Showing posts with label compliance. Show all posts
Showing posts with label compliance. Show all posts

Monday, November 13, 2023

How Accounts Payable Automation and Agility Drive Long-Term Business Productivity

Transcript of a discussion on why business leaders need to prepare now to optimize and automate accounts payable functions to elevate overall financial situational awareness.

 

Listen to the podcastFind it on iTunesDownload the transcript. Sponsor: Basware.

 

Dana Gardner: Welcome to the next edition of the BriefingsDirect podcast series. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator.

 

Gardner

Today’s discussion focuses on how optimizing and automating accounts payable (AP) functions gives businesses the insights and levers to better transform. We’ll examine how improved control and management over cash flow, payables, and related fiduciary functions elevate overall financial situational awareness.

 

Stay with us now as we explore how adoption of intelligent automation joins the expected consolidation and convergence of financial operations and applications in the office of the Chief Financial Officer (CFO).

 

Soon, we may well see more shifts in the required skills and streamlined organization within financial operations at companies. So, leaders need to prepare now.

Here to share his insights as a business operations efficiency veteran and expert is our guest, Jason Kurtz, Chief Executive Officer (CEO) at Basware. Welcome, Jason.

 

Jason Kurtz: Glad to be here. Thanks for having me.

 

Gardner: Jason, before we begin, let’s put some context around our discussion. What are some of the major trends shaping the need for better accounts payable automation, and why is there an imperative to add intelligence and automation to overall back-office business operations?

 

Global change: Taking it all into account

 

Kurtz: The imperative is we’re dealing in truly unchartered waters here for a lot of CFOs. If you think about what’s going on in our world, if you think about the macro-environment, we have potential recessions in some areas of the world. We have higher inflation rates, higher interest rates, and all that affects us in our businesses in various ways. If you think about supply chains, for example, we still -- believe it or not -- haven’t fully recovered from supply-chain disruptions from the pandemic.

 

Kurtz
These trends impact CFOs, and what’s going on in our world. We still have people working in hybrid or remote environments. We still have companies that can’t fill the jobs they have open, including in AP. Then we also have countries such as France, Germany, Poland, and Spain that are adding regulatory requirements for how you should send and receive an invoice.  Countries like Mexico and Brazil are changing their regulations on a regular basis.

Never before have we seen so many things impacting CFOs at the same time. You think about people like me, I’m in my mid-50s, I’ve never worked in an environment where there’s a recession plus high interest rates, plus inflation. You throw that in, and we’ve never seen this before. For many of us in these roles, it’s a unique time in history -- and in our careers -- that we’re dealing with so many challenges at once.

 

Gardner: Because there’s so much that’s unprecedented happening at once, it’s hard to look at the historic record and say, “Okay, I know what’s going to happen next.” There’s very little clear visibility as to what we’re going to be dealing with in terms of our top-line and needed constraints on spending over the next six to 12 months.

 

Kurtz: That’s 100 percent right. We are living with uncertainty right now. Few companies have great data and information to help them navigate such uncertainty. But one of the key documents, key pieces of information and data, is the invoice. If you can get that right, and gather great data from your invoices, man, that makes your job as a CFO a lot easier.

 

Gardner: To get that look at the full record and all of the data, that usually means more intelligence and automation around vital business processes. So, on the micro-level, what are the challenges facing businesses to gain more tactical and strategic control over their finance operations?

 

Kurtz: There are some really interesting challenges that you wouldn’t believe are still challenges. For a lot of businesses, we want to improve profitability in uncertain times. We want to unlock working capital. What’s one of the biggest barriers to that? Over 90 percent of companies say they can’t pay an invoice on time because they don’t have it approved in time.

You need automation and tools that can embed your policies and procedures into your workflow and your processes. You can't do that in a manual world. This is the reality for a lot of the companies we deal with.

Because they have bad data, because they haven’t enabled their suppliers, and because they’re often dealing with scanning and optical character recognition (OCR) documents of poor quality --  and it takes time to manage difficult exceptions – those are all critical hurdles. So, it’s important to solve these to unlock lots of hidden value.

 

Another challenge we talked about; companies don’t have a full staff in AP -- sometimes people are working remotely. How do you make sure those new people are trained, are more efficient, and effective? How do you know they’re following the policies and procedures for your company? How do you quality check the work they’re doing via remote work?

 

Because you want to do more with newer and fewer employees, you need automation and tools that can embed your policies and procedures into your workflow and your processes. You can’t do that in a manual world. So those are just a couple of examples, but this is the reality for a lot of the companies we deal with. From an AP perspective, they need improvements because these really are barriers to their success right now.

