engineering, for example. Let's use that. That's a great example. In in my world, an engineer can be through a company on the contingent side of the house and they're providing very, very expert analysis, expert advice to the client hiring leader, but they're not utilizing their professional credentials like their professional engineering numbers and licenses, to go ahead and certify deliverables.

00;21;45;19 - 00;22;14;10

Eric Osterhout

They're not doing design work or permitting, utilizing their name and placing risk back on the company that provided them. Risk is the key. You can use that same engineer, even the same company, but if they're on the services or SRO side of the house and it's legit, they're going to be using their professional credentials to stamp things. They're going to be creating designs and using those credentials, signing off on permitting, binding the host company or the client company, to those deliverables.

00;22;14;10 - 00;22;36;03

Eric Osterhout

And that place is risk not only on them as a professional engineer, but also the company that provided them. So to me, those are the the defining lines in when you have true services or so, the agreements should be different to reflect that risk being absorbed. There's indemnity clauses and things like that that are more of a nature of warranty, guarantee and performance.

00;22;36;05 - 00;22;57;29

Eric Osterhout

As opposed to on the contingent side of the house. Same engineer giving advice, but at the end of the day, it is the client making the final go no go decisions and signing off on the deliverables and therefore that same company in that scenario on the contingent side of the house is only absorbing, HR type risks or labor risks in the agreements need to be different as well.

00;22;58;06 - 00;23;16;19

Eric Osterhout

A contingent labor agreement with an organization is going to be more labor based, as opposed to on the services side of the House. It's going to be more of a goods and services type agreement. So it's fundamentally different, which also means that on the services side of the House, you're taking into account a lot of risk that you're pushing off on to the supplier.

00;23;16;23 - 00;23;39;20

Eric Osterhout

Whereas on the contingent labor side of the House, the only thing you're really getting indemnity about would be things that are labor related that, that, that, that contingent staffing company absorbs. Those are the two fundamental differences. And if you don't nail down those definitions when you're trying to deploy a statement, a work program, you're going to have problems constantly having to go back to the, well, to be able to make that happen.

00;23;39;28 - 00;24;00;15

Eric Osterhout

So I think this is one area that the adoption has been slow because it's more complex, and there are many more nuances to be able to define that and be able to decide, all right, what is actually services slash statement of work and what is actually contingent. If you can get those things nailed down as much in advance, that will help move your agenda.

00;24;00;15 - 00;24;26;10

Eric Osterhout

And the other thing too, is having a governance process in place to be able to make that call. That includes people in a senior level of executive management that does understand those differences. Obviously, there's always going to be shades of gray, but I always look at it this way and I've always looked at it from I started in this industry with programs is if I can capture 60 to 70% of something, I'm making a difference.

00;24;26;10 - 00;24;58;07

Eric Osterhout

I'm moving the needle, I'm saving money, I'm reducing risk. Right. Same thing with statement of work. If you can go after statement of work and go for the low hanging fruit first, that's obvious. And then you may lose some more complex, arguments. Even though and I always know I'm right, it's amazing how that works. But understanding that you may not always be right, at least at that point in time with the business, if you're gathering and capturing, say, even 50%, heck, even 30%, because it is widely known based on the statistics.

00;24;58;07 - 00;25;23;03

Eric Osterhout

And you mentioned, one of the think tanks, there is so much misclassified statement of work out there that even if you capture 30, 40 or 50% of that, you're making a huge difference and you're providing bottom line savings, that organization. And if it's a publicly traded organization, we all know that whatever you can save in the way of procurement is going to translate to stock price at some point by being better stewards of of the people's money.

00;25;23;03 - 00;25;26;15

Eric Osterhout

So those are a couple of views that I have on that.

00;25;26;17 - 00;25;51;03

Jonny Dunning

Yeah, absolutely. And it's interesting you mentioned the misclassification driver. I always say as within the kind of services became an asset. No, I said market spend management in that area driven by one of three key drivers in my my view, one is misclassification. the second one is just pure spend management where it's like we just don't have to spend under control, which is most organizations.

00;25;51;05 - 00;26;06;26

Jonny Dunning

And the last one might be procurement efficiency, where you've got an organization where there's loads of tagging works lying around, and it's just an absolute nightmare. Trying to do it manually is totally inefficient and therefore ends up being rogue. Spend that. No one's really got any control over that people don't have visibility to below purchase order level, for example.

00;26;06;28 - 00;26;25;08

Jonny Dunning

Very, very common scenario. But and what I was talking about earlier was this confluence between the contingent workforce side of things and the services procurement side of things. Whereas a lot of the time, you know, if you talk to procurement teams in big organizations and talk about and so they'll be like, yeah, I know what a statement of work is.

00;26;25;08 - 00;26;48;07

Jonny Dunning

It's a contract type. But within the contingent workforce industry, it's got its own persona about this is an area of spend that needs to be managed. That is absolutely valid because what you were describing, the differences between contingent workforce, you know, time and time and expenses or time materials, time based, individual based labor versus, well, organizations, outsourced services, understating the work.

00;26;48;09 - 00;27;17;08

Jonny Dunning

The real key to that is the contracting vehicles are very different. And they are they should be very different. If you follow the those contractual guidelines and contractual templates effectively, you can see quite an even split. But I think what you were talking about in terms of misclassification, maybe that's why this is something that's become such a big thing within that contingent workforce industry, when if you look outside of that, you could say they're a little bit removed from like cool procurement because they're they're always liaising with talent acquisition.

00;27;17;08 - 00;27;24;28

Jonny Dunning

I call contingent workforce category managers. do you think that's maybe where that intersection comes from? The misclassification angle.

00;27;25;01 - 00;27;44;25

Eric Osterhout

If, and I think that's also kind of the crux of the issue of why it's so hard to for these programs to, to get their arms around it. I think that's why in many programs, you need someone to be the thought leader over this type of spend, to be able to be the guidance, and it helps to be on the client side.

00;27;44;25 - 00;28;16;15

Eric Osterhout

I know that's always helped me when I haven't been under the MSP, leadership, that it's I'm on the client side because I can identify and navigate those things with credibility. one of the interesting things in back to, to my background is that I've reported in different organizations with these types of programs, whether I've been there to deploy them, fix the dysfunctionality, expand them depending on different points in different clients and employers.

