With Jonathan Winters, Allegis Global Solutions
00:00:00 - Clarifying terminology
00:04:20 - Triage's role in differing stages of procurement maturity
00:22:16 - Structuring requirements and statements of work
00:29:05 - Ensuring solutions have vendor-centric considerations
00:38:45 - The MSP's role in augmenting procurement teams
00:45:00 - The role of tech in Services Procurement – does it need dedicated tech?
00:56:00 - Visibility and the relationship with ROI
01:07:50 - Comparing the maturity of SoW
Jonny Dunning [0:00]: Excellent. Okay, we are now live. Jonathan Winters from Allegis Global Solutions, thank you very much for joining me. How are you?
Jonathan Winters [0:10]: Yes. Well, thank you. Jolly Yourself?
Jonny Dunning [0:11]: Very good, thanks very much. So, we’re here today to talk about the role of the MSP in services procurement and lots of interesting topics to discuss around that. I want to just before we get started, would you be able to just give a little bit of an intro to your background and what you’re doing now, and the kind of the journey you’ve taken together?
Jonathan Winters [0:32]: Yes, sure. So, I’m a procurement guy by background so various procurement rules across the years. Barclays, HSBC, Lloyds, I was the EMEA head at Non-Tech Procurements back at America Merrill Lynch and I was the head of procurement for European Merchants, [0:47 inaudible]. And I joined AGS probably about four years ago now and I’m responsible for our professional services procurement product – EMEA, and it’s a product that manages on behalf of clients of professional services category of spend.
Jonny Dunning [1:04]: Cool. So, I think just before we get into some of the detail, one of the things that always comes up for me when discussing this in the market is some slight confusion around the term MSP. So firstly, some people’s connotations where they’re just looking at it in the context of an IT managed service provider. And then you’ve got sometimes confusion where people are associating it with the recruitment managed service provider concept, but failing to see the relevance of where that fits in with regards to services procurement. I think there’s some other kind of terminology that occasionally comes up, but what’s your take on that in terms of just making sure people understand it correctly?
Jonathan Winters [1:49]: Yes. So, it's psychology depending on your background, it can be a nightmare to figure out what we’re actually talking about there. So, we’re talking about really MSP organizations, which is the temporary recruitment outsourcing organizations entering into this market of professional services procurement and the logic behind the metrics of that market is that there is a big overlap. You’ve got the pure-play contingent engagements, which is one contractor for X number of days on your next payday.
The other end of the spectrum, you’ve got absolutely, unequivocally services procurement engagements, got strategy house coming in advising the board on the product launch, but somewhere in the middle those two meet and they don’t just meet, they overlap. There’s a grey area between where you’re going to have a sort of SOWs [2:38 inaudible], you’re going to have staffing firms who’ve decided that they can get around rate caused by being consultancy firms, and so on, and so forth.
So, what we’re talking about is that space there, we’re talking about applying some MSP skill sets and knowledge to the problems faced by professional services procurement, but also doing so by using regular people to address those problems as well. So, the overlap is really things like creating visibility, using a VMS, tracking the data, onboarding people, offboarding people, or something, but procurement piece is running RFP, it’s negotiating against accusing us of SOWs, it’s checking to see that those SOWs [3:18 inaudible] are limited.
Jonny Dunning [3:20]: Yes. Within Allegis, how would you normally describe this? Because I’ve heard terms like workforce solutions providers, people talk about total talent. I’m always slightly critical of the total talent angle on this side because I look at it and think, well, you’re buying a service from a company, you’re not hiring talent. But ultimately, it’s all about workforce management, it’s all about getting things done.
Jonathan Winters [3:46]: Yes, that’s it. It’s down to it basically, it’s, some work needs doing and somebody’s going to need to do it, and how am I going to engage these people? And really, when you’re looking at MSP versus SOW, the question you’re asking yourself there is, am I buying a solution? Am I paying an organization to deliver a piece of work underpinned by talent doing that work? Or am I paying for the inputs? And am I paying for the talent that we’ve identified to come in and I’ll guide them, direct them, manage them on a day-to-day basis towards probably the same goal? Yes, it’s the difference between inputs and outputs or find a solution and finding talent.
Jonny Dunning [4:22]: Yes. And I think what you said there are about from taking it back to the beginning and looking at what needs to be done, brings me on to the next topic, which is all around the value of triage and I think there’s a scale or there’s a journey of various points that triage input to come in there. How do you see that playing out in the market at the moment? Or where do you see the core value of that?
Jonathan Winters [4:54]: I think for most organizations, what they really need out of triage and there’s nuances to where you are in the majority of your journey, but what you really need are triage organizations, it’s, how am I going to drive this piece of work to the most optimal route to market? With the exception of certain regulations and certain countries, there’s not really a regulatory answer to this, there’s not really it must be this; it must be that, there’s value and impact questions to be asked.
So, to me, there are probably three common mistakes triage processes make today that prevent them from really addressing, what’s the optimal one? What’s the one that will create the most impact on my business? One of those is that you tend to have institutional problems behind it. And what I mean by that is you might say, look, consultants don't count as headcount but contractors do, or you can use contractors but you cannot use the consultants.
So, you’re driving people through institutional barriers, you’re driving them to a route to market. That’s not necessarily the best route to market piece of work they’re trying to get done. That’s one. The second is probably that a lot of triage processes are underpinned by decision trees and these decision trees can sometimes be a bit easy to use it again. There are10 questions, if you answer yes to all of them, you’re going to be told to go to the MSP, you answer no to them, you get told to go to the S&W route to market.
Well, if you’re coming to those with a desire to go on route or to the other already, it doesn’t take long to learn which one, we have the chances to get the output that you’re looking for, so they’re not really achieving the rate if they’re quite easy to workaround. And then the third one is, I think an issue with the proactive versus reactive decision-making. So, I think what happens often is that as an organization, you’ve made this decision somewhere in the business, CPO level, or global capacity head level as to how you want to buy from the market, you’ve got the strategies as to how you want to buy.
But a lot of decision trees, I see, instead of saying this is how we want you to buy this, how we want you to engage with the market, can you construct your deal in this way? Can you put these terms into the deal? They tend to be quite reactive. They say things like, are you paying the vendor on-time –materials or solutions? Is their payment by results? Are you buying the IP of the individual or the IP of the organisation? What that’s doing is saying to the business, you construct the deal and we’ll put it in place, that’s a reactive nature of them.
Jonny Dunning [7:30]: No, it does come back to this thing of it being, it needs to be the best fit for what needs to be done. And as you said, that shouldn’t be driven by a regulatory angle in the sense of trying to make something fit and it shouldn’t be driven by – it should be a pragmatic business decision. What is the most effective way to get this piece of work done? If the most effective way to get his piece of work done is using contractors, then the business needs to use contractors in a compliant manner rather than --so it’s a bit inconvenient to do that because we have to deal with IR35, for example. That’s not a reason to do it in a different way necessarily, it’s the question of, what’s the most effective way with all things considered to get this done?
Jonathan Winters [8:16]: Yes. Start with the best solution to your problem and then figure out what the contractual structure is to facilitate that. Don’t start with, well, here’s a contractor structure and then can you pigeonhole your solution into that?