 

Gardner: Jason, both you and I have been in this business long enough to have seen wave upon wave of new technologies and approaches. And that was great, to use the best-of-breed solutions as they came online. But it has left many organizations with a scattered and disruptive mix of apps and silos that come from different eras.

 

Invoice intervention imperative

 

Kurtz: Yes, without question. We joke a lot about an earlier era of scanning paper docs using OCR, right? That’s just one example of what you’re talking about. For a lot of companies, scanning and OCR checked the box on adopting electronic invoicing. “We’ve done it.” But you and I know that that’s not really the case, right? You don’t get any good data out of that.

 

You have to have manual intervention. It slows your processes down. It’s like using a pay phone, right? Or a fax machine. And no one uses those anymore. But there are still lots of people who have that as their e-invoicing solution, which is crazy.

Keep up with global compliance requirements using this interactive map.

And, to your point, lots of companies have layered different technologies onto their environment over time. Maybe it was a procurement solution, or a sourcing solution, or their enterprise resource planning (ERP) suites, and they’re trying to figure out, at least in AP, “How do I make all of that work? My invoices come and originate in different places.”

 

They ask, “How do I put something on top of that that is modern, usable, and purpose-built for me in that kind of an environment that’s very fragmented and has lots of different offerings and capabilities?” They need something that sits on top of that to make it all more efficient and effective for the AP department. So, again, you hit the nail on the head. There’s a lot of complexity in the companies that we work with.

 

Gardner: Part of the good news, as you alluded to earlier, is that the modern invoice has a beneficial role to play. When you go fully digital, you can layer into that resource lots of metadata, you can bring added processes to bear, and you can use that asset as a powerful tool to usher in benefits across other applications, data, and processes. When you do this right, and you unlock the superpowers with your invoice workflows, how does that set off cascading benefits?

 

Invoice data insights reap rewards

 

Kurtz: One that we haven’t talked about yet, when you get that invoicing data right and you have good data from across your suppliers, that gives you aggregate insights into what you bought from whom, how much you paid, and what the commerce trends are. That gives you the basis for accurate spend analytics.

 

In the current uncertain macro-economic environment, we’re trying to save money and use that money to fund growth where we can find it, or put it away in the bank for profitability, then spend analytics is a great place to start to optimize, right? But you have to have that invoice data first to fully understand what it is you bought from whom, the pricing, and all the added details. So that’s one.

Two, the other part of the invoice data goodness, comes from unlocking working capital. Many companies now discount payment terms so the buyer receives a two percent discount on the net invoice amount if they pay within 10 days. Otherwise, the full invoice amount is due within 30 days. But, if they can’t pay something in 10 days, they can’t get the benefit.

But imagine if we could unlock literally billions of dollars in potential early-payment discounts or working-capital benefits that we could then use to invest in our growth or direct to areas where our acute business needs are. But, again, you must have a working invoice with good data, well-structured and in a timely manner, to be able to handle that management of working capital optimization. Yet, lots of companies still can’t do that.

 

I think those are a couple of examples where the modern invoice can unlock a lot of economic benefits for companies in these uncertain times.

 

Gardner: It has only gotten more important to best manage cash flow now that we’re up to five percent or more on overnight interest rates. The imperative to get fast and detailed cash flow data, and bring that organizational efficiency and agility to bear in real time, is higher than at any time in at least the last 15 years, right?

 

Kurtz: That’s 100 percent correct, and so intelligence is more valuable for us as an organization, and for our large customers. That’s because, in many cases, they have billions of dollars in spend, so that they can unlock millions – even hundreds of millions -- in working-capital dollars due to those higher interest rates.

Such intelligence is also important for our customers' suppliers because their cost of capital is going up, too. When supply chains are still disrupted, who gets what when and at what terms? 

But that intelligence is also important for their suppliers because their cost of capital is going up as well. In this world, where we still have some limited supply chains, suppliers can’t always deliver 100 percent of what they did three years ago. They may still be at only 85 or 90 percent.

 

Who then gets what when and at what terms? Who gets that 85 or 90 percent instead of the requested 100 percent? I would hypothesize -- and our customers are telling us this -- those good payers, the people who pay on time for timely delivery, become the customers of choice. If there’s a limited supply, they may get more of their fair share. There are a lot of benefits for doing this well, being able to pay when you and your suppliers want to pay for the right reasons.