00;28;16;15 - 00;28;48;00

Eric Osterhout

I've worked for, I've reported to procurement. So and that that's probably the majority of the programs that I've been involved with. I've been brought in by procurement. I've also been brought in by HR. I've even been brought in by legal and ethics when there's been problem children or really dysfunctional programs. So yeah, I mean, being able to navigate that's a little bit tough at the mssp level sometimes because you're either under to or under procurement or you're under to with the dotted line to procurement.

00;28;48;00 - 00;29;28;20

Eric Osterhout

But it's hard to get that that backing from procurement when you're a dotted line report. And part of the reason is organizations that don't dedicate a resource to their contingent labor program. And I see that all the time, particularly in procurement sponsored programs, you'll see that the procurement person that is tasked with overseeing the contingent labor program maybe has other duties outside of that, like consulting outside or even doing just different types of procurement, whether it's on the direct side instead of just indirect spend that they're managing, or maybe they're tasked with HR systems or travel or, I don't know, whatever, picking up paperclips, I don't know, but my point is, is that they're

00;29;28;20 - 00;29;50;08

Eric Osterhout

not 100% focused. And it's very tough when you're looking strategically about how you want to corral and capture and and capture and get these things to where you're saving money and doing things in a compliant manner. What a lot of organizations don't realize until it's too late and they're dragged into a lawsuit, or and they lose immediately because the agreement was written on the wrong type of contract.

00;29;50;11 - 00;30;14;25

Eric Osterhout

you have to have the right contract for what you're doing. It. You said it just stunningly a minute ago, exactly how it is. That is more of a goods and services contract on two services, and it's usually multiple people, blah, blah, blah. Exactly. There's a lot. But if you look at it functionally and again, there's not a 100% clear rule even under the definitions that I've provided, it gets you there fairly close.

00;30;14;27 - 00;30;37;04

Eric Osterhout

But there's always those that fall on that gray area. And that's where the governance committee comes in to make the final call. And it comes down again to risk, which is why I encourage in the stakeholder governance process to have someone of a high enough level with enough knowledge, and maybe even create a committee to review those on a monthly basis to determine if they're truly appropriate, or they go to the contingent labor program.

00;30;37;06 - 00;31;07;08

Eric Osterhout

Having that type of sponsorship and engagement and governance will also help your MSP be able to process this stuff more efficiently. And that's really what the name of the game is. That's why you have an MSP is because you need those those tactical arms and legs to accomplish things. So if you can make it cleaner for them and give them a path of escalation that makes sense, that has an actual defined group of people that can finally make the call that even if it's the wrong call.

00;31;07;11 - 00;31;34;01

Eric Osterhout

But if that governance committee says, hey, look, we're willing to absorb the risk of not doing this the right way, we get it. We're just going to do it because I don't know, in many cases, it could be the fact that there's so much money being generated by engaging that resource that way that they don't want to risk anything, and they're willing to say, okay, yeah, if we could take you to coordinates on the wrong agreement, we may be on the hook for this, but it it's not going to come near what we're already bringing in through revenue.

00;31;34;01 - 00;31;56;10

Eric Osterhout

So those are things you have to think about it I don't know I it's kind of crazy. I tend to equate a lot of things to the teachings of Alcoholics Anonymous many times. Right. You know the wisdom to know the difference. It's the same thing with best practices. Not all best practices fit in, in in every organization, you have to have the experience and the wisdom to know what fits what and what makes sense.

00;31;56;10 - 00;32;15;06

Eric Osterhout

Right? The shades of gray. Again, we're dealing with people, whether it's on the contingent side or whether it's on the statement of work side. In a way, it's always a new day. But the key is you have to have a certain amount of guidelines in place and a certain amount of foundation to build on, to build your program and add so to it where it makes sense.

00;32;15;06 - 00;32;24;12

Eric Osterhout

If you've got all those pieces in place, it makes your success factor level higher. I believe that's, you know, my attitude anyway.

00;32;24;14 - 00;32;42;21

Jonny Dunning

Yeah, I think it's a great point you bring up or we kind of, you know, you talked a bit about where the market is and, and why it is in a mature market. I mean, complete agreement with you regarding the size of the opportunity, 20 trillion annual global spend, apparently, I think was the largest that put those figures together, you know.

00;32;42;21 - 00;33;03;27

Jonny Dunning

Yeah, all sorts of different numbers. Some people say six times in most organizations it's six times the spend on contingent workforce. Other people will tell you that's 20 times the spend. It's it's a lot. That's all we need to know really isn't it. And it's there. It's a, there to be it's there as a problem to be solved, which is brilliant and exciting for people like, you and I, working in this area.

00;33;04;00 - 00;33;40;05

Jonny Dunning

I think just just looking at why it's immature and looking at what have been and what are the barriers to this, this, this area is then being addressed effectively. One of the things you brought up was around, but especially isn't. And having a dedicated person within the organization focused on contingent workforce, for example, in procurement. I, I would, I would, I would put forward that maybe the same applies within Misty's because if an MSP is used to talking to that contingent workforce contacts, who could be, as you said, complicated dotted lines into procurement from H.R. to all these different areas.

00;33;40;07 - 00;34;02;10

Jonny Dunning

it's it's the ability to talk the right language to procurement people, I think is critical. so there's two parts to this question. One is, would you agree that MSPs need to invest in that kind of specialist expertise and knowledge in-house? And the second one is really a part of that is a real reflection on from your own journey, your unique position, having come from that project delivery background.

00;34;02;10 - 00;34;19;00

Jonny Dunning

Also having worked on the MSP side and on the buyer side. And so you've had to deal with those different stakeholders. what how is that kind of your, your opinion on whether MSP should be investing in that specialist expertise? How does that reflect on what you've seen in your own experience?

00;34;19;03 - 00;34;38;10

Eric Osterhout

I think it reflects very heavily what you're bringing up. I do believe that there needs to be specialization within the MSPs too often, and I'm speaking my opinion here, which some people may get, some people may not get, but I don't know if you followed me long enough, you'll know that I'm going to call it like I see it.

00;34;38;13 - 00;35;01;18

Eric Osterhout

You know, wherever the chips fall, I stand behind what I say. But I do think MSPs, when they approach it, I think they don't understand that their project teams that are on site or their their program teams that project teams, their program teams on site that are managing contingent labor are probably maxed out at any given time. Just dealing with contingent labor.