Jonny Dunning [8:30]: Yes. I think that’s definitely a problem that some companies are wrestling with at the moment, but with services procurement in general, because there’s often very much a lack of visibility in this area, that’s where things can kind of sneak under the radar a little bit and also be getting models being misused. But when it comes back to triage where that information is being centralized and managed by a workforce solutions provider or an MSP, then it comes full circle. We can discuss that later as to the ultimate aim of this type of program as it comes right back to the beginning of the process.
Jonathan Winters [9:11]: Yes, that’s right. And the foundation level of this is that visibility; you can’t really do a lot of what you want to do in the design value to this fellow without the triage or using data and so without having some level of visibility created. How many people sit under those Sows? How are they being paid? What are they supposed to be doing? If you can get all of that data built, then you can make really valuable impact-based triage assessments and you can base your optimal route to market on data and experience rather than what was probably the RFP or what’s the institutional [9:49 inaudible] headcount versus budgets or what’s the institutionally easiest route?
Jonny Dunning [9:54]: Yes. And it’s interesting the points you’re making about decision trees because it’s something that seems to be quite a hot topic for certain organizations, it’s something that people are quite excited about and they feel like it’s going to solve their problems. The technology element of a decision tree from my point-of-view is pretty simple.
Okay, you can try and make these things more programmatic, but ultimately, it’s about consulting on a requirement-by-requirement basis, or categorizing requirements into different tranches if there may be smaller and going through a streamlined process. But how do you see the balance in that when it’s working very effectively? How do you see the balance in that decision tree process between automation and expertise if you’re providing that for example, from an MSP point-of-view?
Jonathan Winters [10:45]: Yes, I don’t think you can fully automate it. The reason I think you can’t fully automate it, is that if you fully automate it, you’re going to have to have two outputs, just two choices, that is, this is absolutely an MSP engagement that’s a contingent worker and that’s all there is to it or this is absolutely a professional service engagement – speaks to the SOW team again, and that has to be put in place.
Whereas in actual fact, because of that grey area that I talked about earlier and that overlap, quite often, the answer should be, hey, this could be either there are pros and cons to one of the other, maybe you’re looking to mitigate risk, maybe you’re looking to keep costs down, whatever. You now need to speak to somebody who sits in, who spends their whole life in that world of the grey area between MSP and NSW and they’re going to help you understand what’s the best fit to your piece of work.
You can’t automate that piece out so easily because that’s a conversation, that’s an education process in the user helping them understand what each of its market would like, and so on. I think what you can do is you can filter out 80% of the engagements for automation to make that job a quicker and more effective one, but you still need some elements of people behind that.
Jonny Dunning [11:54]: And within the automation, do you see opportunity in the gathering of requirements of the understanding of common requirements? If you look at a services procurement program, typically, at what percentage of the overall spend would you see as fitting into the types of requirement that can be categorized as very similar or similar enough to be put into groups?
Because the whole point with complex services is they’re complex, which is why they’re not easy to manage, they’re not easy for companies to go on top of, it’s a challenging technical solution to be provided. When you look at these types of programs, how are they generally structured? Because from my point-of-view, sometimes we look at this, some type of thing that seems like there’s no commonalities and everything’s completely different, but what do you kind of tend to see across the board?
Jonathan Winters [10:45]: Yes, I think very rarely do you have no commonality actually. This is bitten roughly – and research answer – roughly the breakdown. So, you’re going to find that about a third to half or less that have used in most large organizations are going to be IT-based SOWs. They’re going to be building integrations, acting as an XI, reeling in small IT projects. You’re going to find a small little percentage at the very top are truly unique, and even the unique tend to be unique to industry rather than unique to business, so that’s going to be something that the travel world does, the banking doesn’t, something that banking does, construction doesn’t. But you’re going to find that most of it is the IT, and you’re going to have some change.
You’re going to have some ops, almost identical vendor lists, certainly for everything of scale that’s going to be the same vendor list. So, actually, there’s a huge amount of commonality across the marketplace on the face of it, in terms of, what are you doing and who are you using to do it? Where you lose a commonality, is in, how are you engaging them to do that work? And how are you paying them to do that work? And then, how well have they been delivering that work? So, you might have one organization operating two identical clients doing identical projects and come up with wholly different results because of something the nature of the business, the nature of that location, the nature of the team, but that’s all hidden. So, the commonality disappears after that first couple of layers.
Jonny Dunning [14:22]: Yes, so obviously, you can have commonalities within industries and you’ll get certain commonalities across the market within organisations. Obviously, there were going to be key departments like, you mentioned the level of prevalence of this type of spending in IT, for example. And I guess it’s always a measure of maturity and how far along an organization are with managing this type of spend, how big they are, the size of their spend, etcetera. But one of the things that even if you look at contingent workforce, generally managers find it quite difficult to write job descriptions, companies are always working on the latest with their MSP, the latest version of all their updated job descriptions and that's fairly easy to pigeonhole when you compare that to project-based SOW, so there must be some real challenges for organisations. I know there are challenges for organisations just in terms of writing good requirements and I kind of see that as part of the triage process potentially, if you described it as triage a bit further down the line, obviously.
But I always think there are opportunities within organisations where they can learn from best practice where requirements are being written or have some commonalities that, for example, maybe in the future certain elements of that could be templated, which can put in various kind of standard bits of information to make life easier for people. But at the moment, within most organisations, it’s extremely ad hoc. What’s your view on that from the point-of-view of commonalities and opportunities to streamline that within an organization?
Jonathan Winters [15:53]: Yes, I think they’ll change it to that. So, we think back a few years it was an overrated procurement system cataloging a lot of your commoditized goods; entire catalog makes it super easy means that you didn’t have to go and buy, and that sort of shied away from the more ambiguous sorts of products and services, such as professional services. But I don’t think it needs to though, I think there’s a core of most projects that overlap, so it’s an IT change project, it’s going to be a change manager or a project manager, there’s going to be some developers or whatever. You can build the core of that and what you’re adjusting is the peripheral of it.
So, you’re adjusting how long it’s going to take, probably systems they working on, and so on, and so forth. I think you can start to catalog the core of that and then allow flexibility to adjust bits and pieces of it. And if you were really to spend a lot of time going through what you’ve already bought in the past, you’ll find that there’s a lot of it, it’s just buying the same stuff or very similar stuff over and over again, in which case you should be able to catalog it quite easily and almost pre-negotiating that with them, just, hey, look, this is the sort of thing I’m going to come to market people for three or four times a year. I’m going to be really quick when I come to market, how much is it going to cost? How long is it going to take? And then people can order it much more quickly.
Jonny Dunning [17:07]: Yes, and it’s interesting what you’re saying about how it can in some ways be formalized and categorized more effectively. That’s where I see the divergence between the use of technology for goods of materials versus services procurement, because obviously, as you said, goods and materials, it’s very catalog-driven, it’s quite binary, it either is this or isn’t this whereas, with services it’s just so much more complex, there are obviously those shades of grey. And I think there are certain elements of how a statement of work should be written within a particular organisation that can be captured and used to inform the process and help people make use of that channel or use that channel more effectively or control the use of that channel more effectively.
But I think there’s also potentially some real expertise input that can be given to just help people write better requirements. I think that comes down to, within the organisation, it comes down to potentially opportunities for the MSP to really help with that, but I also feel that the supplier can potentially be a very valuable part of that. How do you see that stacking up in the sense that, for example, if it’s a really specific piece of work where the supplier owns expertise?
