See our Outsourcing Provider Directory here

Outsourcing Labor Procurement

EDS Shares 10 Do’s and Don’ts

In today’s economy, managers are continually looking for ways to further reduce costs and improve productivity. It’s no wonder many companies are taking a renewed look at outsourcing expenditure such as professional services labor procurement.

The marketplace offers a range of solutions from stand alone tools to master vendor programs to complete process outsourcing. Pete Quigney, VP of labor procurement at EDS, a Plano-Texas-based Information Technology services firm that provides BPO services to clients, shares his views on what to look for when outsourcing the labor procurement process.

1. Design the Overall Strategy

A thorough understanding of your company’s labor usage and its relation to your core business will help you define your requirements when outsourcing the labor procurement process.

First, what are you calling labor? Is it defined the same way enterprise-wide? Common definitions and nomenclature, especially globally, must be the first order of business when deciding what to outsource. Using consistent terms in the marketplace enables managers to compare pricing and volume usage on skill sets.

Connecting outsourced labor purchases with key corporate functions will give your company a more holistic view of these overlapping activities and becomes extremely valuable when evaluating global sourcing, which EDS calls “Best ShoreSM“. Once that is established, you can make decisions to purchase labor, hire new employees, or train your current ones using common denominators.

2. Communicate the Opportunity, the Goal, and the Progress Internally

Active senior leadership support is critical to the success of any company-wide program, and this one is no different. Begin with a top-down approach and ignite senior leadership interest via opportunity statements and progress reports. Companies with established high tolerance for maverick buying will find compliance, hence success, particularly challenging; so establish the rules early and follow through. Make sure leadership at all levels “buys in” to the value proposition.

3. Align Purchasing Process with What’s Being Bought

Process is another area worth scrutinizing. Since all labor is not alike, it makes sense that purchasing processes might be eased for higher volume, lower value purchases. Ensure your outsourcing program aligns processes with what’s being bought so that hundreds of dollars in transaction activity aren’t consumed to pay for a $50 invoice. Assign the appropriate amount of scrutiny for large commitments and contract liabilities and the most streamlined process for every purchase.

4. When Negotiating, Pick Your Priorities and Keep It Simple

Choosing outsourcing partners via RFP/RFQ (Request for Proposal/Request for Quote) continues to be widely practiced, but many companies lose sight of the fact that the sourcing/RFP process is just the beginning. After the contract is signed, the ease and accuracy of daily transactions really tell the story about the savings realized.

When negotiating with service providers, pick your priorities and keep it simple. Always keep in mind the volumes being processed. Don’t negotiate for items that cannot be managed later by either party. Incentives for process improvements and innovation are welcome on both sides of the table. Make sure they are measurable and realistic.

5. Source Outside the Box

Some segments of outside labor, such as staff augmentation, offer companies considerable opportunities above and beyond the “just outsource it” mentality. For example, in areas where the contractor market is mobile, it is possible to obtain the same contractor through various suppliers.

If your process enables you to keep a pulse on supplier bill rates and contractors’ wage rates, it’s easy to find the least-cost alternatives. Source outside the box – there’s more than one way to find a contractor and more than one way to employ its services. Don’t pay for services you don’t use.

6. Buy Skill Sets in Measurable Units

The operations function of a well-managed outsourced program should closely link reality with strategy. The program should buy skill sets in measurable units where appropriate, so that rates can be compared accurately and volumes of purchase by skill set can be measured.

7. Tie Purchase Data to the Money Spent

You know who you buy from, but do you know what you are buying and why? Do you know how much of your spend can be fully leveraged and what can’t, due to certain business circumstances? In the situations where you do not have a choice of suppliers, is the price being negotiated or just paid? Assumptions that you can leverage all expenditures are usually wrong once you scrutinize the data, so ensure your program captures this type of information. Tie this intelligence to your data at the moment you know it best; when you do the transaction.

8. Watch the Transactions

When the transactions on labor are accurately recorded, they can provide data to evaluate supplier service levels on position fills, quality and billing accuracy. Outsourcing programs should also include processes that perform periodic supplier audits and internal user compliance reviews.