00;35;01;18 - 00;35;24;07

Eric Osterhout

And I'm not so sure that there are I mean, there are exceptions out there. I don't want to generalize too much, but I'm not so sure that those folks on that team have the knowledge and the training provided by their company to be able to really understand the differences and nuances. So I think there is value in having a dedicated person on that team.

00;35;24;07 - 00;35;47;10

Eric Osterhout

If you're going to go down this journey, there needs to be somebody that is not just somebody pulled from a project, I mean a program team that's doing contingent, but somebody that really knows this stuff. Right? And they don't have to be 100% of an expert, but they should be able to within reason, particularly if the client side of the house has somebody like me that can build them a training curriculum.

00;35;47;10 - 00;36;14;16

Eric Osterhout

That's pretty simple. I mean, I've built presentations for every company I've been engaged with at some point where I outline, all right, this is what suspected misclassified statement of work spend versus contingent spend looks like. And I even use examples like I talked about with the engineers in there to be able to help drive that home. So if they're if an MSP is going to try to help a client wrangle this in, they need they need to have that expertise for sure.

00;36;14;18 - 00;36;39;01

Eric Osterhout

I think again, the challenges come back to we hear a lot about the buzz we've been talking about statement of work span and capturing that since I can remember, at least in 2008, for sure. and it's still a big topic yet there's still that much out there that's not under control. That said, there are some organizations that have done a really good job that bring you that under control.

00;36;39;03 - 00;36;56;07

Eric Osterhout

I talked with one resource that presented it procure cotton. And while I didn't agree with 100% of how he did it, one thing I will not disagree with is that he has the knowledge of the ability to do it, and he's making results happen, right? I respect him a lot. And we sat down and talked to procure cotton for quite a while.

00;36;56;09 - 00;37;20;11

Eric Osterhout

but again, I think that the real barriers are that organizations and it's not just the MSPs fault, but organizations don't have a fundamental knowledge of how to break that out and what they have. They don't have good tools in place, which is why I think that there are tools that are being developed daily to be able to help identify, to be able to scan contracts and pick suspec out.

00;37;20;11 - 00;37;42;17

Eric Osterhout

I think I it's going to be huge to help increase adoption. Right. Think about this. A lot of organizations do have a centralized procurement system in place to be able to deploy POs and statement of work that the business reaches out to that, hey, I need this. And then they type it up and they, you know, this intake comes in usually a lot of, electronically in some format.

00;37;42;17 - 00;38;07;16

Eric Osterhout

Many companies are still manual, but even if it's emails, if you could put an AI type front end in the middle between the hiring leader and that particular, for lack of a better term, shared services center that develops and deals with the kind of volumes that they deal with, from everything from, direct procurement to indirect. I mean, there's big differences, but there's getting millions of these requests annually, right?

00;38;07;16 - 00;38;24;11

Eric Osterhout

Or thousands with thousands of being a little too dramatic there. But if you could put an AI front end that would scan that and identify likely suspects, even if they are legit, but if it comes across as, hey, they're using named resources, hey, there doesn't seem to be an element of risk here. Hey, they're doing this. They're doing that.

00;38;24;14 - 00;38;50;08

Eric Osterhout

it's only one person. It's a single provider. And be able identify on the front end. Those particular suspect requests. And then you can investigate that further. That's where having someone on the MSP side that can actually understand the talk and the lingo and be able to go back to procurement or whoever, or even if it's even their handlers in HR talent acquisition saying, hey, we think this is this is, suspect.

00;38;50;11 - 00;39;13;18

Eric Osterhout

And then again, that can then plug into the process of, of escalating those very suspect ones that can't be resolved at the mssp level can go up to that governance committee to make the call. Again, I go back to visibility. That's people really hate. It's been the same thing since we deployed contingent worker worker programs. managers sometimes don't like the visibility.

00;39;13;20 - 00;39;52;22

Eric Osterhout

It also helps as a leader or within the buyer side, which will also help the MSP. Again, I go back to definitions and I go back to being able to make sure that the business has the the leadership backing or the stakeholder engagement to be able to say, yes, this is how this is going to operate. And on the flip side, they need to be able to go back and bring HR to the table and procurement and legal and say, all right, we need to look at what the approval requirements are for contingent labor and then services, because again, sometimes it's more restrictive to engage a contingent worker than it is just to bypass

00;39;52;22 - 00;40;22;09

Eric Osterhout

that and dummy up a statement of work and pass it through centralized procurement, to be able to get it through up to your ASL that you can sign off on a spending limit. Sometimes that's the path of least resistance. But if you make it more attractive or an easier to utilize the right process in this case, if it's not true, so you running it through contingent the contingent labor program and classifying it correctly, you're gonna you're going to have gains in compliance.

00;40;22;09 - 00;40;41;11

Eric Osterhout

You're going to have savings gains not just on the surface because you're not paying for risk, which we all know the difference between a resource and they can be the same kind of resource, same type. If it's on the services side, you're paying anywhere from 30% or more, because risk comes at a cost. That perceived risk that that organization's absorbing.

00;40;41;11 - 00;41;09;16

Eric Osterhout

That's providing that worker. But not only that, if you can engage and utilize the contingent worker program, which has all these downstream integrations to finance systems, onboarding, provisioning, there are huge efficiencies to be gained. Right? And what happens is, is when people don't classify things correctly, there's a lot of paperwork and paper invoicing and trails and renewals on statements of work and POs to be recut at certain times.

00;41;09;18 - 00;41;27;18

Eric Osterhout

There's all that work that has to happen on that side to accommodate that not appropriate services worker. Right. So you're gaining efficiencies, cost savings outside of right structures, even just in process efficiencies by classifying work correctly that make any sense?

00;41;27;20 - 00;41;47;23

Jonny Dunning

Yeah, that makes complete sense. And I think, you know looking at those barriers. So so firstly one thing I noted down there was you were talking about the need for having specialist expertise within Mssp teams, in my experience. Otherwise you have a credibility problem and I feel like procurement teams in organizations just they can sniff it out immediately.

00;41;47;25 - 00;42;08;19

Jonny Dunning

You know, if someone's talking the using the wrong terminology, using kind of like staffing or contingent workforce terminology, trying to talk to someone who's very dedicated to services. Okay. Then people got to recognize that away. It makes them feel uncomfortable. And I understand why that is. I think a lot more of these are trying to go down the road of growing that expertise and building and building in that expertise.