Jonathan Winters [18:23]: I’ll come on the supplier in a second as I can, but just to wrap up one bit that you mentioned there around sort of creating the control and the expertise of helping build as I said SOWs. I think that actually, the biggest thing that’s driven by should be the maturity of the organisation. So, if you’re an organisation– and we're talking here, I guess like buying, which was mentioned.
In a procurement organisation were quite low levels of maturity, you probably not have a lot of control over the process, you’ve probably not got a lot of people following the process if there is a process there and what you really need there to move yourself along is more rigid ways of doing things. You wanted standardizing in a system, you want to have template contracts, you almost want the business units not get too involved in the contractors to come to you and to say, this is what I’m doing and then you’re going to use your expertise to build that for them.
As you progress down that maturity journey into something a little bit more advanced, I think you should be giving some of that power back to the business unit in the form of empowerment, rather than lack of control, and therefore, you should be looking at ways of working processes, policies, tools that facilitate the business users building a lot of their own deals but with the information, with the tool sets available to them, and the education to build really great deals.
Jonny Dunning [19:44]: Yes, we certainly see that from a tech point-of-view in the sense that the self-service element of technology-managed services procurement is absolutely critical, just the ability for users within the business to be able to do that.
Jonathan Winters [19:57]:And that self-service would be potentially dangerous in an environment where it’s not suited to it, where nobody’s got a clue what they’re buying, how they’re buying it, whether they should be buying it or not. But in the right environment, for an organisation whose probably been acting in this centralized way for a few years and people learned the value of procurement, learned the importance of sticking to the rules potentially in a regulated environment so there’s a bit more of a culture of that.
That self-service is really empowering the business unit there if issues are there, but what it’s also doing is getting you more buying and I suspect you guys probably see this in terms of uptake. Most procurement people or organisations, probably at best, get about 70% of the total spend flowing for themselves, the spend that should have flowed through and even that would be considered quite decent. I think there are three reasons why people don’t engage procurement.
I know better, I don’t want to spend any time on it, or I’ve got something to hide. If you’re able to empower people to approach the market and sell deals themselves, see the data that helps them make better buying decisions themselves; assuming it’s right for the culture of your organisation, you take off the table that I know better and I haven’t got time for it –arguments – and therefore, you should get more spend throughput.
Jonny Dunning [21:16]: Yes, definitely. And what we tend to see is that the level of control that you may want to layer on, for example, for a tool like ours, depends on the maturity of the organisation, it also depends on the culture of the organisations. It’s just people aren’t told what to do, they’re independent, they get on and do it. That doesn’t mean that having self-service access for example, for a system that’s guided by input, for example, from an MSP, that is no reason why that can’t still lay out a useful path for them.
So, for example, allowing self-service but having that as effectively a guided process where you might have templates and you might have certain fields that are configured in certain ways that aid that process. I think it could be really useful. And then procurement can layer on as much or as little control as they may want because the most important thing, as you rightly said, is getting that uptake initially without the data and the process flowing right through, then you really don’t get the insights and the value at the end of it.
But I think also, one of the points you brought up, that was quite an interesting one, just with regards to, for example, templating the contractual process or at least having a structure around that. And I kind of see this part of it as two bits – I see it as the requirement and then there’s the work order or the statement of work. So, one of the things I think some organisations or some stakeholders find quite difficult is actually just communicating that requirement out to the market and there’s a skill to doing that.
And there’s also a skill to then formulating the scope of work and the work order. I think some companies are quite wary of getting suppliers too involved in that because it might feel like the tail wagging the dog, and it’s a self-fulfilling prophecy and all sort of thing. But equally, if there is a sensible process with back and forth there, I think not the writing the initial requirement, but when it comes to shaping the work order that could be a really collaborative process.
But I guess from an MSP service point-of-view, there are opportunities to add value and get involved when it comes to actually just guiding people through the requirements. We sometimes see situations where even a requirement will go through a sign-off process before it even goes anywhere else and be refined and I think there’s maybe quite a bit of value that can be added to that point. But then also a kind of maybe refereeing or helping with the scope of work decision point.
Jonathan Winters [23:40]: Well, what the MSP will often do or the service procurement provider will often do in that early stage is help the business user first of all, just really start to articulate their requirements and start to think about what they want to get done rather than what they think needs to get done. So, what’s the goal? I need this integration building by Christmas. Often, even if that’s the aim, the first engagement will involve sort of coming to the team and say, hey look, I need four people for Christmas. Okay, well what are you trying to achieve? What is it going to look like? How do we articulate that?
That’s the first task because once you’ve got that done, you’ve got to find somebody in the market who’s going to commit to the delivery those results. There’s absolutely value in the vendor base getting involved in that because if you upload, set the outcome criteria, you’re potentially going to miss some innovative solutions. I think I need an integration but actually, somebody else in the market might be able give us different ways of solving the problem.
So, there is value in engaging with the market there, but the biggest value just comes with sitting with somebody who’s approaching the market on a day-to-day basis and saying, okay, these are the ways I’m going to describe what you want to get done. They said this is how we’re going to use the contractor to ensure that there is sort of quality levels are achieved, this is how we can link the risk to the contracts, and so on, and so forth.
So, that’s kind of what the team will be spending a lot of their time doing and also just ensuring that one of the highest points of value in this whole process is tracking what happened after the NSW was executed, but you really need to be -- the stuff you were doing beforehand is what’s going to set you up to success in tracking that, it’s a well-constructed, relatively standardized, but it’s still a detailed statement of work, clearly articulated requirements, acceptance criteria, payment terms and milestones, and so on, and so forth. That’s what’s going to set you up to building great data at the back-end. So, one of the things a program team will often do is spend a lot of time with the user in the business, really getting that down to the perfect level of detail.
Jonny Dunning [25:47]: Yes. And we do tend to see kind of user hierarchies within someone’s using the system with an MSP involvement, that will be a split user hierarchy of different roles and different levels of handoff where a requirement over a certain value might automatically go to the CFO for sign off, for example, it might be that all requirements go through some sort of initial MSP requirements triage process just to check they’re up to certain standards, then that could help feed into things like template stuff. And so, it’s a process that builds with maturity in the program, really.
Jonathan Winters [26:17]: Yes, and that’s something that’s really useful and it might be value, it might be risk factors, it might be that you can have access to client data, so there’s extra signups or what have you, but it’s really useful to what happens if you don’t have those extra levels of visibility is that you think you’ve put templates in place and you’ve used a system that insists that they fill in the deliverables and the acceptance criteria, but you end up with meaningless deliverables or acceptance criteria. All the time you see examples of work where the deliverables as you’ll send me the following resources and the acceptance criteria as we sign off their timesheets. So, what the organisations has done in those situations, they think they put controls in place, but they haven’t put checkpoints in place to validate those controls are working and therefore the controls have a work. So yes, those extra levels of approval with deliverables and scopes ensure that you are actually getting what you think you’re going to be getting for running a program like this.
Jonny Dunning [27:10]: Yes, I think it’s a tellingly pragmatic exercise to have to go through this because it comes back to, what is the business looking to achieve? How well is the business communicating that? And how well do individual stakeholders and business unit managers understand how what they’re doing is contributing to the overall strategy of the business? So, it’s absolutely critical and as you say, it’s a very pragmatic thought process. It goes back to what we were saying about how the requirements were created in the first place, it being the best way to get a piece of work done and defining that work, and understanding the objectives.
