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Statement of Work (SOW)

Statement of Work is the superpower to see through the future and plan your course of action. It might seem like a herculean task to centralize the process of SOW Management, but it isn’t. Understanding the current Statement of Work (SOW) framework of your organization and approaching them systematically for concluding the centralization process. A Statement of Work is being used in your organization currently, in one form or the other. You must take a step back and observe the bigger picture more holistically so that you can accomplish the set goals of better quality, risk mitigation, cost saving, and higher efficiency of the employees.
It is extremely important to identify elements like service category, administration type, and engagement pattern to develop tactical business processes, which will simplify management.

  • Service Category
    You must know of the statement of work framework utilized by your company to complete its work as that of financial services, business consulting, IT services, engineering, marketing, creative, and many more. 
  • Engagement Pattern
    With the increasing acceptance of the Statement of Work framework in various industries, many consistent patterns are being observed in the market. For instance, organizations are using the framework in project-based, managed programs, offshore or offsite, independent contractors, Business Process Outsourcing (BPO), and business services.
  • Administration Type
    Just like a tactical approach of managing the statement of work framework fits best according to the engagement pattern and the service category. On parallel lines, the administration type varies on the condition that the program is self-managed or has a Managed Service Provider (MSP).

There is no denying that no two individuals can be absolutely similar and thus, no two statement of work frameworks can be managed using the same way. As you start using more and more SOWs, the common trends will help you in identifying the management strategies that have worked and what needs to be improved. The statement of work agreement is structured based on various aspects, such as the corporate strategy, business goals, and organizational culture, that influence it massively. This whitepaper is dedicated to the consistent engagement patterns observed in our client base. A word of caution is that these patterns are not the sole factor that guides a company in finalizing the SOW framework. Other mutually exclusive aspects make up the final structure. Finally, before we dive into the discussion of these patterns, remember that SOW frameworks help you grow with higher efficiency and provide more opportunities to the employees while streamlining the entire process of achieving a particular goal that is decided or planned by the company management.

Characteristics of a Statement of Work (SOW) pattern

According to the major engagement patterns, the common characteristics are Deliverables, Payments, Unit Based, Recurring Payments, and Time & Expenses. Concerning the engagement pattern, every characteristic occurs rarely, occasionally, or frequently.

Project Based
The project-based SOW engagements are pretty common and they focus definitively on the deliverables. They have a fixed endpoint and a defined group of employees working on it. These employees are paid when they conclude all the pre-defined objectives of the project and complete the deliverables. In this Statement of Work engagement, the team is located onsite generally and is selected from the full-time staff of the firm.

Managed Programs
A statement of work for managed programs is not about a specific project or deliverable but for a partner, the company would like to retain. Here, the services are similar to business services SOW in the aspect of the involvement of multiple stakeholders but vary in the type of service provided as they are much more comprehensive. The SOW is heavily dependent on the budget allotted for the same. When the budget for the upcoming year is planned, the deliverables might or might not be defined but the company initiates a framework to ensure the availability of a supplier as required.

Offshore or Offsite
In an offshore agreement, the buyer has no idea about the resources, and he does not track them as a partner organization manages them. There is no process of onboarding, offboarding, or employee tracking and the buyer is focused on deliverables primarily. This statement of work framework also includes subsets of offshoring, i.e. offsite, nearshore, and remote. The characteristics in the agreements for these subsets are similar and the only difference is that the group of workers work and live in the origin country. Further, they resemble project-based SOWs highly and give lesser emphasis on onboarding and named individuals. An example to understand this type of company project can be picked from the automotive industry Suppose a company runs an engineering design project offshore. Here, the company is not involved in the everyday operations and the workers do not have to note down the expenses or fill any timesheets including no interaction with the company that buys the final product manufactured.

Independent Contractors
Similar to project-based SOWs, independent contractors also focus on deliverables, but they have specialized workers, and they work independently to produce the desired end product. There are endpoints for these contractors and the worker might be integrated into the staff or would be provided work offsite. A significant difference between a project-based SOW and independent contractors’ SOW is that in the former, the negotiations take place between two corporations, and in the latter, the negotiations are between a contractor and a corporation. The end date of the project and all the specifics are discussed and negotiated in detail to avoid any irregularities or delays. It is extremely important to know that misclassification of these workers is a significant concern. Due to this, regulating bodies have been monitoring engagement with them and the companies have been more careful about classifying them correctly.

Business Process Outsourcing (BPO)
A BPO statement of work is signed up only in the case when the organization is not proficient in the field or is not interested in managing that particular function of the business. Thus, they look for procuring the same from an outside resource. The most common types of business functions that BPOs meet are Human Resources Outsourcing (HRO), IT Outsourcing (ITO), cafeteria operations, call centers, and lawn care. These SOWs are more prevalent among larger organizations as the incentive of partnership is huge for the suppliers, i.e., the bigger the company, the more services will be required. The key distinguishing factor of BPO SOWs is that they have scheduled, unit-based payments and Service Level Agreements (SLA).

Business Services
This Statement of Work framework is based on multiple stakeholders of the organization engaging with service providers on a need basis. Majorly the schedules and deliverables associated with this SOW are unit or hourly-based and are performed according to their field of service or product. Generally, this type of SOW is selected by people that need accounting or legal services.
One can never decide on a single prescriptive path for the SOWs that the organization needs but it is possible to walk through this perplexing path by approaching it methodologically.

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