00;42;08;21 - 00;42;27;24

Jonny Dunning

But another area that you mentioned was about ownership, and I think this is a really critical one, because, if you look at most organizations, the way that they procure, the way that they do that procurement will be on a category based strategy. So they're not going to have a mega category necessarily. That's called services procurement. They're not.

00;42;27;26 - 00;42;51;00

Jonny Dunning

You know, the question in my head is always who owns the problem? And that could be, in my experience, because it's an immature market. And procurement is quite a young function. And it's not known standardized within across organizations. It could be a range of different people, functions or areas actually own that problem. It could actually be someone in procurement excellence who's looking at it from a tech stack point of view, saying, we've got all these things organized.

00;42;51;00 - 00;43;08;08

Jonny Dunning

They're all sort of pipe, you know, processes. Great. I'll continue. Work for stuff is great. The way we buy goods in materials is brilliant. But what about all these statements of work vacancy begat? Or it could be that it is a, a particular category manager or like a global category leading consultancy or professional services or something like that.

00;43;08;11 - 00;43;26;21

Jonny Dunning

I.T services. or it could be somebody maybe on the kind of more the kind of like labor services side where their primary kind of entry point is around that misclassification angle. So the thing which comes into my head, who actually owns it, do you do you think that's a barrier within organizations?

00;43;26;24 - 00;43;57;07

Eric Osterhout

Well, I think those are huge points. And I think they are even in last organization I was involved in. you can be dealing with different, like you said, different category team members. It can fall under indirect for HR services. It can fall under professional services. I mean there's so many areas. And again this is where I go back to you can't blame the MSP for not being effective at this because they're not the buyer.

00;43;57;07 - 00;44;23;18

Eric Osterhout

They're not on the inside of the organization. And as you said, there's so many disparate titles and disparate areas that that can do their own thing. This is why I think in some ways, organizations need someone almost as a business partner type role for external workforce. That is, again, on the client side that understands kind of like, how do you remember the, you're British.

00;44;23;18 - 00;44;39;27

Eric Osterhout

So it probably didn't play over. There needs to be show in the US called The Love Boat. And it was back in the 70s, and it was about a cruise ship. And there was a guy named Isaac Isaac who was everywhere. Isaac brought people towels, made sure they got to the right bingo game and and they made sure they had drinks.

00;44;39;28 - 00;45;08;13

Eric Osterhout

You need an Isaac in your organization. You need somebody that's familiar with all the different areas that external workforce touches. And people know who to go to to get the right information, to be able to get things handled and to be able to build those relationships and bonds, and to also introduce and maybe help translate what the mssp saying, and also to teach the mssp because another thing, it's not just the roles and jobs, it's the taxonomies and terminologies that companies use.

00;45;08;13 - 00;45;43;10

Eric Osterhout

All are different. But you're right, there is a a little bit of a bias on procurement and to an extent even on HR represents or talent acquisition representatives that if you use different terminology, they just kind of tune out. You're right about that. But I do think that this is why successful contingent labor programs and that have successful statement of work components to them, they have that buy in on the the client side to be the person that actually can be the, the Sherpa, so to speak, to make sure people get to where they need to be.

00;45;43;12 - 00;46;06;21

Eric Osterhout

And so I think that's huge. I think that is a hindrance. And if you can bring in the right people to be that person to manage those different question that come up from the Mssp even prior, at some point you can train up the resources from the Mssp to understand that. Then they can be a little bit more left to their own devices.

00;46;06;26 - 00;46;37;12

Eric Osterhout

But to be that primary escalation point, that's huge towards the success. And I tie that back into organizational change management too. I think that person that has the skills to be able to identify and realize what work is functionally, where it needs to go also would probably be a pretty good person to to evangelize the program internally to, you know, identify change champions and be able to push that message up and also to liaise with overall the leadership over this.

00;46;37;12 - 00;47;01;26

Eric Osterhout

Right. And I think that person has to have a seat at the table almost on an equal footing. Is the program director, over the program internally, right? I mean, some organizations with the business partner model, they they have a contingent labor program director internally or manager internally. And then they have these VP's that work with the business, these procurement VP's, for example, business partners that work with the business.

00;47;01;28 - 00;47;19;12

Eric Osterhout

And I think those two need to be at the same table and need to communicate a lot to be able to make this happen. But I do think successful organizations that want to deploy these types of, you know, award winning and cutting edge contingent labor programs and then adding on and becoming a model for statement of work management.

00;47;19;14 - 00;47;48;21

Eric Osterhout

They need that knowledge outside of the Mssp. You can't always depend on the MSP. I mean, look at how MSPs are funded traditionally, at least in in North America. And to an extent, I think Europe is pretty similar. MSP operates on a little sliver of billing. Right. And so it's kind of tough when you think of how many transactional things they touch and what they have to do it really, it's kind of unfair to expect them to know everything and do everything and have all that thought leadership and focus.

00;47;48;24 - 00;48;06;03

Eric Osterhout

I think it depends on the buyer as well, to partner with them, to be able to give them that knowledge. You know, having that internal knowledge that the landscape, the politics and the technology within your own organization, that when you bring them in, you can give them that guidance. And yes, can you eventually train them to be more self-sufficient?

00;48;06;06 - 00;48;13;13

Eric Osterhout

That's the goal. But initially you need to be that Sherpa, or you need to be Isaac on The Love Boat and make sure that they get what they need.

00;48;13;16 - 00;48;31;23

Jonny Dunning

I love that example. Yeah, I agree, and I think the kind of last point I want to tie that into is just really just to spend. In a sense, I think that can be a barrier, is it feels like the organization has got to, you know, eat the whole elephant at once because it's such a big area of spend.

00;48;31;25 - 00;48;52;14

Jonny Dunning

Unless they're able to get programs to get this spend under management started in a manageable size. it just again, just just hits the buffers in terms of too many people need to be involved. It has to be a giant budget. It has to be really big and complex or actually there are ways and means to roll things out on a more agile basis.

00;48;52;16 - 00;49;15;07

Jonny Dunning

I love the fact you mentioned taxonomies as well. I mean, it's quite a specific point, which is highly relevant, for us, when we're rolling out, software solution set up these by management, we're rolling that out for organizations. If it's an aerospace company, what they call what they call a similar role to be they, you know, a seed manufacturing organization might be completely different, or they might have service towers.