The growth we’re seeing in the use of statement of work or the increased appreciation of this model and the increased scrutiny on this model. The various reasons, cost pressures, things like COVID shining a light on spend like this, then also, regulatory factors and the general transition that is certainly the case that there are trends around work moving more to outcome-based delivery necessarily than just time materials. It’s very easy to say I want a Java developer working X many hours a day and they’ll just get on with it and then things that things will get done when they get done. Whereas actually defining an outcome is just so much more pragmatic. But, in some cases, it’s a bit of a leap for some organisations or for some stakeholders to get their heads around.
Jonathan Winters [28:31]: Yes, and it’s a little bit more work on the front-end building those exceptions, criteria’s, and deliverables, and building the milestones, and creating mechanisms to track those milestones and really payment on those milestones. But in the long term, it makes a world of difference, how many contractors are going to extend it on their term? How many times budgets have been added to in order to facilitate and overrunning projects? Whereas, if you just transfer the risk in the first place, it wouldn’t be taking a bit more time in the beginning, but those loads of problems would have gone away.
Jonny Dunning [29:02]: Yes, exactly. I totally agree. And so, one of the things we were talking about was just getting the supplier involved in that whole kind of requirements and work order creation process. And you mentioned with stakeholders within the business when it comes to self-service, the three issues being, If I remember rightly, I know better, I haven’t got time, or maybe got something to hide and therefore, I’m going to try and circumvent this process.
One of the things that I want to come on to discuss is the value of having some level of vendor-centricity to make this work on both sides. And obviously, if you make the process awkward for a supplier to do business with an organisation, they’re going to want to go around it. But do you think that maybe there are those similar, quick kind of things to address on that side as well?
Jonathan Winters [29:56]: Yes. I think certainly if you don’t build it with the supplier in mind, it won’t work because the supplier without exception will have stronger relationships throughout your business at the senior levels than most procurement teams will have and therefore if you build a process that they don’t like or don’t want to engage with, they’ll just work around you. So, you’ve got to build something that works for both the user, the person the business is going to request some work getting done, and the vendor and if you can do those, then you’ve got a program that will work.
And in order to build a vendor-centric solution, you need to find, what’s in it for them? What’s the upside? It might be that if you follow this process, you can be certain that you will be getting paid on time, which in some organisations means a lot. It might be that if you follow this process, you’re going to get visibility opportunities that you didn’t get to see before. You’ve been doing great work in department A all these years, but you’ve never met anybody from department B to follow this process that will allow department B to see what you are up to.
Or it can be any number of things but you’ve got to find something that’s in it for them, otherwise, the vendor will be tempted to work around the process and then the solution doesn’t have you lost, you’ve lost any benefit running a centralized program.
Jonny Dunning [31:11]: Yes, and obviously, it’s going to vary depending on the size and type of organisation and you’ve got different problems within different parts of the supply chain that needs to be addressed to make this work for them. For example, you might have smaller suppliers that are super innovative, and they fit in really well with the organization’s policies around sustainability and diversity and whatever it might be. But it’s hard for them to get noticed because the organisation has concrete relationships with some very big suppliers, they tend to use across all areas just because there’s very low risk in the individual decision-makers around doing that.
Jonathan Winters [31:49]: Yes, and this is what I said earlier, which is that most of the value is in figuring out what happened after the SOW is signed. If you can really track and I tend to boil it down to four key questions: Did the vendor do what they’re supposed to do? Was it done to the standard that was agreed? Was it done within the time frame that was agreed? And did it ultimately cost what they said it was going to cost? When you can track all of those, you create a level playing field. These small vendors with innovative solutions and so on, they might have literally no marketing and sales budget. They might be amazing at delivering work within your business, whereas the larger organisation, they’ve got the marketing ability to silence the smaller players.
If you can track those data points and start building a dataset on those and allow that to start to influence the decision-making, you’ve leveled that playing field, you’ve given a voice to the smaller suppliers, where isn’t. And you’ve also maintained the voice of the larger suppliers, where isn’t, and you’re able to say to the suppliers, hey look, if you’re doing great work for me, the whole business is going to know about it, that’s going to win you more businesses, that’s going to facilitate your growth, it’s going to reduce your cost of sale. We’re going to really sort of shout it out when you’re doing good stuff that should get a lot more buy-in from all scales of suppliers.
Jonny Dunning [33:06]: Yes and when you’re looking at this information and you’re looking at visibility and you’re trying to create a valid decision-making process, you can’t do it if you’re only capturing part of the information. So, to benefit the big suppliers you need to capture all information to benefit the small suppliers, you need to capture all information. And if everyone’s operating on a kind of equal footing in terms of the fact that they are providing a service to the business and they are a trusted partner of the business, it makes sense to understand really effectively on both sides, what’s going well, and what’s not going well.
And will create opportunities as you say, visibility within the wider business, but also just in terms of finding out where things are going wrong, by the fact that, if you’re using a system effectively you can get real-time reporting. That’s something that’s very interesting to a lot of people because find out their project is going wrong before it’s too late in terms of how that flows up the reporting chain. Because as you were talking about earlier in terms of creating value on the client business user side and also on the supplier side, procurement can sit in the middle and they just get the value of just having all this visibility and all of this data.
So, actually, they might be kind of orchestrating things but not getting in the way effectively – might be the wrong phrase – but just really allowing the process to flow, but then being able to draw our insights and notice problems when they’re coming up and address that. Because typically, I would imagine that something that’s very much after the fact problem, something’s gone wrong with this project, can you go and have a look into why the suppliers hasn’t delivered. What’s going on? And then you’re into looking at trying to find the original contract, looking at the original milestones. What’s changed? What’s been tracked? And if that’s not centralized anywhere that must be ahead of the task.
Jonathan Winters [34:53]: Yes. I’m not sure there are exceptions, but procurement tends to operate within the SOW conveyor belt. They get engaged at the beginning of the process, they put the SOW in place against negotiated, approved, executed, and they go and do the next one. They don’t tend to get the opportunity to be involved in what happened after the SOW is signed unless something goes dramatically wrong like you say. So, I think having that data helps on the micro-level of, hey this deal is not going very well, we’ve got some early warning signs, can you come and help? But I think it also helps on the macro level where you can start to build up this dataset that says, well, these are the vendors that within my organisation deliver on time, on budget, to standard.
How many attempts do they take before they get things right, and so on? And then, instead of just sort of looking to resolve the deals that have gone wrong, you can get ahead of that and stop appointing the companies who don’t deliver very well. Stop appointing the companies who get involved in those deals where you’ve then got to step in later and start driving work towards organisations who’ve got a solid empirical track record of delivering good quality work on time, on budget, within your specific environment. And if you’ve got a good enough dataset, that could be down to location, to a particular facility, it could be down to skill sets, it could be down to scale of projects, and so on, and so forth. Once you build a big dataset, you can cut that data in so many ways to facilitate these more insightful and empirical decisions.
Jonny Dunning [36:20]: Yes, and there’s so much valuable information to be unearthed. I always tend to quote the value of the services procurement spend as being, trillion-plus. But I saw a really interesting recent report from you guys that put the value of it significantly higher than that when you take all of these facets into account. So, it certainly makes sense that the opportunity to really put scrutiny on this area and understand the value and understand what people are getting for their money is an incredible opportunity, it’s a massive opportunity.
