Trace the development of external workforce management for customer buyers and partners over the past two decades, and the extraordinary journey becomes apparent. In the early-mid 2000s, companies were beginning to grasp the importance of effectively managing their contingent workforce. As businesses grew and matured, so did their understanding and utilization of their external workforce, gradually climbing the non-FTE maturity scale. Platforms like SAP Fieldglass emerged as market leaders, offering integrated, efficient, and comprehensive solutions to manage external workforce supply chains. As we enter 2024, the combination of MSPs and VMS has become indispensable for organizations seeking rapid advancements on their maturity scale. They ensure substantial returns on investment and lend a strategic edge in planning and forecasting, thus enabling companies to harness the power of their external workforce effectively. The continuous evolution has transformed how companies perceive and manage their external workforce, shaping a promising upward trajectory for the future for anyone pursuing it.

Yes, workforce management has come a long way, specifically in external workforce management. This evolution has hugely influenced customer buyers and partners, impacting vital decision-making processes. Over time, companies grow and progress on the external workforce maturity scale, representing their capability and efficiency in managing their contingent workforce. However, climbing the maturity scale can take a lot of work. This is where Managed Service Providers (MSPs) and Vendor Management Systems (VMSs), like SAP Fieldglass, come into play. They provide streamlined, efficient, and high-quality solutions to manage the external workforce, thus enabling companies to rapidly leap up their maturity scale, leading to improved returns on investment and achieving strategic business goals. These tools play a fundamental role in workforce acquisition and management and strategic forecasting and planning, thus amplifying their command over the external workforce.

Here are a few critical questions to ask yourself to gauge where you are in your journey and strategic actions you can take to scale your external workforce program to outpace your competition in 2024.

Where are you or your prospects in their external workforce journey?

• Generation One: This stage is marked by a basic level of workforce management. Companies in this bracket typically use spreadsheets or other manual methods to manage their external workforce. From a Vendor Management System (VMS) perspective, usage is often minimal or nonexistent, with companies primarily relying on direct relationships with suppliers or non-systematic approaches.
• Generation Two: This generation introduces the standardization of procurement procedures for contingent labor. Companies embrace VMS solutions, enabling them to systematize processes and better manage supplier queries. From a VMS perspective, this generation is marked by initiating a systematic approach to managing the external workforce, emphasizing cost controls, visibility, and compliance.
• Generation Three: In this stage, companies have mature Vendor Management Systems embedded into their operational structure. These systems have become critical for managing and optimizing the entire life cycle of external labor, including procurement, onboarding, management, and offboarding. A significant focus is on talent quality, supplier performance, and workforce analytics.
• Generation Four: This generation showcases an advanced use of VMS solutions. The companies see their VMS as a strategic tool for managing and making decisions about their workforce mix. This data-driven approach optimizes cost, quality, efficiency, and risk management. Integrating VMS with other enterprise systems allows for complete visibility and control over the workforce, including third-party services, independent contractors, and Statement of Work (SOW)-based engagements.

As a buyer, where are you in the purchase process?

1. Recognition: This is the first phase, where a need or a problem is identified. The company realizes its current external workforce management process needs improvement or modernization. Critical factors in this phase include acknowledging the problem, understanding and accepting the need for change, assessing the existing process, identifying goals, and the commitment of leadership to pursue change.
2. Evaluation: In this phase, the company reviews and assesses potential solutions. They might closely examine various Vendor Management Systems (VMS), Managed Service Providers (MSP), or other solutions based on their needs. Key factors include defining criteria for choices, researching various options in the market, checking references and reviews, and conducting demos.
3. Decision: After evaluating various options, the company decides on the solution they want to implement. Key factors here include careful analysis of pros and cons, as well as looking into cost-benefit analysis. Solution certifications and experience are acceptable for running or administrating the solutions while ensuring a successful launch.
4. Implementation: In this phase, the company deploys the chosen solution, such as a Fieldglass. Key factors in this stage include preparation for change, defining the implementation plan, system configuration, data migration, testing, and training of users.
5. Go-live and Review: The new system goes live, and the company begins to measure the solution’s effectiveness. Adjustment and configuration tweaks take place to adapt to real-world scenarios. Key factors include post-implementation support, user acceptance, measuring results against objectives, ongoing training and attention to user feedback, system adjustments, and continual review.

Processed correctly, these phases can lead to a successful transition to a more effective and efficient external workforce management system. Implementing a new VMS such as SAP Fieldglass can fundamentally improve the companies’ ability to manage and maximize their external workforce.

What are the four main maturity milestones for customers who run external workforce programs?

