Finding the Right Solution to Source and Manage Your Contractors
By Mark Rosenberg on Mar 16, 2011
Many of our PeopleSoft Enterprise applications customers operate in service-based industries, and all of our customers have at least some internal service units, such as IT, marketing, and facilities. Employing the services of contractors, often referred to as "contingent labor," to deliver either or both internal and external services is common practice.
As we've transitioned from an industrial age to a knowledge age, talent has become a primary competitive advantage for most organizations. Contingent labor offers talent on flexible terms; it offers the ability to scale up operations, close skill gaps, and manage risk in the process of delivering services. Talent comes from many sources and the rise in the contingent worker (contractor, consultant, temporary, part time) has increased significantly in the past decade and is expected to reach 40 percent in the next decade. Managing the total pool of talent in a seamless integrated fashion not only saves organizations money and increases efficiency, but creates a better place for workers of all kinds to work.
Although the term "contingent labor" is frequently used to describe both contractors and employees who have flexible schedules and relationships with an organization, the remainder of this discussion focuses on contractors. The term "contingent labor" is used interchangeably with "contractor."
Recognizing the importance of contingent labor, our PeopleSoft customers often ask our team, "What Oracle vendor management system (VMS) applications should I evaluate for managing contractors?" In response, I thought it would be useful to describe and compare the three most common Oracle-based options available to our customers. They are:
- The enterprise licensed software model in which you implement and utilize the PeopleSoft Services Procurement (sPro) application and potentially other PeopleSoft applications;
- The software-as-a-service model in which you gain access to a derivative of PeopleSoft sPro from an Oracle Business Process Outsourcing Partner; and
- The managed service provider (MSP) model in which staffing industry professionals utilize either your enterprise licensed software or the software-as-a-service application to administer your contingent labor program.
At this point, you may be asking yourself, "Why three options?" The answer is that since there is no "one size fits all" in terms of talent, there is also no "one size fits all" for effectively sourcing and managing contingent workers. Various factors influence how an organization thinks about and relates to its contractors, and each of the three Oracle-based options addresses an organization's needs and preferences differently.
For the purposes of this discussion, I will describe the options with respect to (A) pricing and software provisioning models; (B) control and flexibility; (C) level of engagement with contractors; and (D) approach to sourcing, employment law, and financial settlement.
Option 1: Enterprise Licensed Software
In this model, you purchase from Oracle the license and support for the applications you need. Typically, you license PeopleSoft sPro as your VMS tool for sourcing, monitoring, and paying your contract labor. In conjunction with sPro, you can also utilize PeopleSoft Human Capital Management (HCM) applications (if you do not already) to configure more advanced business processes for recruiting, training, and tracking your contractors.
Many customers choose this enterprise license software model because of the functionality and natural integration of the PeopleSoft applications and because the cost for the PeopleSoft software is explicit. There is no fee per transaction to source each contractor under this model. Our customers that employ contractors to augment their permanent staff on billable client engagements often find this model appealing because there are no fees to affect their profit margins.
With this model, you decide whether to have your own IT organization run the software or have the software hosted and managed by either Oracle or another application services provider. Your organization, perhaps with the assistance of consultants, configures, deploys, and operates the software for managing your contingent workforce.
This model offers you the highest level of control and flexibility since your organization can configure the contractor process flow exactly to your business and security requirements and can extend the functionality with PeopleTools. This option has proven very valuable and applicable to our customers engaged in government contracting because their contingent labor management practices are subject to complex standards and regulations.
Customers find a great deal of value in the application functionality and configurability the enterprise licensed software offers for managing contingent labor. Some examples of that functionality are...
- The ability to create a tiered network of preferred suppliers including competencies, pricing agreements, and elaborate candidate management capabilities.
- Configurable alerts and online collaboration for bid, resource requisition, timesheet, and deliverable entry, routing, and approval for both resource and deliverable-based services.
- The ability to manage contractors with the same PeopleSoft HCM and Projects applications that are used to manage the permanent workforce.
Because it allows you to utilize much of the same PeopleSoft HCM and Projects application functionality for contractors that you use for permanent employees, the enterprise licensed software model supports the deepest level of engagement with the contingent workforce. For example, you can: fill job openings with contingent labor; guide contingent workers through essential safety and compliance training with PeopleSoft Enterprise Learning Management; and source contingent workers directly to project-based assignments in PeopleSoft Resource Management and PeopleSoft Program Management. This option enables contingent workers to collaborate closely with your permanent staff on complex, knowledge-based efforts - R&D projects, billable client contracts, architecture and engineering projects spanning multiple years, and so on.