Jonathan Winters [36:55]: Yes, and you’re sort of faced with two choices then. Are you going to go back to your business and say, well, here are some ways we can add more value to this spend category? Here is where you create more visibility, that visibility can translate into value and this is what it means for the business. Or are you going to react, when the business comes to you and says, actually it turns out that we feel that this is an area of spend that needs more scrutiny.
I was talking couple years ago to the CPO of a pretty large company, and they were spending about 500 million pounds a year on professional services, and like most companies, they knew who they were spending it with, how much each vendor got, start date and end date of the programs, maybe some project titles, the sort of thing that you would have in yourP2P, but that was about it. I didn’t really know an awful lot more granular level detail than that one, on what the half a billion was going to.
And the CEO, understandably, at one point in a cost-cutting environment of that business within the time that I came along to the CPO and said, “Well, what do we get for a half a billion pounds?”And he couldn’t really say much more than, “Let me see who we spent it with, this is how many deals they did, this was how much each one earned from us”.And the CEO instantly, as happened in a lot of organisations puts some controls in place. All consultancies spend, that comes through me, I’ve got to approve it regardless of value.
What that CPO really wanted to be able to do with his boss was to say, yes, this is how much we’ve spent and this is the impact it’s had on our business, this is why that 500 was really well spent. This is how we drove it to vendors, we’re delivering good work, here’s all the work they delivered, here’s all the milestones we’ve delivered, here’s what we’re expecting to happen in the next 30 days, 90 days, so on and so forth, and really show that that money was being managed to value an ROI rather than managed to process a transaction.
Jonny Dunning [38:43]: Yes, absolutely. And it comes onto this whole element which we can discuss later around managing to budget versus managing to value. But again, this is complex. Most projects are different, there will be some commonalities, but projects are different. It’s not like buying goods, it’s not like just hiring people on a time materials basis. It’s a very specific type of requirement to manage as a whole, which kind of brings me onto one of the points I wanted to make.
Just in terms of, as an MSP, as a workforce solutions provider, where you're addressing this within an organisation versus where organisations are just doing it on their own. What’s the difference? Is it just that the ones that are looking to do it on our own, just have that effective capacity? Because, to be honest, I don’t really ever see procurement teams that aren’t lean, very, very rare to see that. What’s the difference? What are the hurdles that exist for those organisations that are going to look to do on their own versus the opportunities and the benefits where they say, we are actually going to outsource this problem in some way?
Jonathan Winters [39:56]: Well, I guess it was simply a capacity play. It would be a relatively short-lived business because that would very quickly commoditize and yes, you’re right all procurement teams are lean because all procurement teams are seen as a cost reduction department, it’s very difficult to work with the boss and some say, I’d like to hire an extra 10 people, you can’t incur cost you should be there to reduce it. But it has to be about more than just, we’ll augmenta team.
It has to be about bringing insight and skills, it has to be about addressing something that they weren’t already addressing themselves, and to most organisations that is what happened after you signed the SOW. That’s the bit that’s really not something that most businesses were doing themselves. Now, there’s a lot you can do before the SOW sign in terms of reading the RFP’s, articulating those deliverables, and so on. And the better you get at that, the easier it is to manage the what happened afterward, the easier it is to track that. But for us, it’s about both sides of that signature event.
Can we build really, really good quality contracts and transfer risk and run market competitions and so on up until the point of execution? And then really importantly, can we follow that to every single SOW without exception, through to conclusion, and then learn from that and ensure that that data loops back to the beginning of the process and drives better buying decisions next time around. And I guess in theory, any organisation could do that themselves if they really wanted to, but it’s about bringing the technology, it’s about bringing the experience, it’s about having done this in however many other organisations that allows that to be done in a scalable, efficient, and manageable way.
Jonny Dunning [41:40]: Yes, absolutely. I think the best practice side of it must be a huge element and it’s just that specific expertise that’s not necessarily going to exist. It would be very rare for it to exist in most organisations certainly, that we come across.
Jonathan Winters [41:57]: In this world, we often talk about the overlap of professional services and contingencies, that grey area and as much of that grey area exist in their deliverable and that being the contracts are being provided or service that is being provided. And also, that grey area is a fairly niche world to staff fixing the problem, right? So finding people who’ve got an understanding, not only of procurement, and buying services, and transfer risk, and negotiating contracts, but also the talent will because ultimately, these SOWs are backed by talent and you’ve got to identify that, you’ve going to manage that as well.
Finding people with that overlap is difficult and it is an area where the MSPs perhaps have an advantage over the in-house teams trying to build that out themselves. Especially as ultimately, an in-house team will be an SOW program within the client will either be open by procurement or HR and if it’s not about the procurement, it will be very procurement-centric in the way it will be managed, in the way it’s being staffed, and it’s not about HR, it will be very HR-centric. Very rarely do you find ones where the two have sort of managed to collaborate really well and build teams with cross skill sets.
Jonny Dunning [43:00]: Yes, so obviously, from your point-of-view, your background is absolutely pure procurement prior to this. But I guess within the setting that you’re operating within, you have now the opportunity to really kind of cross-pollinate from all of the best practice that already exists within that MSP world in the contingent workforce space. Where although the two delivery models are very different, it’s still about getting work done, and as you say, there is still kind of somebody doing something at the end of it, by the very nature of it being a service that’s delivered.
So, yes, as you say, there are grey areas, but in terms of offering a service to help a client manage this, it needs to be quite a holistic viewpoint. And so, for an organisation to be able to outsource it, they can outsource it to get this holistic solution. Whereas they want to try and set that up internally as with anything if you want to try and in-source it, you can always try and build it all out, but it’s never going to have the level of efficiency that you can have if you’ve already done that for 20 customers and you’re bringing in the solution the way you’ve seen all these things work and come across various problems. Not to say there won’t be the requirement for some serious problem-solving skills where everyone does everything differently. Even if they got same systems and similar industry, there seems to be a lot of variation.
Jonathan Winters [44:14]: Yes, everybody’s got their own little uniqueness and it helps once you’ve built a client but that spans multiple industries. There is skill sets and so on, and so forth. But everybody’s got their own little uniqueness and that’s why you’ve got to hire talented people. People who can think themselves, people who can come up with solutions, but fundamentally, you’ve got to keep it to the core objective which is helping an organisation manage risk through their SOWs, guarantee that the service is going to be delivered to the organisation, make better buying decisions, figure out what route to market makes no sense for you. That’s the product that people sit around that need to be bright, motivated individuals.
Jonny Dunning [44:55]: Yes, absolutely. So, one of the things that you mentioned was that the core gap is effectively what happened after. What happened after this was agreed? What happened in the delivery? We totally see that from a tech point-of-view, in the sense that that’s the gap. You can create a purchase order in a P2P system perfectly well, there are lots of systems out there where you can do contract processes, but as soon as you get into capturing the information, and then making sure it’s delivered in a way that’s consistent with that and measuring that delivery, that’s where the real value sits, and that’s where the real gap is. When you look at the tech landscape out there, so from our point-of-view, we’re approaching this from a very specialist angle, but there are various kind of different approaches or different kind of ways that the market could look at this. What’s your view on the role of tech within this services procurement setting within an offering such as the offering that you guys provide and also the role of dedicated tech versus generalist or existing technology?
