Services Procurement Insights 2019: The Big Reveal

1. INTERNAL Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce Research in collaboration with

2. © 2019 SAP SE or an SAP affiliate company. All rights reserved. The drive to retain market share and break new ground in the digital economy has stoked companies’ appetite for talent and new capabilities. © 2019 SAP SE or an SAP affiliate company. All rights reserved.

3. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Organizations are increasingly turning to the external workforce to get work done. Meet the modern workforce Internal workforce External workforce Employees Workers who are on the company’s payroll, typically receiving traditional employment benefits. Non-payroll workers Also referred to as contingent labor, these individuals are engaged by an organization to do work on its behalf, but not as employees. They can be contracted via staffing agencies, through freelancer marketplaces, or directly by the company. Examples: Independent contractors, freelancers and temporary labor. Services providers – the invisible workforce Companies contracted to get work done, typically on a project basis, via a Statement of Work (SOW). They provide services delivered by people. Examples: Consultancies, IT outsourcers, marketing agencies, law firms, facilities management companies, call-center operators and accounting firms. Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

4. © 2019 SAP SE or an SAP affiliate company. All rights reserved. How important is the external workforce in meeting the following business goals? “Important” and “Extremely important” responses The external workforce is critical to organization’s success. Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

5. © 2019 SAP SE or an SAP affiliate company. All rights reserved. The external workforce is essential for organizations to thrive in the digital age. of executives say the external workforce helps them compete in a digital world say it is important or extremely important in meeting business needs for specialized new IT and digital skills Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce What’s more, the external workforce accounts for 42% of total workforce spend. Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

6. © 2019 SAP SE or an SAP affiliate company. All rights reserved. For us, the value of the external workforce has never been cost. It’s flexibility. It’s strategic. JP Stadelmann Head of Purchasing for the External Workforce, Swisscom Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

7. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Services providers such as strategy firms, IT outsourcers and marketing agencies are a significant portion of external workforce spend. They play pivotal roles in getting work done and operate at the heart of the enterprise. The stakes are high as companies spend billions on these services. Narrowing the lens to focus on services providers… © 2019 SAP SE or an SAP affiliate company. All rights reserved.

8. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Services providers are frequently under-managed. They often operate as an invisible workforce. Under-management prevents organizations from reaping the full value of their services providers and creates risk. …but opportunities are being missed © 2019 SAP SE or an SAP affiliate company. All rights reserved.

9. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Illuminate your invisible workforce See your contribution in a new light Rise above the silos Manage with rigor We identified four key actions to help organizations unlock more value from their services providers.

11. © 2019 SAP SE or an SAP affiliate company. All rights reserved. 36% 39% 41% 44% 44% 48% Who is doing the work Where they are located Contract terms Responsibilities (what they are doing) Compliance with required licenses and certifications Access to systems and confidential company information Lack of visibility into services providers is a serious problem for most companies. How informed are you personally about services providers doing work for your organization? "Highly informed" responses Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

12. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Quality of work and progress against milestones and/or deliverables are surprising blind spots. of executives are highly informed about the quality of work at the supplier level are highly informed about progress against milestones and/or deliverables 25% 27% Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

13. © 2019 SAP SE or an SAP affiliate company. All rights reserved. With such limited insight into quality and progress, it’s difficult for executives to have confidence in value delivered or know whether they are achieving a good return on their investment. © 2019 SAP SE or an SAP affiliate company. All rights reserved.

15. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Most companies do not apply sufficient rigor in managing services providers. Security breaches, compliance issues and maverick spend are worryingly widespread. How often does your organization experience the following with regard to its services providers? “Sometimes,” “Frequently” and “Nearly every engagement” responses 37% 39% 41% 43% 44% Overcharges and duplicate payments Compliance issues (e.g., certifications, workers exceeding tenure, etc.) Digital security breaches (e.g., confidential data or information) Unauthorized spend without approval of Procurement Rates that deviate from an agreed-to rate card or master services agreement Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

16. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Management rigor drops off through the life of the engagement. How well does your organization manage services providers in the following areas? “Well” and “Very well” responses 64% 55% 54% 47% 30% 25% Workforce planning Measuring performance against stated goals Sourcing Onboarding Offboarding (cutting off system and facility access) Re-engagement given positive experience Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

17. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Services providers play pivotal roles in organizations’ strategy, digital and technology initiatives, customer experience, branding and more. Lack of effective management may result in unsatisfactory project outcomes and missed opportunities. © 2019 SAP SE or an SAP affiliate company. All rights reserved.

19. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Collaboration is beneficial to achieving optimal business outcomes. How effective is cross-functional collaboration (between Procurement, HR, IT and lines of business) with regard to your services providers? “Effective” and “Highly effective” responses 72% 69% 66% 65% 59% Workforce planning Spend management Performance management Governance Sourcing Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

20. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Companies that manage services providers holistically will have a competitive advantage over those who are working in silos. David Swift Head of Global Corporate Procurement, Novartis Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

22. © 2019 SAP SE or an SAP affiliate company. All rights reserved. There is room for improvement in terms of services providers meeting goals and objectives. Approximately what percentage of services providers at your organization meet their stated goals and objectives? 12% 12% 16% 19% 41% Less than 60% 61-70% 71-80% 81-90% 91-100% % of services providers %ofrespondents Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

23. © 2019 SAP SE or an SAP affiliate company. All rights reserved. There is ample opportunity to increase return on investments in projects involving services providers. Organizations spend billions on consultancies, law firms, marketing agencies and other services categories every year. Wouldn’t you like to spend better? © 2019 SAP SE or an SAP affiliate company. All rights reserved.

24. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Services providers are vitally important to an organization’s future success. Yet, in most organizations, management is confined to Procurement, and the focus is on the financial aspects of the work. Not just “a Procurement thing” © 2019 SAP SE or an SAP affiliate company. All rights reserved.

25. © 2019 SAP SE or an SAP affiliate company. All rights reserved. However, Procurement doesn’t have visibility into operational aspects such as who is doing the work, quality and milestones. Seldom is there a closed loop to feed this performance back to inform the master contract. This is an opportunity for the business to contribute and add more strategic value. © 2019 SAP SE or an SAP affiliate company. All rights reserved.

26. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Learn from the Pacesetters who are leading the pack. Around 11% of companies in our research outshine the rest. These “Pacesetters” have much more rigorous approaches to managing and extracting value from their services providers. Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

27. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Pacesetters are charting the way forward in this still-evolving field. They stand out in three important ways: Visibility of services providers Effective management of services providers Competitiveness in a digital world Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

28. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Pacesetters have superior visibility. How informed are you personally about the following details of services providers doing work for your organization? "Highly informed" responses Pacesetters Others Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

29. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Pacesetters manage services providers with more rigor and realize dramatically different results, except in the case of digital security breaches. How often does your organization experience the following with regard to its services providers? “Sometimes,” “Frequently,” and “Nearly every engagement” responses Pacesetters Others Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

30. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Pacesetters collaborate better across functions on various aspects of managing services providers. How effective is cross-functional collaboration (between Procurement, HR, IT and lines of business) with regard to your services providers? “Effective” and “Highly effective” responses Pacesetters Others Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

31. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Pacesetters report substantially better performance regarding their services providers. Pacesetters Others 2% 1% 15% 82% 26% 18% 20% 36% 70% or less 71-80% 81-90% 90-100% Approximately what percentage of services providers at your organization meet their stated goals and objectives? % of services providers %ofrespondents Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

32. © 2019 SAP SE or an SAP affiliate company. All rights reserved. Management rigor pays off. Pacesetters’ services providers are more likely to meet goals and objectives and complete projects on time and on budget. Greater visibility, particularly into quality of work and progress against milestones, will help executives ensure they obtain good ROI. Companies must view and manage services providers as an extension of their workforce. What can we learn from the Pacesetters? Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

33. © 2019 SAP SE or an SAP affiliate company. All rights reserved.© 2019 SAP SE or an SAP affiliate company. All rights reserved. Here’s how to capture more value from your services providers: Reframe how you view services providers. Recognize they help you get work done, so treat them like a workforce. Identify the skills you will need to succeed in the digital era, and build a strategy to ensure you can access them. Gain visibility into quality of work and progress against milestones to gain confidence in assessing ROI. Improve cross-function collaboration between Procurement, HR, IT and the lines of business. Ensure your leadership – including the C-suite – has visibility into the scope, impact and spend on services providers. To manage services providers at an operational level, you will need a program with effective management, strong governance and executive sponsorship. Services Procurement Insights 2019: The Big Reveal Unlock more value from your invisible workforce

34. © 2019 SAP SE or an SAP affiliate company. All rights reserved. SAP Fieldglass collaborated with Oxford Economics to conduct an in-depth telephone survey with 1,050 senior executives about their use and management of the external workforce, with a focus on services providers. Respondents were from mid-sized to large companies in 24 industries across 21 countries in five regions. Oxford Economics also conducted qualitative interviews with multiple executives in the field, to take a deep dive into services procurement and to hear reactions to the survey findings. Get our full report at: https://www.fieldglass.com/services-procurement-insights-2019 Find out if you are a Pacesetter. About our research