00;49;15;10 - 00;49;33;22

Jonny Dunning

The way they break the catalogs down is going to be different. How they run their, you know, all their procurement processes and how they categorize everything they do, all of the different programs and projects. it's very individual. And that's that's where I think that agility is not a one size fits all, problem and solution scenario that we're in at the moment.

00;49;33;29 - 00;49;56;24

Jonny Dunning

There's a lot of complexity to it, which is obviously another barrier. But I think there are there are ways and means that we're talking about here. There are approaches. The mean is a solvable problem. And that leads me on to my next point, which is just looking at you and I talking about this from our own personal experience working in this area, we know there are massive savings to be made.

00;49;56;27 - 00;50;14;27

Jonny Dunning

How do you think the market can become more aware of that and obviously things like case studies and stuff like that. We've got some cool case studies coming out at the moment. I'm sure there was some great ones that procure come. How do you think the market needs to be educated? Because you've got to reach the right people within these organizations as well.

00;50;14;29 - 00;50;21;22

Jonny Dunning

And when they like, could be various different roles. That's quite a challenge, reaching the right people to get this message out.

00;50;21;25 - 00;50;42;29

Eric Osterhout

Yeah. I think, I think that's a very complex question. And we could probably do an entire podcast just on that question. But one of the things that that comes to mind is that I think there's a lot of focus in the market on what tools. Right. But I don't think the tool manufacturers have spent as much time on.

00;50;43;01 - 00;51;03;19

Eric Osterhout

All right. The tools are great. You need that because they it in pro tip I'll throw out here right now is the number one thing is make friends with whoever controls identity management in an organization and then see if you can sell them on using the contingent labor programs tools for identity management. At some point, even if it's just headcount tracking right.

00;51;03;21 - 00;51;24;28

Eric Osterhout

Because if you can get those into the system and start aligning who owns what around an organization, then the future part of your evil plan for world domination is then you can start to work on statement work. But, I think there's a very heavy focus on what toolsets to manage this stuff, and I don't think there's enough on how to actually go to that next step.

00;51;24;29 - 00;51;44;29

Eric Osterhout

Right. We got the tool. It's integrated. How do we start bringing in and identifying what fits? What does it fit? How do we determine what what our environment? How can we make the case using the taxonomy and terminology within our own organization, to be able to demonstrate what the differences are between? Now I go back to contingent versus statement of work and I beat that to death.

00;51;44;29 - 00;52;08;24

Eric Osterhout

But you get my point. Being able to start putting those places in those pieces in place, I think, will help tremendously with laying that foundation and then getting the right people involved. Right. the other thing about getting the right people involved in, you said getting the word out to the right people, because I don't think at a lot of these conferences.

00;52;08;27 - 00;52;30;29

Eric Osterhout

And again, this is one of your big ideas here, I think that you could almost have a separate focus on bringing in folks from that are involved in the services side of the House or statement of work side of the House. Right. I think many contingent labor managers that attend these things are being tasked and requested by leadership or whoever that, hey, we need to do something about this.

00;52;30;29 - 00;52;49;24

Eric Osterhout

I need you to deploy a statement work module. But they're they're not really the people that have to eat, sleep and breathe it. Attending. I would task those on our side to say, hey, look, when you're when you're going to these conferences, start dragging somebody that you traditionally wouldn't bring. Don't just bring a team member from from your contingent labor team.

00;52;49;24 - 00;53;27;01

Eric Osterhout

How about reaching out and seeing if you can talk to somebody in it that is involved in, I don't know, integrations of HR systems or something. I mean, bring in people that have a different view and perspective on on how things should run. In other words, if you can get somebody that may not have been a great supporter of of bringing statement of work under the contingent labor program, but if you can get them to actually see the logic behind it by attending, these types of conferences where there are speakers like myself and many others like me that are that are is knowledgeable or more knowledgeable on it, and or maybe better communicators

00;53;27;01 - 00;53;45;15

Eric Osterhout

than I am because I'm a Texan and I'm kind of pragmatic. I'm not necessarily, you know, the most polished guy in oral. So I do what I can. But, I think that would help get that word out and be able to help, you know, make it an easier transition within your organization if you can get people from different, different organizational silos.

00;53;45;15 - 00;54;06;24

Eric Osterhout

Because face it, everybody talks about, yes, we're not siloed. We have a centralized this and it. And the fact is yeah you do. But there's still silos out there in the business. it's just not quite as pervasive. If you can get somebody like that on board to help you see the value. One of the things that and this is just another pro tip author out there, I mentioned it earlier, but the automation right.

00;54;06;26 - 00;54;30;17

Eric Osterhout

If you can get buy in from people leaders and you have the processes in place and the approval side of the house, right. Yet that that you've eased it up to make it palatable for them to utilize this new paradigm shift in an organization, use a statement of work module under the Contingent Labor Program for External Services statement at work.

00;54;30;19 - 00;54;48;02

Eric Osterhout

I think you can get them to be interested in it if you make it attractive because of the fact that many of the times that when they're doing these statements of work and POS, again, I go back to how much work are they having to do to maintain that? They're having to chase invoices, they're having to submit invoices.

00;54;48;09 - 00;55;05;03

Eric Osterhout

Whereas if you could automate that by utilizing all of the integrations you have, place in your contingent labor program for billing and things like that, that means all they got to do is go on their phone and approve. Hey, I just need to say yes to these hours or this billing, right? It's so much easier. And oh, by the way, that invoice didn't get paid.

00;55;05;03 - 00;55;25;11

Eric Osterhout

My suppliers carpet. Okay, well, and I'll throw that back on the program team with contingent labor and they want it down with, with, accounts payable. Right. So it's much easier for them. The key is you have to make the environment conducive for them to make that transition. That helps a lot. So that's a that's another pro tip I'll give you on that is make it simple for them.

00;55;25;11 - 00;55;45;12

Eric Osterhout

And then utilize the fact that, hey we can make your life easier if you play ball with this on this and start small. Right? I'm a big bang guy on a lot of things, but when it comes to statement of work, I believe you need to have a big enough population to test it and make sure everything works the way it should, and then you can start expanding.

00;55;45;12 - 00;56;03;15

Eric Osterhout

But I just think you also have to have reasonable expectations of what fits the statement of work module for a program. you know, the super temp type situations that Deloitte's that I'm going to call out names. You may want to edit that out. I don't know, you leave it in. But anyway, you get my drift. The big four.

