Agility isn’t always on the payroll

Stronger reliance on data, analytics and automation helps procurement leaders make better-informed decisions and respond faster to emerging risks. But even firms far along in their digital strategies have much to gain from applying cloud-based tools more broadly and deeply to managing the external workforce, writes Chris Willcocks, Head of Intelligent Spend Management, SAP ANZ.

One year into its grip on the global economy, COVID-19 continues to disrupt job markets, with new volatility arising from overstretched health-care systems, emerging variants of the virus, and uneven distribution of vaccines. Despite the ongoing turbulence, businesses are taking steps, not only to recovery, but toward a more resilient future in which greater flexibility and visibility render them less vulnerable to disruption.

At the Commonwealth Bank of Australia (CBA), these steps include investing in digital transformation, with a focus on procuring and managing external workers such as specialist contractors.

The bank set up a ‘contractor hub’ with the help of SAP to function as a single place to source, engage and manage its 2,000 strong contingent workforce. Enabled by the SAP Fieldglass solution for vendor management, CBA’s Contractor Hub is now known as the largest managed service program in Australia.

Cloud-based technologies have allowed CBA to maintain seamless operations, despite immense disruption due to the pandemic. The bank was able to access and attract the best contingent talent in the marketplace, which in turn allowed them to stand out as an employer of choice for this increasingly important demographic.

Additionally, visibility into the bank’s highly skilled external workforce allowed the business to improve contractor productivity, gain relevant insights and reduce overall costs to the business.

But how much of a difference does digitalising the process of procuring and managing contingent labour and services providers actually make? According to new research from SAP, it can unlock newfound value and make a world of difference.

What the numbers tell us

In collaboration with Oxford Economics, SAP has conducted research into the impact of technology and process digitalisation in the procurement function. The report surveyed 1,000 procurement and supply chain executives responsible for direct and indirect spend and services, including the management of contingent labour and services providers.

Over half of executives (55 per cent) say their company would be unable to conduct business as usual without an external workforce, with over 60 per cent saying contingent labour and services providers help them compete in a digital world, lend extra capacity to help manage peaks in demand, and are essential for getting work done.

Over half of executives (54 per cent) specifically credit the external workforce with helping their businesses to recover from downturns. Meanwhile, seven in ten say contingent labour and services providers are “important” or “extremely important” in enabling organisations to manage costs, operate at full capacity, and improve the customer experience.

The freelance boom

Many of the executives surveyed cite the pandemic as a watershed event for their businesses, where external workers proved decisive in maintaining the smooth flow of operations and keeping the promises made to customers.

This reliance on the highly skilled external workforce is only expected to grow in Australia. With the Federal Government’s JobKeeper program ending soon, many Australian businesses will need to start thinking about ways they can to do more with fewer resources. It’s predicted that flexible work will experience a boom as companies rethink their traditional team set up and opt for a more agile, cost effective structure.

The bigger picture

Perhaps unsurprisingly, the research reveals that organisations that embrace the digital transformation of procurement tend to outperform those who have yet to do so. Stronger reliance on data, analytics and automation helps procurement leaders make better-informed decisions and respond faster to emerging risks. But even firms far along in their digital strategies have much to gain from applying cloud-based tools more broadly and deeply to managing the external workforce. They, like others, struggle with incomplete data, manual processes, and opaque or inconsistent measures of performance.

A perfect example is the means by which organisations manage the external workforce, consisting of contingent and temporary labour, independent contractors, consultants and other services providers. Together, on average, they account for 42 per cent of total workforce spend, with payroll employees comprising the remainder. Though highly skilled external workers lend businesses the flexibility they need to achieve resilience in times of disruption, they are often under-managed, constraining organisations from reaping the full value from their talents.

Through the digital transformation of external workforce management, however, businesses gain critical visibility, enabling them to manage with rigor and improve the return on investment. By actively managing their external workforce with the transparency and real-time insights made possible by cloud-based applications, businesses can expand value, strengthen compliance and reduce risk.

As business leaders plan for a return to less anxious times, look for the digital transformation of external workforce management to play an increasingly prominent role in enabling organisations to rebuild and reemerge stronger on the other side of the pandemic.

This article was originally published on Inside HR

To find out more, visit the SAP Australia Intelligent Spend homepage.