 

Gardner: You’re teeing up some of the changes needed in CFO-required skills. Whereas due diligence, operational integrity, and process efficiency may have been top of mind when it came to bringing new people into the office of CFO, now you’re talking about more analytical, entrepreneurial, and innovative skills. We need a different kind of person in these strategic thinking and data analysis roles, right?

 

CFO role encompasses more analytics 

 

Kurtz: Yes, absolutely. In almost every role in the finance department now, comfort with data and analytics is becoming more critical. Those are the skills that help with automation and gaining insight into how you best manage your resources and capital. Those two skill sets -- comfort with technology and proficiency with data and analytics -- are probably two of the most important.

The other thing we’re seeing is the office of the CFO is broadening its responsibilities, too. They’re taking on more operational responsibilities and further impacting their organizations. So, that means being consultative and being good influencers and educators. Those are all part of the skill sets that a good finance organization has to have right now.

 

Gardner: There is no closing the door to the back office and then only coming out once a quarter with an audit or report anymore, right?

 

Kurtz: That’s right, you can’t do that. You just can’t do that.

 

Gardner: Let’s put some meat around some of these solutions in practical terms. How are these AP automation solutions paying off in brass tacks?

 

Productivity, processing, profits -- all up

 

Kurtz: We’re seeing incredible benefits. When we see automation in the AP function, you go from a company on average processing maybe 5,000 to 7,000 invoices per full-time annual employee equivalent (FTE) to companies processing, 30,000 to even 50,000 invoices a year per FTE. So, that’s a massive productivity benefit. You see the level of electronic invoices from your suppliers going from, on-average for most companies at 34 percent to some of Basware’s best-in-class customers attaining 99 to nearly 100 percent.

OCR is no longer the answer to processing PDF invoices, but AI-powered solutions are.

So, again, that plays into the benefits of accessing great structured data around an invoice. If, for example, you examine invoice processing time, most companies average around 11 days for AP functions. But Basware’s best-in-class AP customers are looking at hours or minutes, certainly less than a day, for processing. And that’s part of what you need to do to unlock the working-capital benefits. And you see companies with 20 to 30 percent of their invoices being touchless -- meaning you never physically have to manually have an intervention into an invoice from receipt through payment – are up from formerly around 21 percent. But again, Basware best-in-class customers are gaining with more than 90 percent being touchless.

 

These are the kind of metrics and value that AP automation solutions, and in particular Basware, customers are able to achieve.

 

Gardner: Can you apply these tactical metrics to also measure improvement in overall business productivity and financial returns?

 

Kurtz: Sure. Take a look at a customer of ours like Heineken. They implemented Basware’s AP automation solution. It streamlined invoice processing, reduced manual efforts, and improved data accuracy and efficiency. All of that resulted in greater than 40 percent reduction in their cost to process invoices within their function as a whole. So more than 40 percent reduction in overall AP team and organization costs by implementing an AP automation solution.

We can be really impactful. The same kind of thing happened at Toyota Industrial, another customer of ours, where they saw similar benefits from streamlining the invoice processing, reducing manual work, and getting suppliers to send invoices electronically. They attained better data, but also significantly reduced cycle times and earned invoice processing time savings. And that lead to better spend visibility and access for a well more than 50 percent reduction in the cost of processing within accounts payable as a whole.

Those are some of the benefits. I think the order of magnitudes are really incredible and transformational. We’re talking about literally millions of savings in hard dollar savings and then tens of millions of dollars in potentially in working-capital benefits as well.

 

Gardner: You can’t define productivity much better than that, right?

 

Kurtz: I like to think so.

 

Gardner: Okay, we have those direct, hard number AP improvement benefits. But as we alluded to earlier, there are some burgeoning types of benefits that come from having the data analytics and capability to innovate on larger strategies for buying, spending, and paying. Let’s talk a little bit about some of the ancillary benefits that come when you automate, when you go truly digital, and when you explore innovations around how the business itself operates.

 

Tech-savvy, budget-aware people thrive

 

Kurtz: Yes, there are a bunch of benefits. Let’s not underestimate the people benefits, right? So many of us are working in hybrid working patterns and remote working environments. I think one of the real benefits is to be able to onboard our people faster and have better productivity from them that much faster than you can in a non-automated world. So that’s one.

 

Two, you can attract a higher level of quality of candidate, particularly -- not to stereotype -- younger generations who are attracted to the technology that we need to incorporate into finance functions over time. They’re attracted to great technology and purpose-built technology. So, that’s another interesting example of ancillary human capital benefits of modernizing AP operations.