00;56;03;15 - 00;56;32;14

Eric Osterhout

Big five, those people many times they don't really fit the model, right. I have reasonable, engagement requirements. In other words, what really constitutes that? You want to fit in your statement of work program? Your organization? It may not make sense to like you're doing a total, ERP transformation. It's millions, hundreds of millions of dollars to do this that may not fit the model that we're looking at.

00;56;32;14 - 00;56;54;21

Eric Osterhout

It makes sense to go with a true statement of work goods and services type agreement that has all of the restrictions and legal protection, involved. So understand where you're laying it is, right? Maybe start with stuff that's 5 million or less. All right. And then the other thing is don't overdo it. Don't bite. You know, you can't eat the whole elephant all at once.

00;56;54;21 - 00;57;16;07

Eric Osterhout

You take it a bite at a time. in most of the programs I've been most successful with, with statement of work in in being able to kick that off, it's procurement negotiates and puts in place the statement of work and gets all the t's crossed and the i's dotted right. Then they hand that off to be integrated into the statement of work module.

00;57;16;09 - 00;57;33;23

Eric Osterhout

It doesn't necessarily have to be an all at once thing where you go, okay, the MSP is managing the statement work module on our VMs and they're going to negotiate all the WS and blah blah blah, because they don't have the knowledge of how the organization operates. Right? So it makes sense to do that and then hand it to them, signed and completed.

00;57;33;23 - 00;57;54;08

Eric Osterhout

They import it into the statement of work module and they move from there. Here's another gazillion dollar tip I'm going to share for free right here on Johnny Dunning Show. is when you are putting in place the guidelines and the rails of implementing your your SSW module and bringing in that spend that fits it, and actually fits it.

00;57;54;11 - 00;58;14;18

Eric Osterhout

First of all, bring in the ones that may really be contingent labor at first, okay? Don't don't don't make that fight. At the same time you're implementing the module right now, you're just trying to implement the module and give them efficiencies. Right? That's the mindset. So don't try and beat them down on price. Don't try and negotiate. just import them in.

00;58;14;18 - 00;58;33;11

Eric Osterhout

And here's the pro tip that I'm going to say that will make the difference in the long run. It's a long con game right. You need to get things get your arms around it. Start getting them into the module. When you bring them into the module, these workers that have been traditionally outside, but they want to move them into the statement work module to gain those efficiencies.

00;58;33;13 - 00;59;03;24

Eric Osterhout

an area like, you know, in our last organization, Tace, which is our technical infrastructure services group, had a lot of vendors that they felt like they could gain efficiencies and not have to chase paper for. So when we started bringing them in, make sure that you bring in their workers because most of his time and expense bring in their workers and use the same job titles that translate to what they're doing on the statement work side, it may not be 100% exact, but we all know that they're all very similar.

00;59;03;26 - 00;59;23;22

Eric Osterhout

use the job titles that match as close as possible that you already have, and your contingent labor program. And the reason why I say that is because, as I said, bring in everything. Don't worry about sorting it out initially. Get your arms around it and get the process working and keeping them happy. Then what you can start doing is the change management and evangelization.

00;59;23;24 - 00;59;47;22

Eric Osterhout

Evangelization around that. Start taking reports of like what the market rates would be to replace those workers on the contingent side, i.e. not take exceed rate market, rate rate carding, so to speak. So if you have the job titles of the people you're bringing in and you have them matching to what's in the contingent labor program already, you can start building very different reports and go, hey, we suspect that this is misclassified statement of work.

00;59;47;22 - 01;00;10;14

Eric Osterhout

Yeah, we brought it in and it's functioning. And all these great people are getting paid. La la la managers happy. But you know that for these equivalent resources they're a contingent labor supplier. You would be paying X and such for this X and such widget guy or lady. And so you can then start building that delta file to be able to say look, this is how much you're actually leaving on the table, but I'm not classifying this correctly.

01;00;10;14 - 01;00;17;27

Eric Osterhout

And that's the hugest pro tip that I would leave with today for free. You heard it on Johnny Show. right here. So anyway.

01;00;18;00 - 01;00;37;02

Jonny Dunning

Yeah, that that's that's great. I mean, you put forward some, some really interesting points there that really, you know, the tie in to how this is going to accelerate the adoption within the market. These are the things that people need to do. These are the things that people need to consider right. From the basic steps up to the more sophisticated ways that this can be approached.

01;00;37;04 - 01;00;53;03

Jonny Dunning

And I think, you know, in building that base case, you covered off some of the savings that would that would really go into that the negotiation to get better deals, which obviously includes things like running more competitive bidding rather than just awarding stuff when it's not when it's not captured.

01;00;53;05 - 01;00;53;29

Eric Osterhout

each point.

01;00;54;01 - 01;01;15;10

Jonny Dunning

You mentioned about the, the kind of it's just not possible to manage this manually. You mentioned about automation. You mentioned about efficiency. That's a huge savings driver. Maybe seen as a soft saving within a lot procurement teams, but that is still a massive saver. obviously negotiating better deals instantly. A hard saving pre-contract. You know, what was the budget?

01;01;15;10 - 01;01;40;14

Jonny Dunning

What was the what was the actual, contracted price or how much to be saving on negotiation? Definitely a hard saving. You also mentioned visibility and control. more on the soft savings side, when you talk to most procurement people, but critical. And that ties into the risk, the misclassification, all of that compliance and governance side. I think the last one I wanted to touch on was really, the spend on the management, it call it, it ties into all of the others.

01;01;40;14 - 01;02;05;07

Jonny Dunning

It ties into, you know, the efficiency, the automation, the visibility, the control, all that sort of stuff. But another thing, an area that's interesting, what procurement teams will look at and savings, as they'll say, is a, if this statement of work engagement is run under procurement control and procurement, visibility, we'll say 15% because the procurement person will write outright better requirement.

01;02;05;09 - 01;02;27;15

Jonny Dunning

They'll make sure it goes out to the right supplies and make sure it a competitive process to make sure it's the negotiation, etc., etc., etc.. will say on average 10%, 15%, whatever it might be, increasing that spend on the management, it's something we see massively within the customers that we deal with as a way that they measure the progress of the program, because it can be quite complex to try and really nail in and measure the savings.