Jonathan Winters [45:59]: Yes, I think the dedicated tech pieces is a really simple question, we need dedicated tech. You were alluding to it earlier, it’s a unique category of indirect procurement. This is one of the few categories where you’re buying something that you can’t measure, don’t weigh it. You can’t, test its speed or so on that, you could with hardware or software or any other of the core categories. It’s ambiguous, it’s difficult to manage. So, the core traditional P2P platforms, just kind of, don’t serve it particularly well, so you do need dedicated tech. You need tech that is addressing the unique problems of the procurement process. These are something that can run an RFP, something that can help you build a contract, and so on, and so forth, but comes from a background of understanding the treatment of individuals and so on. So, it’s no good, just building a pure-play output contract.
You’ve got no way to onboard the resources, you’ve got no way to track how many people you’ve got where they are, are they in the safe part of the world? Are they in the endangered part of the world? Did they come to work today? Didn’t they come to work today? You’ve got to have that sort of coming together of technology. So, it does need to be dedicated because it’s a unique set of problems, so it’s a unique piece of software.
It needs to have all those obvious integrations because you’re going to have a lot of organisations that will have a policy that all contracts must end up over here or all spend must flow through this particular area. That’s fine, you can adjust all the integrations to make that happen, but dedicated technician essential and tech that’s grown out of this emerging market of SOW and MSP operating side by side. And then to the other point in there around, what happened afterward? It’s not a straight as it sounds to track every SOW through to conclusion and then because they are all different. They are all different milestones, and they might be in different places and with different actions associated with their own payments or remediation or so. So, that’s quite complicated stuff. And then, the bigger complexity is turning that into the data to make better [48:04 inaudible] decisions.
You are, or I am guessing, would never buy something on Amazon now without reading some reviews. You ordered it. Did it turn up on time? Was it damaged or not when it arrived? Were you very happy with the product? Yet people don’t traditionally do that. Yet, when they’re spending millions and millions on professional services at a corporate level. So, I think there’s this space that the technology needs to fill a building, not quite an Amazon five-star review process necessarily, but something quantitative and qualitative around, hey, have these deals delivered as you’d expect? Was it easy to work with these organisations or not? Did they meet the standards that you expected to or not? And then the tech platform can build all of that out and then facilitate that high level of efficiency on the next purchase.
Jonny Dunning [48:55]: Yes, exactly. And it ties into the four criteria you mentioned earlier of, did they do what was supposed to be done? Was it to the appropriate standard? Did it happen in a timely manner? And did it happen to the appropriate cost? And there are various kind of quantitative metrics that should be captured within a specialist services procurement management system that will inform that part of the process. But then there’s the other side of it, of, did they do a good job? And in terms of measuring quality, that could be to a specific criteria. It could even take into account things like the invasion delivers or the sustainability of that particular supplier or the way that work was delivered, it doesn’t really matter, but that qualitative element plus the quantitative element is something that could be really used to be make powerful insights. But it only works, if the workflows can capture that information.
And I think this is where you get this big disconnect at the moment where typically, you might have a process that can capture a statement of work agreement, but it will end up sitting in a shared file, you’re not the management of milestones for example, which is going to be programmatic. It won’t be dealt with at a granular level and that’s where I think the complexity of buying services versus buying goods, again is a really relevant point because unless you capture that grown-up granularity, specifically relating to how services are delivered, there’s no way you can make those insights and inferences later because it’s not just as black and white as buying 50 red widgets.
Jonathan Winters [50:28]: And this is why tech is so essential because let’s assume an average midsize sort of flexi 250 organisation is going to execute somewhere between 500 and 1,000 SOWs a year and every SOW has four milestones in it and you want to ask those four questions of each of those four milestones. You start getting to a scale, where efficiency, ease of use and ability to aggregate data, and so on, is an absolute must. I’ve seen organisations try and sort of deal with this, we’ll use our P2P, and at the side will have some sort of spreadsheet and then the management team and so forth.
It doesn’t work when you get to that sort of scale. So, if you really want to be able to track those qualitative and quantitative outputs and then users for decision making and ensure that you really understand what you bought and whether it was delivered and whether it was any good, then you do need dedicated tech. But at the same time, it doesn’t need to be super complex, super high-end revolutionary stuff. It’s fundamentally, relatively straightforward challenging settings – its workflows. The state captures this data interrogation, but it needs to be, I guess, developed out of the team who understand that space.
Jonny Dunning [51:45]: Yes, the devil’s absolutely in the detail and there’s also the aspects of what happens in real life versus the theoretical panacea of what looks great. Real-life comes along, things change, people need flexibility, different organisations take a slightly different approach to others. So, I think the core workflows are always going to be fundamentally the same and if that’s correct for this type of engagement model, it works. However, it’s all of the stuff around the edges of that you need to have the ability to be able to configure and work with how an organisation needs to work and quite often be informed by the workforce solution provider or MSP that is assisting or working as part of that organisation. It’s still fairly early in the market in terms of maturity from that point-of-view, in terms of the number of tech solutions in this area.
And I think sometimes companies can get caught in a bit of a space between traditional contingent workforce technology and top-level procurement technology; where effectively the milestones can just kind of fall through the cracks, fall through the gaps in a sofa. But when you were saying earlier this is one of the most difficult categories, the only category that you can’t measure. It’s so complex and so diverse, but as you said there are always those fundamentals. Was it on time? Was it to budget? What was the quality like? How much scope creep was there? How often does this supplier…? What’s their average cost overrun? How often do they win a bid? How often are they on time at a milestone level? Once you start collecting this information, even if you’re collecting it in what I would call a fairly passive manner where you’re not putting loads of restrictions and onerous governance on top of people, you’re just getting them using the system, making it nice and easy on both sides. You’re just collecting this information in this flow-through.
Jonathan Winters [53:35]: Yes, and it doesn’t become the only thing that you make your future decisions on, it just becomes an extra data point, so you’re still going to run the RFP’s and you're still going to hear the promises from the vendors as to what they’re going to do, how they’re going to do it, how long it will take them, how much it’s going to cost them. But you’re looking at that next to some data of, okay well they’ve told me something similar a dozen times before and they’ve always met it or they haven’t always met it. You’re also able to challenge the preconceptions. Almost every procurement person will have a similar story, but every organisation you’ve got, somebody in the business who’s always using the [54:08 inaudible] of sort of piece of work bit, always [54:09 inaudible]. Unless you’ve got the data, you kind of can’t challenge that. You can’t say to them, hey, look, let’s try and use somebody else because the answer will be, but I know my stuff and I know it’s the only firm who can do this. Once you’ve got enough data around that firm then in this other department, they’ve done it, fine and the one you’re using has had these issues.
Once you’ve built data, you can maybe validate their view, then the data maybe proves that they were right towards you as this vendor. But it may be introducing them to an opportunity of doing something differently, but you can only do that with data because fundamentally, as a procurement person in an organisation, you will be experts on procurement. You’re not the expert on what’s going on in each individual department. Years and years and years ago, I did some procurement in the NHS and one of the contracts I did was for a deal to buy heart stems; a little thing that goes into a vein going out the heart from what I can remember.