So many of us are working in hybrid working patterns and remote work. A real benefit now is to be able to onboard people faster and gain better productivity from them much faster by being in an automated environment.

Another one is clearly the savings visibility, right? And we have customers who are using that spend data that you get from invoices that we talked about to identify tens of millions of dollars in savings from having better data associated with invoices.

 

Toyota, again, is a good example. If you think about the overall finance function, one of the things they use our AP solution for and can gain from improved invoices data is the capability to rapidly monitor budgets. By improving their budget awareness, and having better conversations sooner in their fiscal quarters, they get a head start on performance metrics to know where they stand relative to budgets -- and being able to then act swiftly. They tell us that’s one of the really big benefits.

 

Again, that fits in with the overall CFO theme of being more consultative, being more of a business partner. That comes in large part from being able to see data, gain insights, track trends – all much earlier in the process. You simply can’t do that if it takes you 11 days to process an invoice, or you retain only 50 percent of the data, or you get garbage for data because it’s scanned, and then you have to go back and manually figure out what it is.

 

All of those are some of the ancillary yet impactful benefits that we’re seeing.

 

Gardner: Given the ongoing tight labor market, it sounds like the role of the finance people can now better help innovate for other parts of the organization, such as human resources. Better tracking payments and processes can help exploit a gig economy of contractors or use different forms of labor while tracking the costs in full.

 

So, is there an elevation that we should expect to see in terms of the status and impact that the finance office can have across the business?

 

CFO: From counter to consultant

 

Kurtz: Without question that’s the case. Here at Basware, our CFO is becoming more of a consultant, business partner, and adviser to other functions within the organization. That is a very common trend and theme we’re seeing as CFOs have broad influence and more operational span of control. They are changing from being the counter to being the financial consultant.

 

These new types of CFOs are bringing the insights from all of that data that we’ve talked about and helping the whole business operate better and deliver on expectations of profitability, growth, or whatever it is that that function is focused on.

Move from manual ways of working to the most automation AP processes possible.

And then, if we want to be really provocative about where this leads, you might have AP organizations that become profit centers. Because of the cost-reduction elements that they can take out, the working-capital benefits that they can unlock, and the ability to attract more supply -- all of those things help with investment, innovation, and growth. We might someday be looking at finance functions that are profit centers instead of cost centers.

 

Gardner: Interesting! Well, that’s a good segue to the last part of our discussion, which is what can we expect next? What’s in the future when we exercise true and pervasive AP automation? When will we be able to further avail ourselves of tools like machine learning (ML), artificial intelligence (AI), and instill an analytics culture within our businesses? What does your crystal ball show you coming for the modern accounts payable impact when we do it right?

 

Kurtz: We’re going to see a world in the not-too-distant future where in 95 percent-plus of the time, an AP person won’t ever have to touch an invoice. We will have better data from an invoice. Using AI, we will gain the capability to match and handle nearly all exceptions. We already have this today, but it’s going to keep getting better and better.

Soon more than 95 percent of the time an AP person won't ever have to touch an invoice. And we will have better data from that invoice. Using AI, we'll handle nearly all exceptions ASAP.

And you’re going to see these AP teams become much less, “How do I manage this exception? How do I go track down who the buyer was; what happened?” and all of that, to more of, “Hey, now I can think about what’s the best way to deploy my working capital. How do I take this data that we’re getting and spot impactful trends in it?”

 

As we become more touchless and automated, it’s going to free up value-added time to enable CFOs to be the business optimization partners, to spot trends, to understand better what’s happening in the business, and to bring ideas, solutions, and creativity to the rest of the organization. That will, in turn, fund the innovation that we want, fund the growth that need, and not just be a cost of doing business that we’ve been in the past.

 

Gardner: Yes, no better way to get a sign-off on something then when you can tell them it’s going to pay for itself, right?

 

Kurtz: That’s right. That’s exactly right.

 

Gardner: Jason, where can people go to learn more about these trends and solutions? Where do you look for good analysis and information about these trends, markets, and solutions?

 

Kurtz: At Basware, we do our best to be educational and share what we see happening in the industry as well as track industry trends and benchmarks. You can go to Basware.com to see that or follow us on LinkedIn. We post a lot of content on our LinkedIn page.

 

I like to read a lot of the industry analyst content that comes out. I think there is some really good stuff. I know recently I’ve done some good reading on benchmarks from Ardent Partners. They’d done some really interesting studies. Forrester has interesting studies that I’ve been reading about as late. So, those are two great examples.

 

Basware is also a founder and innovator around EESPA, one of the leading associations of invoice and AP automation providers across Europe. We’re constantly working together to bring forth ideas and innovation on how to bring more automation to the industry.