With the enterprise licensed software model, your organization maintains responsibility for the sourcing, onboarding (including adherence to employment laws), and financial settlement processes. This means your organization maintains on staff or hires the expertise in these domains to utilize the software and interact with suppliers and contractors.
Option 2: Software as a Service (SaaS)
The effort involved in setting up and operating VMS software to handle a contingent workforce leads many organizations to seek a system that can be activated and configured within a few days and for which they can pay based on usage. Oracle's Business Process Outsourcing partner, Provade, Inc., provides exactly this option to our customers.
Provade offers its vendor management software as a service over the Internet and usually charges your organization a fee that is a percentage of your total contingent labor spending processed through the Provade software. (Percentage of spend is the predominant fee model, although not the only one.)
In addition to lower implementation costs, the effort of configuring and maintaining the software is largely upon Provade, not your organization. This can be very appealing to IT organizations that are thinly stretched supporting other important information technology initiatives.
Built upon PeopleSoft sPro, the Provade solution is tailored for simple and quick deployment and administration. Provade has added capabilities to clone users rapidly and has simplified business documents, like work orders and change orders, to facilitate enterprise-wide, self-service adoption with little to no training. Provade also leverages Oracle Business Intelligence Enterprise Edition (OBIEE) to provide integrated spend analytics and dashboards.
Although pure customization is more limited than with the enterprise licensed software model, Provade offers a very effective option for organizations that are regularly on-boarding and off-boarding high volumes of contingent staff hired to perform discrete support tasks (for example, order fulfillment during the holiday season, hourly clerical work, desktop technology repairs, and so on) or project tasks. The software is very configurable and at the same time very intuitive to even the most computer-phobic users.
The level of contingent worker engagement your organization can achieve with the Provade option is generally the same as with the enterprise licensed software model since Provade can automatically establish contingent labor resources in your PeopleSoft applications. Provade has pre-built integrations to Oracle's PeopleSoft and the Oracle E-Business Suite procurement, projects, payables, and HCM applications, so that you can evaluate, train, assign, and track contingent workers like your permanent employees.
Similar to the enterprise licensed software model, your organization is responsible for the contingent worker sourcing, administration, and financial settlement processes. This means your organization needs to maintain the staff expertise in these domains.
Option 3: Managed Services Provider (MSP)
Whether you are using the enterprise licensed model or the SaaS model, you may want to engage the services of sourcing, employment, payroll, and financial settlement professionals to administer your contingent workforce program. Firms that offer this expertise are often referred to as "MSPs," and they are typically staffing companies that also offer permanent and temporary hiring services. (In fact, many of the major MSPs are Oracle applications customers themselves, and they utilize the PeopleSoft Solution for the Staffing Industry to run their own business operations.)
Usually, MSPs place their staff on-site at your facilities, and they can utilize either your enterprise licensed PeopleSoft sPro application or the Provade VMS SaaS software to administer the network of suppliers providing contingent workers. When you utilize an MSP, there is a separate fee for the MSP's service that is typically funded by the participating suppliers of the contingent labor. Also in this model, the suppliers of the contingent labor (not the MSP) usually pay the contingent labor force.
With an MSP, you are intentionally turning over business process control for the advantages associated with having someone else manage the processes. The software option you choose will to a certain extent affect your process flexibility; however, the MSPs are often able to adapt their processes to the unique demands of your business.
When you engage an MSP, you will want to give some thought to the level of engagement and "partnering" you need with your contingent workforce. Because the MSP acts as an intermediary, it can be very valuable in handling high volume, routine contracting for which there is a relatively low need for "partnering" with the contingent workforce. However, if your organization (or part of your organization) engages contingent workers for high-profile client projects that require diplomacy, intensive amounts of interaction, and personal trust, introducing an MSP into the process may prove less effective than handling the process with your own staff. In fact, in many organizations, it is common to enlist an MSP to handle contractors working on internal projects and to have permanent employees handle the contractor relationships that affect the portion of the services portfolio focused on customer-facing, billable projects.
One of the key advantages of enlisting an MSP is that you do not have to maintain the expertise required for orchestrating the sourcing, hiring, and paying of contingent workers. These are the domain of the MSPs. If your own staff members are not prepared to manage the essential "overhead" processes associated with contingent labor, working with an MSP can make solid business sense. Proper administration of a contingent workforce can make the difference between project success and failure, operating profit and loss, and legal compliance and fines.
There is little doubt that thoughtfully and purposefully constructing a service delivery strategy that leverages the strengths of contingent workers can lead to better projects, deliverables, and business results. What requires a bit more thinking is determining the platform (or platforms) that will enable each part of your organization to best deliver on its mission.