1. Initiation: Companies often experiment with external workforce solutions in this initial phase. They identify opportunities, set objectives, and implement solutions on a small scale or in a limited area to discover the benefits and challenges.
2. Standardization: Companies standardize their external workforce management processes and practices once they understand the basics. They develop consistent rules and procedures for sourcing and managing external talent, and they may implement technology systems to support these standardized practices.
3. Integration: Once they have standardized their practices, companies integrate the external workforce management function with other business processes or procedures. Integration can take many forms, including cross-functional project teams, joint planning processes, and shared systems or technologies.
4. Optimization: After integration, companies can focus on optimizing their external workforce solutions. They can fine-tune their processes, look for additional cost savings or performance improvements, and measure and track performance to ensure they achieve their targets. They may use advanced analytics to make more informed decisions, predict future workforce needs, and implement technology solutions to automate or streamline some processes.

While these stages may vary between companies or industries, they offer a broad overview of how companies mature their external workforce programs.

You may ask yourself how I can move up the maturity ladder quicker with my external workforce program. Hello to SAP’s MSP partners!

Managed Service Providers (MSPs) can play a crucial role in helping companies elevate their external workforce management practices. Here are ways they can facilitate and expedite the progress:

• Expert Advice: MSPs have professional experience dealing with various workforce issues across several industries and can provide invaluable advice on best practices for managing and optimizing an external workforce. They can help devise effective strategies and policies per the company’s needs and targets.
• Implementation Support: Leading MSPs can help implement vendor management systems (VMS), automating and streamlining processes. They can provide training to the staff for efficient utilization of these systems.
• Integration Guidance: MSPs can help organizations integrate their VMS into their broader enterprise systems, ensuring a single view of the entire workforce for strategic decision-making.
• Analytics: MSPs can also help companies leverage workforce data for better decision-making. They can provide businesses with robust analytics and reporting to help unearth valuable insights about workforce performance, cost savings opportunities, and future workforce requirements.
• Continuous Improvement: As workforce needs evolve, MSPs can provide ongoing support to help companies adapt and optimize their external workforce programs. They can recommend process improvements, technology upgrades, supplier performance management, and risk mitigation.
• Compliance Assurance: Given their expertise, MSPs keep abreast of regulatory changes and can assure that a company’s workforce program remains compliant. They can help manage contractual agreements labor regulations, and mitigate potential risks.

By utilizing the knowledge and services an MSP provides, companies can accelerate their journey up the maturity ladder in managing their external workforce. (Check out my previous blog on how MSPs are game changers for customers’ strategic focus on their external workforce.)

What key actions can my organization take, whether I am the buyer or hired by the buyer as the MSP, that can be taken to leap from one maturity level or generation to the next?

1. Assessment and Planning: To move ahead, it’s first essential to understand the current level of maturity. Conducting a review to evaluate their existing systems, processes, and compliance status can provide valuable insights. Based on this evaluation, they can create a strategic plan to overcome weaknesses and leverage strengths.
2. Implementing VMS: If not already in use, implementing a robust Vendor Management System (VMS) like SAP Fieldglass can standardize processes and offer better visibility into the external workforce.
3. Training and Education: It is critical to ensure that all stakeholders understand the benefits of improving workforce management practices and know how to effectively utilize the tools and systems.
4. Integration: Integrating the VMS with existing systems across HR, finance, procurement, and other departments can ensure a unified approach toward workforce management.
5. Data-Driven Decisions: Leverage VMS’s data and analytics to make informed decisions. These insights can help identify areas of improvement and streamline operations.
6. Constant Review and Improvement: Regular reviews of workforce management practices can help identify gaps and areas for improvement. This continuous improvement mindset can accelerate the maturity journey.
7. Collaboration: Encouraging collaboration among all interested parties can help bring diverse perspectives, promote more effective solutions, and ensure buy-in from all stakeholders.
8. Compliance: Staying abreast of and adhering to all legal and regulatory requirements is crucial during this transition.
9. Consult with Experts: Seek advice from Managed Service Providers (MSPs) or consultants with expertise in workforce solutions. Their experience can enable customers and partners to leap from one maturity level to another more effectively.
10. Automate processes: Leverage automation in VMS for routine tasks such as onboarding, offboarding, invoicing, etc., to increase efficiency.

Remember, moving up the maturity ladder aims to streamline processes, gain better control, and derive maximum value from the external workforce.

Reflecting on the progression of a critically important industry, it is amazing how this concept has morphed into a mainstay of business strategy. Businesses globally are reaping the benefits of a well-structured, optimized external workforce.

The scope of Managed Service Providers (MSPs) and VMSs has expanded beyond simple workforce management. They’ve become crucial components of strategic decision-making and forecasting, helping to optimize return on investments. This has dramatically multiplied the effectiveness of our external workforce – both from an operational standpoint and in terms of budget management.

With the global workforce comprising ~40% of freelance or contracted workers, we stand at the threshold of a transformation in the workforce management industry, driven by technological advancements and innovation. We are just beginning an exciting journey in external workforce management.

Need help identifying the right MSP or Solution Integrator for your business? Check out our SAP Partner Finder or reach out to an SAP Fieldglass representative near you.