Powering Digital Transformation With Contingent Workforce Management


Contingent workers have proven to be an essential component to the global labor market. Only recently have leading businesses like Philips developed digital strategies to procure and manage external talent.

One year into its grip on the global economy, COVID-19 continues to roil labor 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 toward recovery but toward a more resilient future, in which flexibility and visibility render them less vulnerable to disruption. At Philips, the global health technology company, these steps include investing in digital transformationOpens a new window , with a focus on procuring and managing contingent labor and services providers.

“Our driving purpose at Philips is to make lives better,” explainsOpens a new window Martin Thomas, head of total workforce management for the global health technology company. “So when the pandemic hit, we wanted to do everything we could to increase production of the monitors and ventilators that were in such high demand.”

“Visibility into our highly skilled external workforce allowed us to shift and redeploy resources quickly to do that and keep our people safe,” Thomas says.

Throughout the pandemic, cloud-based technologies have lent Philips and countless other organizations precisely the visibility they need to manage the external workforce with aplomb and agility in uncertain times. But how much difference does digital transformation make, particularly with regard to procuring and managing contingent labor and services providers, in furthering an organization’s agility, sharpening its decision-making capabilities, and unlocking newfound value? As it turns out, it makes plenty of difference in achieving all of the above, according to new research from SAP.

The Rise of External Workers

In collaboration with Oxford Economics, SAP has conducted extensive researchOpens a new window into the influence of cloud-based vendor management solutions on organizations and the impact of technology and process digitization in the procurement function. SAP wanted to find out whether companies that embrace digital solutions are more agile and can respond more effectively to disruption. So it surveyed 1,000 procurement and supply chain executives responsible for direct and indirect spend and services, including the management of contingent labor and services providers. The executives who participated hail from 14 industries in 23 countries. One-third of them occupy the C-suite.

Over half of executives (55%) say their company would be unable to conduct business as usual without an external workforce, with over 60% saying contingent labor 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%) specifically credit the external workforce with helping their businesses to recover from downturns. Meanwhile, seven in ten say contingent labor and services providers are “important” or “extremely important” in enabling organizations to manage costs, operate at full capacity, and improve the customer experience. 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.

Elevating Procurement Through Digital Transformation

Perhaps unsurprisingly, the research reveals that organizations that embrace the digital transformation of procurement tend to outperform those who have yet to do so. Their stronger reliance on data, analytics, and automation helps businesses to 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 vendor performance.

Organizations have made significant progress on their journey toward the digital transformation of procurement, and they cite many benefits from doing so. Approximately ten percent of them, the leaders, indicate they’re much further along on the path, surpassing their peers in the extent to which they’ve invested in digital technologies and adopted analytics capabilities as the basis for decision-making. These key investments include robotic process automation, predictive analytics, artificial intelligence, and cognitive assistants. Successful adoption of these technologies has resulted in greater operational efficiencies, fuller compliance, and broader collaboration with partners.

Workforce Strategy for the Future

A perfect example is the means by which organizations manage the external workforce, consisting of contingent and temporary labor, independent contractors, consultants, and other services providers. Together, they account for 42 percent of 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, thus constraining organizations from reaping full value from their ample talents. Through the digital transformation of external workforce management, however, businesses gain critical visibility, enabling them to manage with rigor and improve 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 attenuate risk.

As business leaders plan for a return to less anxious times, look for unlocking value from external workforce management, which is going to play an increasingly prominent role in enabling organizations to rebuild and reemerge stronger on the other side of the pandemic.