9. Tools are Key for Governance

At today’s business velocity, “internet speed” tools are a market differentiator. The tool for your managed labor program should “float” seamlessly between your company, your outsourcing provider, and suppliers so that all can access data and execute transactions.

In addition to providing a “corporate memory and understanding” of transactions, the tool should objectively record data and feed analysis for future internal and supplier discussions.

10. Measure, Refine, Repeat

Continuous measurement and refinement delivers quality results that can be applied across your company. For example, accurate labor market data can help HR or compensation departments plan more competitive packages to attract quality employees; or, conversely, suport the argument that some functions are done more cost effectively by outside labor. Build measurement and feedback into your process.

Lessons from the Outsourcing Journal:

  • Effective labor procurement is essential for cost savings and productivity improvement.
  • Don’t assume your labor expenditure is “not much.” If you have a way to look at what is being purchased as opposed to what it’s being called, you may well find that you’re buying more labor than you think under the names consulting, maintenance/repair, temp staff, services and the like. Make sure everything gets included in the scope of the outsource agreement.
  • Don’t underestimate the amount of savings. Measure the savings from process streamlining, leveraging the expenditure and actually “minding the store.” Sourcing the suppliers and reducing rates can get those up-front glamorous savings within reach. But process improvement, data integrity and user compliance will make it reality!
  • Don’t underestimate the value added. Savings from reduced expenditures go directly to the bottom line. Service level improvements from your service providers improve your business. Process improvements and red-tape reduction improve your speed to market and help employee morale.

Get 3 Free Quotes Logo

  • Save 70%
  • Unrivaled expertise
  • Verified leading firms
  • Transparent, safe, secure

Get Started

Small Teams Call Logo

Start your Outsourcing Journey in 15 seconds.

Get Started

Enterprise & Large
Teams Call

Explore with an Enterprise Expert

  • Independent
  • Trusted
  • Transparent

Dive into “Outsourcing”

A Guide to … Selecting the Correct Business Unit … Negotiating the Contract … Maintaining Control of the Process

Order now

Outsourcing Articles

Start your
journey here

"*" indicates required fields

Start your outsourcing journey.

Book a call with an outsourcing expert now

This field is for validation purposes and should be left unchanged.

"*" indicates required fields

This guide will walk you through some areas most important when outsourcing, such as
  • Identifying Your Outsourcing Needs Intelligently
  • Research & Selection
  • The Bidding Process
  • Contracts & Agreements
  • Implementation & Onboarding
  • Ongoing Management
  • Evaluating Success
  • Additional Resources

Book a call with an outsourcing expert now

This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Become an OC Partner
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Media Inquiries for OC
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Subscribe to our Newsletter
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Submit Press Release
Accepted file types: pdf, doc, docx, Max. file size: 8 MB.
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Submit an Article
Accepted file types: pdf, doc, docx, Max. file size: 8 MB.
This field is for validation purposes and should be left unchanged.

"*" indicates required fields

Request Ben Trowbridge as a Keynote Speaker
This field is for validation purposes and should be left unchanged.

Go to standard quote

Exclusive Enterprise Assistance

  • Independent
  • Trusted
  • Transparent

Offshore staffing solutions for enterprise. Independent expertise, advice & implementation

  • 200+ Firms, Global Reach
  • Offshore, Nearshore, Onshore, Rightshore
  • Managed Request for Proposal (RFP)
  • Assisted Procurement Processes
  • Vendor Management
  • Unique Build Operate Transfer model
  • Captive & Shared Services
  • Champion-Challenger
  • Multi-site, multi-vendor, multi-source
  • Managed Solutions

For Enterprise and large teams only

  • Book 20-minute consult, obligation free

You will get:

  • Needs Analysis & Report
  • Salary Guidance & Indicative Pricing
  • Process Map

Only takes 1 minute to complete the form

Get Started

Not an enterprise?

Go to standard quote