01;02;27;17 - 01;02;46;15

Jonny Dunning

But you can see if your, your contract, your price is different, different to your budgeted price. and you can you can also see, with regards to spend on the management, how much spend all we actually dealing with it because in some organizations with consulting for example, it might not be budgeted as such in the sense it might be when you need it.

01;02;46;16 - 01;03;06;04

Jonny Dunning

It's kind of like a slush fund type approach. But if you understand what percentage of that spend you have under management and you apply that logic of a procurement person is going to add X value, that's another really interesting hard saving. Hopefully people can use to accelerate that adoption to build those sort of business cases. is that is that would you agree with that?

01;03;06;06 - 01;03;29;17

Eric Osterhout

Would and I think as, as it's a journey, as I mentioned, you're not eating the elephant all at once, as you mentioned. And as I mentioned, two, talking about starting with having procurement negotiate the statement of work and the conditions and the terms, and then dropping it down into the MSP team that's managing the statement of work module.

01;03;29;19 - 01;03;55;18

Eric Osterhout

I think over time as the the the adoption in the program becomes more mature on statement of work, you will see that you're going to start having commonalities of projects within the statement of work module. And that is where the next level of genius comes in, is that you can then take that team and they'll have enough experience and have seen enough data coming through, and enough statement of works and understanding the terminology.

01;03;55;21 - 01;04;18;19

Eric Osterhout

Then they can start reaching out and partnering and building that bridge with procurement, whatever team it is, whatever category that's involved, and saying, all right, we now have the knowledge I can speak their language. I've seen enough of this. We can start moving to the next generation of statement. It works. But, you know, so W-2 or something, and you can start utilizing these tools that have features, like you said, competitive bidding.

01;04;18;25 - 01;04;38;11

Eric Osterhout

You can then become a partner to that procurement team and say, look, we noticed that we have I'll just use SharePoint, for example, do something simple. We've noticed we've had a lot of SharePoint projects over the last few years. We we understand that you guys are using pretty much the same players for this. this.

01;04;38;14 - 01;05;01;19

Eric Osterhout

why not allow us to use for the next SharePoint project that comes across in your desk and the business dark into your door? Why not use the RFCs or the other requests for, for, you know, RFP capabilities of the SSW module tool that we have, right. And be able to assist you with now automating some of those competitive bidding tasks that are on your plate.

01;05;01;24 - 01;05;17;22

Eric Osterhout

Wouldn't that be great? And I know as someone who has done all these, in Rfis and RFCs, that would make my life right if I had somebody, it would automate all that stuff and it would come back, scored, and then I could go back to the business and say, here's what we found. We used ECS and such.

01;05;17;27 - 01;05;46;14

Eric Osterhout

You may recognize these suppliers, our Mssp team or our our team recommended a couple of other suppliers that maybe you're not familiar with, but we've used in different parts of the organization. And here are your top five or top three or top ten, I mean, whatever. all that works done for them. For me, that would have been huge because a lot of that stuff, I had to manage myself utilizing, tools that were not necessarily purpose built or user friendly at organizations.

01;05;46;17 - 01;06;14;22

Eric Osterhout

so to me, that would be another huge driver along that vein of being able to help increase that. Right. And the potential would be that, you know, you could start reining in based on those numbers you were talking about with the latest report. Who cares if it's five times bigger than contingent or two times or ten times or 80 times if you can get a majority, or even a small, even if you can get 20% of a of of that, you're you're affecting major change.

01;06;14;22 - 01;06;32;13

Eric Osterhout

You're saving the organization and a lot of money and bringing a lot of efficiency to the table. And that will help make you successful as an external workforce program along the journey. Right. so that that would be what I would how I would add to what you said. I think you summed it up quite eloquently, but I wanted to just add a couple extra points there.

01;06;32;15 - 01;06;58;24

Jonny Dunning

Yeah. You subplot performance management with the 100% on that. That's very much at the far end of the sophisticated spectrum of this. You've got the data going through, you got historical information. That's a massive one for us. That's an area where we're also clearly, in terms of what we're doing with AI is more front end requirements creation, kind of using, yeah, I like how it's kind of requirements generation, tool scope creation.

01;06;58;24 - 01;07;18;28

Jonny Dunning

So copilot as it work. but the back end is a huge area of opportunity for AI as well. Just in terms of a it's more machine learning, really just assessing the metrics, the quantitative, the qualitative elements of it, and just putting all those signals together to give an overall score, because then you can actually assess suppliers across, different projects in different.

01;07;18;28 - 01;07;33;20

Jonny Dunning

We all know every project's different. It's not like you can go, how much is a job a developer from this to supplier versus that's not it's this project is completely different to project B, but how do I know which of those suppliers are doing a better job. Where they on time were they to budget. Where did they push the.

01;07;33;20 - 01;07;54;02

Jonny Dunning

So all of these things, if you can measure that at a milestone or deliverable level, this milestone of deliverable could be a pure project deliverable. It could be a KPI, it could be a sprint in an agile process. It could be, a block of consulting time, whatever it might be. But if you measure it, then you get into all that kind of beautiful honesty that you're discussing there.

01;07;54;02 - 01;08;20;08

Jonny Dunning

And, and I tend to agree with you with regards to the, the measurable change that can be effected because it is such a big opportunity. I guess just to kind of wrap things up, my last question you is you're a guy with vision. You've been involved with this for a decent amount of time. What's the potential of this market in terms of looking at the potential of this versus other areas of the continued work with market, other areas of kind of procurement?

01;08;20;13 - 01;08;30;19

Jonny Dunning

Well, because it feels to me like we're moving more and more into a service based economy anyway. but where do you see the potential of this in the kind of longer term?

01;08;30;22 - 01;09;01;12

Eric Osterhout

One thing I wanted to throw out that I think it's lost sometimes on on the last statement before this question I have is that if you are truly utilizing statement of work and services in the approved, correct manner, based on the functionality of the tasks in the contracting part of it. One thing that that often gets overlooked is when you're dealing with contingent workers and contingent work task based employment risk.

01;09;01;14 - 01;09;31;29

Eric Osterhout

Go to that employment risk. What's the biggest thing on the contingent worker side? Your managers can't really give direct feedback about performance, right? I mean, they can they can rate it right. The worker in a numbers fashion or there's approved, you know, dispositions when you're done with it. but on the goods and services side, because that is a different type of structure and you're dealing with a company, there is nothing that says that you can also track along with time to complete where they on time.