There was no way in the world I could add sort of subject matter knowledge to that contract that would be crazy if I was to try. We needed the specialist doctor who knew his stuff in there. And what we needed to do was bring his knowledge of the heart stems to my knowledge of procurement and use that to approach the market. So, you’re not looking to the business to try and sort of trip them up with this data and to force them into certain deal structures because you suddenly know better. You’re just using an extra data point to maybe validate what they already know or maybe introduce them to other options that they wouldn’t necessarily have seen unless the data was there to help them.
Jonny Dunning [55:37]: Yes, and ultimately, the role of technology in that is as an enabler to this overall goal, which I guess you could say is capturing the process. You need an effective process to capture that data, but then taking that data and taking it right back to the beginning, kind of where we started about; what needs to be done? And what’s the most effective way to do it? And that comes onto one of the last key points that I really wanted to cover which was around the role of the MSP or workforce solutions provider within the services procurement market in relation specifically to visibility and the relationship between that visibility and ROI. We’re kind of touching on it here but ultimately, it’s about the value versus cost-saving discussion as well. And I’ll be interested to get your views on that in terms of how you see that playing out in the market and also just the recognition of that value rather than just the cost-saving element.
Jonathan Winters [56:40]: Yes. So, I’ve been in procurement now since the early 2000s and in all of that time, there’s been a continuous conversation in procurement about wanting to move away from being measured on cost-savings. Cost-savings are an easy enough measure to have because they are what they are and it gets at the end of the year. Have you got that number? How did you get that number? It is kind of easy to measure. But it’s not really what matters to the business. Yes, the business might need to [57:07 inaudible] cost down, but actually what they mean by that is we need to manage value, right? And procurement hasn’t traditionally been measured on values; it’s been measured on cost. So, that narrative in the industry has been going on for a very long time. I think that programs, where you are measuring what happened after the contract was executed, where you’re putting more effort into finding the right route to market, where you’ve been putting work into articulating deliverables [57:31 inaudible].
They could facilitate that move towards value as opposed to cost. Now, I think that the target state is still a true ROI, a true sort of as we get to the end of each project together – an ROI number, that’s a little way off, but the first steps towards ROI are understanding what happened. Did the project succeed or fail? Those four points we talked about, four is really proxy to that question. Did it work or didn’t it work? Did I channel spend towards a vendor who maximized my chances of that working? And then at the end of the year, how many of these projects that I managed delivered great results? How many didn’t and then ones that didn’t, what did I do to, of course, correct after that and find a way to address that number in future?
That allows you to start entering into a value conversation with your business and gathering all this data around what was supposed to happen. How much did it cost? How long did it take and so on? That allows you to get into a conversation about how procurement facilitated launching a new product that procurement facilitated entering a new market, procurement facilitated in building a new system. As opposed to procurement managed 500 million and we managed to reduce it by 7 million this year. You Don't know if that was a good thing or a bad thing. So, getting into the value conversations is far more important.
Jonny Dunning [58:47]: Not knowing whether if it was a good thing or a bad thing, I totally agree with that because ultimately, you might have the typical situation of a CFO saying, we spent a hundred billion on services last year, we need to cut back to 90 million this year. Well, if it was delivering a really good return for you, then you’re cutting off your nose to spoil your face. But getting to that point requires not the credibility, but it requires procurement to being seen as providing strategic input as you say, rather than just saying control cost. And if procurement are armed with this information and they are able to oversee a process without as I say, you’re not getting in the way of the process operating nice and smoothly where appropriate, then it just allows something that is going to be ultimately of real value to the business, to come to the fore where procurement can advise the business and they can get to that front-end of the process and start looking at who are the most effective suppliers? What other business drivers are there that I need to take into account? Okay, we’ve got a huge drive on making sure that all of our supply chains have great records when it comes to sustainability, for example. That’s an important criteria we then need to factor that into all this other information that we’ve got so that we can add value from the supply chain that we’re engaging with.
Jonathan Winters [1:00:10]: And until you had those systems and processes in place that allow you that granular level detail, then the CFO can only come and say, spend 10 million less next year. It’s the only option. Once you have tools in place, policies in place, processes in place, teams in place that are able to drill it down to individual actions that happened in the [1:00:31 inaudible] so that the quality outcomes and satisfaction ratings and individual clause items in their contracts. Then there are options for other strategies to happen, but really any other strategy couldn’t be executed unless you have that in place.
Jonny Dunning [1:00:47]: Do you think there are still some organisations out there that would swear blind as long as you’re working to budget? That’s fine because I’ve certainly come across some organisations where that seems to be the thought process internally. Whether that would be voiced up to the C-Suite or whether that be voiced out to the market might be different. But there seems to be within certain organisations, to be a level of satisfaction of saying, well, as long as I’m over the budget, that’s fine. Firstly, is that acceptable in this kind of like, post-COVID world whether spending X amount of money, which organisations are spending huge amounts of money in this area? Is that really acceptable? Surely not.
Jonathan Winters [1:01:29]: No. I think few things I want to achieve that -- So, if you sort of suggested – I think that breaks in the hierarchy somewhere, I’m operating the budget, so it’s fine. I think if you ask the CEO of that, they might disagree. Somewhere in the hierarchy, that message would switch. So, again, there might still exceptions that I don’t know, but on the whole, I feel that is the case. What we’ve talked to at the beginning of the process, you’re doing this triage, you’re figuring out, what am I trying to achieve? What’s the best route to market to make that happen? Even if you’ve got the budget and you can’t articulate what you’re trying to achieve, I think we fundamentally have to ask you to be spending any money anyway, right? What are you aiming to do? What is this money supposed to deliver?
And therefore, you can’t measure whether that happens or not, then, are you’re really sort of acting as a strong custodian of those budgets? And then also, I’d say that I’m operating a budget, is fine. It’s probably an okay argument when budgets are relatively easy to come by and times are good and the economy is growing. When you hit the other part of the cycle where the budget has become a lot harder to get hold of – also I’d like 500 grand and I promise to operate within that 500 grand. As an accountant, you’re going to need to be able to say, this is exactly what I expect to do, this is how I’m going to ensure that this happens, this is how I’m going to make sure that I’ve got as much change left at the end of the process as possible. I think that we’re operating a budget argument is one half of the cycle but not both.
Jonny Dunning [1:03:04]: Yes, and I think when you’re looking at this sort of process being implemented, it should be helping the stakeholder like you say, if the stakeholder doesn’t really know what they want to buy and maybe in that scenario, they’re not acting as the best custodian of that budget within that organization. Maybe if they had a bit of help, it’ll be good for them and it would actually work. Maybe they want to be a better custodian with that budget, but it’s difficult really getting to the point of defining milestones and it might be a wider problem in the organization where they need to flow that problem up a little bit to understand actually, what is it you want me to do? So, I think always it comes back to this thing where I just look at it as it’s a very pragmatic work delivery model; I’ll pay you X to deliver Y. Did Y get delivered? If it did. Excellent, here’s your money. And it’s just that pragmatism can flow right through the whole scenario and I think can add a lot of value in all sorts of areas.
Jonathan Winters [1:03:59]: Absolutely. I think there’s an element of -- put it this way, when you hear it like that, I’m going to pay you this money to get this work done and once you’ve proven that it is, I’ll pay you. Very few people will argue against the logic and almost everybody will agree that’s the best way to operate. However, we’ve been operating for decades of just, I’m going to be hiring a lot of T&M-based people and I’m going to guide them towards the answer and I’m going to hope that we get there before my budget runs out.
