When developing the business case for an SOW management program initiative, it is critical to define what drives its return on investment: What will be the focus and rationale for making investments in management-enabling technologies as well as the initiative’s required program management expertise and resources?
SOW engagements are inherently different from other forms of contingent work — they are designed to develop a specific result. As a result, there are different perspectives to consider when it comes to ROI.
Similar to implementing a CW program, the targeting and management of ROI drivers and strategy is critical to the development of an SOW management program business case. So, when thinking through ROI drivers for an SOW initiative, it important for the program manager to keep an eye on the original baseline of drivers for the CW program’s investments and resources.
However, there are additional considerations when adding SOW program management capabilities. SOW engagements are designed to develop a specific result. Hence, they have specific ROI business case drivers too, and with expansion into SOW management services, it will be important for the CW program manager to know what the SOW engagement manager’s ROI drivers are.
Acquiring this knowledge involves listing and prioritizing the factors most likely to increase an SOW engagement manager’s ROI goals and the organization’s net value with the final addition of the SOW management practice is incorporated in the CW program.
ROI Perspective Pyramid
There are three basic ROI perspectives that need to be aligned with the SOW management program objectives and goals:
- The CW program’s SOW management capability investments and enhancements
- The engagement manager’s ROI goals in taking on an SOW project or service engagement
- The alignment with the organization’s overall ROI drivers and perspective
Certainly, staff augmentation services can have the same effect on these three ROI management perspectives, but SOW engagements are more specific and direct in application and are results-oriented in their structure, objectives and purpose.
Potential SOW Program ROI Considerations
As with staff augmentation, when considering specific ROI drivers, SOW program managers will need to focus on quality, efficiency, costs, and risks (a QECR performance management methodology). But there are some differences because of the nature of SOW/services procurement management execution versus staff augmentation engagement management. For example, ROI cost drivers for SOW management can be focused not just on making sure that competitive talent labor rates are applied during the project but how project time management (speed to solution) can be a key ROI cost driver compared to a narrow focus on just governance of labor costs. Other overall financial management expertise of SOW projects and/or services will also come into play if a product purchase and/or change orders are involved. In many SOW engagements, cost is not necessarily the prime ROI driver because of the overall business context driving the need for the engagement to take place and be completed, forthwith.
Some key ROI considerations when managing SOW spend activity:
- Speed to solution
- High-quality SOW engagement deliverables/results
- Services procurement management competence
- Visibility of SOW classification spend, activity and talent resources
- Risk mitigation (worker classification, scope creep, cost, management insurance and IP protection)
- Engagement definition scope and expertise management
- Defined, targeted savings and engagement financial management
- SOW solution provider optimization/permutation (leveraged known pool of SOW solution providers)
Potential Examples of ROI Drivers
When defining and targeting ROI drivers for SOW engagement activity management, a CW program manager may need to prioritize their focus on the following:
CW Program Perspective
- Reducing baseline costs to engage an SOW project or service
- Optimizing the access and speed to an SOW solution
- Enhancing the deliverable quality management and the quality of SOW engagements
SOW Engagement Manager’s Perspective
- Reducing the actual total cost of ownership (TCO costs) of an SOW engagement
- Reducing the speed-to-solution timeframe and costs
- Enhancing the quality of the deliverables produced
- Enhancing admin process in creating new innovative intellectual property advancements
Organizational Perspective
- Enhanced standard product quality
- New innovative competitive knowledge in the marketplace
- New innovative competitive advantage via process or practice improvements
- Enhanced cost base improvements in process management and/or product manufacturing/development that improves overall profitability
- Measurable enhancement to client/customer satisfaction or loyalty
- Creation of a new business opportunity/product or service offering/ revenue stream
Once you understand how the different ROI perspective drivers align, you can build the business case for incorporating the SOW management initiative into a CW program. Don’t get bogged down by the different perspectives involved, but simply tailor your SOW management initiative to support the SOW engagement managers’ core wants and needs, which may offer a different ROI perspective that needs to be considered when designing a responsive and competent SOW management program.