01;09;31;29 - 01;09;51;19

Eric Osterhout

How many, how many, how many changes of scope or extensions did you have, blah blah blah. You could track all that data. You can also track what the hiring leader really felt about the success of the project. And they can be very candid. You can track that and report on it. Whereas on the contingent labor side, you really can't do that now if you're misclassifying contingent workers and putting it under.

01;09;51;20 - 01;10;07;14

Eric Osterhout

So yeah, this is where it becomes a legal morass sometimes, and it becomes very sticky as to what you can say and do and what you're kind of limited, right. But if it's classified correctly, hey, all bets are off, man. X and such company did a horrible job. They missed it. We don't ever want to use them again.

01;10;07;14 - 01;10;21;01

Eric Osterhout

Blah blah. You can put that and report on. It's different as long as it's not, you know, reputationally besmirching of that company within reason, but legal can help you define that. But all right. So where do I think the terms of potential are with this. Is that the the the question.

01;10;21;01 - 01;10;24;02

Jonny Dunning

Yeah. When and where could this get to.

01;10;24;04 - 01;10;45;26

Eric Osterhout

I had asked you this the last four years or so, that I think this is the biggest area of savings that contingent labor programs can get their arms around. Just even if they again hit a small percentage of that, do the low hanging fruit and classify it correctly, be able to make the case to lower those rates, because why are you paying for risk?

01;10;45;26 - 01;11;07;05

Eric Osterhout

You're not absorbing that suppliers not absorbing. I mean that's that to me is huge. And if you can make that case and demonstrate that to the business, they'll start to realize over time. And I think this is the area that could as many as we said before, it can be two times, it can be five times, it can be ten times, it can be 80 times what your contingent spend flowing through your organization is today.

01;11;07;07 - 01;11;25;14

Eric Osterhout

And I think that's probably the largest area of focus that when it comes to a cost savings perspective. And I know everybody really dogs on procurement about everything is cost savings beating up suppliers. So you know, it's not always about beating up the suppliers to save money. It's about buying in the right channel. It's about buying in the correct manner.

01;11;25;14 - 01;11;41;18

Eric Osterhout

That's where you can affect savings and your suppliers. Other than begrudgingly over time, some of your services suppliers that aren't really services suppliers, they might, get their nose out of joint a little bit over time. But the fact is, they really weren't buying in the correct channel to be, or they weren't providing workers in the correct channel.

01;11;41;24 - 01;11;54;29

Eric Osterhout

So at some point they have to realize, yeah, we just got caught with our hand in the cookie jar and we'll have to go back to contingent rates for these workers. And managers will realize that, too. It's like, yeah, it was an easy way to get around the program so I didn't have to get approval. Yeah, okay, we get that.

01;11;54;29 - 01;12;19;03

Eric Osterhout

But eventually, at some point, we have to make sure that we're ensuring value to the stockholders of an organization, and that means buying and being good stewards of their money. So I think the biggest potential in our industry is I think there's two things. Statement of work, definitely, because that is where even if you get a small piece of it, if it's as big and animals as most, of the think tanks believe it is, you're going to be saving money.

01;12;19;03 - 01;12;39;15

Eric Osterhout

And again, I go back to even contingent labor. It's not always about saving money is your core focus. It's about doing things right and limiting risk and making sure you're engaging in the right manner. Because if you do all those things, and then with the automation and being able to classify those workers correctly, you're going to save money as a byproduct, right?

01;12;39;21 - 01;13;04;26

Eric Osterhout

It's about getting everything right and the rest will follow. It's like if you build it, they will come, you know, borrow a line from Field of Dreams. But, yeah, I mix a lot of metaphors. Sometimes it's TV, sometimes it's movies. but the fact is, if you do things right, the savings will come. And I think that's really what leadership is starting to wake up to look at, some organization are more awake than others in regards to that.

01;13;04;28 - 01;13;23;20

Eric Osterhout

Others, it's going to be still a journey. But again, all of the things that you mentioned about having the right resources in place, you can't just depend on your mSRP. They need to have somebody that's a business partner in a way, you know, whether it's a procurement business partner or external workforce, global business partner, whatever you want to call it.

01;13;23;20 - 01;13;45;09

Eric Osterhout

But having someone that can navigate and translate between the MSP to you because as you said, every company calls it different. Aerospace calls it inspectors. One things pipeline companies calls them something else. I mean, it's all different. So I think those things are will slowly if you can get the pieces in place, you can start removing those barriers.

01;13;45;13 - 01;14;15;19

Eric Osterhout

And I think it's probably the largest area of savings, that organizations can in capture over time. And it is a journey. It's, it's it over time it will grow if you do things right. And as you learn and build those partnerships within the business as well, that will help everybody to get that accomplished. so in reality, I think it's something that you have to plan for, and then you have to be realistic about what your expectations are for it, and then you have to have the right tools.

01;14;15;19 - 01;14;25;12

Eric Osterhout

Donnie. I mean, that's that's going to help as well, because if you don't have the ability to capture it, view it and see it and know where it's at, it's very hard to actually make it successful.

01;14;25;14 - 01;14;51;20

Jonny Dunning

Yeah. absolutely brilliant way to wrap things up. Thank you so much for joining me. it's going to be exciting to see what the, the next chapter has for you. I think, you know, clearly, you and I being involved in this market, it's very exciting. We love it. We're passionate about it. I thought it was a great point you made earlier about kind of like when you look at some of the, the conferences and events and things like that, you think this, this kind of needs its own dedicated thing and the right group of people.

01;14;51;20 - 01;15;12;01

Jonny Dunning

But, you know, it's an exciting time to be part of the industry. And it's brilliant to have you come to have this chat with me and get these ideas out there, because I think it's useful people for people to understand, you know, how other people are saying it, what you've seen and done already, the experience that you've gained through all the programs that you've worked on, because it is an evolving market and there's so much to play for.

01;15;12;01 - 01;15;18;09

Jonny Dunning

So, yeah. Listen, thank you so much for joining me. I really appreciate it. it's been a great chat. I enjoyed it.

01;15;18;12 - 01;15;24;06

Eric Osterhout

I appreciate you having me on. And, you know, any time you'd like to talk further, let me know.

01;15;24;09 - 01;15;26;15

Jonny Dunning

But thank you very much indeed.

01;15;26;17 - 01;15;27;03

Eric Osterhout

Thank you.