I’m going to hope we get there before my end-of-year review because we’re trying to deliver against my objectives. I think when people understand that you can transfer risk, and then that you can manage that risk transfer after execution, and that you can make informed buying decisions and you can manage that risk even further down by seeing who’s been successful in the past, I think. Most buyers, most people in the business unit who are looking to engage for a service will pretty quickly come around to the idea of engaging in that way.
Jonny Dunning [1:04:55]: Ultimately, its horses for courses, isn’t it? And as we discussed with the whole triage process, there are certain things that are going to be best to use time materials, certain things that really best to use permanent employees, certain things that are best to be delivered on an outcome. But if you have the option lined up, ready to go, and working effectively, then you can make maximum use of that channel where it’s most appropriate. A couple of last things before we wrap up, so, in terms of cost-savings, another element that I thought would be interesting to get your take on is just, how hard do companies try and squeeze?
And when you’ve got just a cost-saving mentality, rather than trying to drive this value, which I think the value can be measured to a certain or to a large extent around, was it delivered? Was it on time or budget? Was it within scope? And did they do a good job? That’s a pretty good measure of value to start you off with. In terms of return on investment as a specific metric, that’s obviously slightly more complex. You said that’s probably the Holy Grail, but with a cost-saving mentality, there is this squeeze, which can be a very effective in some ways but where does it cross that line?
Jonathan Winters [1:06:00]: Yes, people react to measures. So, whatever you're incentivized on as an individual that’s probably where you’re going to put your focus, right? So, within the organisations where you see the most squeezing and it can sometimes be, it’s going to hit the wall at some point, there’s a cost of sales, a cost of delivery, so you can only reduce your vendors costs so much before you simply can’t engage them anymore. But the organisations where you see the most of that are the ones who can only measure against cost-savings. And therefore, it’s the only thing you can give people, their objectives, and therefore, it’s the only thing they’ll do, it’s a cycle there. The organisations who can measure value will measure value and will incentivize people towards creating value because frankly, it’s just a better business approach but it’s facilitating the ability to do that. It’s not something you can switch to.
So, I guess to the core question, it still happens a lot, still a lot of organisations who are really focused on savings. It’s an awkward category to be in if you focus on savings because there are a lot of new projects and therefore, you don’t always get an official saving, the way it tends to work is, how much did you spend last year? How much did you spend this year? Well, the new project, you didn’t spend anything last year, so you’ve got those cost-savings. So, it’s kind of an awkward category to be in if you’re stuck in that pure-play saving space, you probably going to drive towards a lot of T&M because [1:07:23 inaudible] can’t see you can create saving measures. If you can move your business into value, you free yourself up to other more interesting role and be able to articulate a lot more of the impact that you’re having as opposed to just manage to squeeze 10% around this year, but that’s going to wait at some point.
Jonny Dunning [1:7:41]: Yes. So, the procurement can articulate more easily the value that they’re providing but also, they’re delivering more value. In essence, they’re able to deliver more value, they can move away from just transacting and take a more strategic approach to it where they can inform future buying decisions and inform retrospective measurement of what’s being done and that is massively valuable. Last question before I let you go, last area I wanted to just quickly look at was – obviously your core expertise is very focused on that procurement side. But if you look at the use of MSP programs in the contingent workforce area, in terms of the level of maturity of the entire ecosystem of expertise, process, technology, and the all-around service offering. If you look at that within the traditional contingent workforce MSP scenario versus this services procurement scenario with the appropriate offering that can be used for that, how far behind is the services procurement element of it compared to the contingent workforce element of it? Because I would see the contingent workforce element as being fairly mature or all these angles. What’s your take on that?
Jonathan Winters [1:9:00]: Well, the contingent programs have been around a lot longer than and the services program. So, they had a longer period of time to mature and I guess on a standardized... The advantage that that gives to the services side of things is that there are still multiple different approaches across the marketplace to how you would address services. Now, my bias to you is that you address that by taking the best of the MSP world, the management of tools, the creation of visibility, the on-boarding and off-boarding, then the knowledge of talent; you merge that with procurement people who have been running RFPs, negotiating contracts and so on for many years and then that brings you the right mix. But then I guess what should services look like question, is not a settled question right now, it’s still early in its place in the market, so it’s not as mature but it’s maturing at quite a rate.
And you sort of rollback five years or so, it would have been relatively forward-thinking and considered innovative for the procurement teams to be going out there and engaging a third-party, especially an MSP to manage the rest of the leads. Today it’s pretty much the standard, so that’s the majority of RFPs that we see for MSP. Certainly, here in the US have an element of that sort of view, might be a small element, it might be bigger than the MSP on occasion, but it’s become the market norm. So, it’s maturing at a great pace driven by demand, driven by the market conditions, driven by this need to switch to value as opposed to cost, but yes, it’s certainly have not been around as long, and therefore, there’s aspects of it which are still open to debate.
Jonny Dunning [1:10:53]: Yes, it makes it a really exciting space to be in, I would wholeheartedly agree with you on that and I think that certainly echoes the sort of feedback that we get from the market. But yes, I think it’s going to be interesting times ahead and with stuff like COVID kind of almost accelerating the process, with that emphasis on, what am I spending and what did I get for that money? Yes, I think it’s a good time for companies to be addressing this.
Jonathan Winters [1:11:16]: I think you mentioned COVID there and there’s COVID, there’s IR35, there’s unique to industry issues, but what this all is, they’re, all just flavors of reasons why people should have known better what was in their SOWs, and therefore, it’s prompted people to get greater levels of visibility on all the SOWs from here on in. COVID as organisations put hiring freezes in places COVID hits, they weren’t able to very quickly course correct how they would end their SOWs, so that leaves the visibility port[11:50] within them.
As IR35 sort of come along, people put great eye-opening programs in place around their contingent with populations but haven’t been able to do them where the contingents at within their SOW portfolios. And then this theme recurs around the world under different regulatory regimes and so on, and so forth, but all of it just simply says, hey, look, even if I’ve started that transactional day-to-day, I want to do the next deal better, there are strong reasons why you really need to know what’s inside each and every SOW, how well it was going, how it’s structured, whether resources sit and so on. And I think they all just come together, it’s not just one incident, it’s all of these incidents come together to prompt people to start looking at managing their SOWs differently.
Jonny Dunning [1:12:34]: Yes, I totally agree, and there comes a time where the push forces overcome the fact that this is a tricky problem for companies to solve, which then prompts the development and maturation of effective services with the expertise, the process, the effect of technology to deliver this and make it possible. Yes, as I say, I think it’s going to be a really exciting next few years in terms of watching the journey, this is what I expect to be a rapidly accelerating journey along the maturity chain. And as you say things like IR35, things like COVID; IR35 as you say, that’s basically going to have equivalents all around the world, then you’ve got other factors that throw in there like Brexit, where it changes the dynamic between how companies can access talent. But anyway, listen really, really interesting to talk to you. Thank you so much for all your insights. Yes, really great to get your opinion.
Jonathan Winters [1:13:26]: Thanks very much. Jolly enjoy it. Cheers.
Jonny Dunning [1:13:28]: Superb. I hope to speak to you soon.
Jonathan Winters [1:13:30]: See you soon. Bye.
Jonny Dunning [1:13:30]: Cheers.