See how your organization stacks up on the top AP metrics comparisons.

And then frankly, Dana, most folks joke about me being a Chief LinkedIn Officer, and I’m a LinkedIn addict. I think there’s all kinds of great data that I find around LinkedIn and I’m constantly looking on there and finding interesting articles and information. So, just a few thoughts on where we can find some interesting insights.

 

Gardner: I’m afraid we’ll have to leave it there. You’ve been listening to a sponsored BriefingsDirect discussion on how optimizing and automating AP functions gives businesses the insights and levers to better transform.

 

And we’ve learned how improved control and management over cash flow, payables, and related functions elevates the overall financial situational awareness and sets the stage for better shaping the office of the CFO for the future.

So, please join me in thanking our guest, Jason Kurtz, CEO at Basware. Thanks so much, Jason.

 

Kurtz: Thank you, Dana.

 

Gardner: I’m Dana Gardner, principal analyst at Interarbor Solutions, your moderator for this ongoing series of BriefingsDirect discussions. A big thank you to our sponsor Basware for supporting these presentations.

 

And a big thank you as well to you, our audience, for joining. Please pass this on to your business communities. LinkedIn is an excellent way to do it, as Jason pointed out, and do come back next time.

 

Listen to the podcastFind it on iTunesDownload the transcript. Sponsor: Basware.

 

Transcript of a discussion on why business leaders need to prepare now to optimize and automate accounts payable functions to elevate overall financial situational awareness. Copyright Interarbor Solutions, LLC, 2005-2023. All rights reserved.


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Thursday, January 14, 2021

How Capgemini Optimizes Contingent Workforce Agility Using SAP Fieldglass


Transcript of a
discussion on the growing importance of contingent workforces for businesses around the world to satisfy their skills and information technology needs.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Our next digital business innovation discussion explores the growing importance of contingent workforces. As more businesses look to external workforces and services to satisfy their skills and information technology (IT) needs, the ability to manage those workers and services is lagging.

Even as upward of 42 percent of workforce spend is now going to external workforces, many organizations lack visibility into the nature of that spend. As a result, they can’t manage the productivity, nor the risk.

Stay with us now as we hear from a contingent workforce expert at Capgemini on managing the processes that best procure and support talent and skills agility.


T
o learn more about making the most of a diversified portfolio of workers, please join me in welcoming Andreas Hettwer, Vice President and Group Procurement Category Director at Capgemini in Berlin. Welcome, Andreas.

Andreas Hettwer: Hello, Dana.

Gardner: Andreas, what’s driving the need for external workforce management -- and specifically the role of contingent workforce workers -- there at Capgemini?

Hettwer: We are a big company with roughly 250,000 employees worldwide. At Capgemini, as a consulting digital transformation company, we innovate and address the entire breadth of client opportunities in the evolving world of cloud, digital, and platforms.

And that means we have a huge variety of roles, skills, and capabilities that we need to deliver to fulfill all of these kinds of projects. There are constraints in both capacity and in the niche capabilities needed. Our contingent workforce is part of our strategic component of making sure that we deliver great projects to our clients. This is why we need a contingent workforce program globally.

Gardner: And is the use of IT skills and workers a leader in this field? Is there something about IT specifically that lends itself to a contingent workforce?

IT contingency makes progress

Hettwer
Hettwer: Yes. First of all, from the skills perspective, we are an IT consulting company and therefore this is our major skill set that we purchase from the market. But, again, the variety is huge and therefore we need to make sure that we address all of the different sources to make sure that we have the right capabilities and capacity ready.

Gardner: And how long has this been going on? How long have you been working to perfect and improve the use of such a contingent workforce?

Hettwer: Quite a long time. We began in 2016. At first, we knew our spend of contingent workforce but we didn’t have a clue really about the numbers -- the headcount or the tenure of engagements.

We didn’t know what kind of external capabilities we had acquired from the market, including the roles and skills. We didn’t even know anything about the fulfillment rate or how long it took to source the right capabilities. We didn’t know if we had missed some opportunities to deliver the right projects to our clients.

On the other side, we were not able to understand what we had paid for the individual roles, skills, and levels per country, and whether this was a good price compared to the market. We didn’t know if that helped drive competitive bids toward our clients or not. Given this environment, we decided we needed to change. This is why we then began our global program.

Gardner: Of course, human resources (HR) organizations have had systems of record and processes to manage ongoing, full-time workforces. But when things are project-based and ad hoc, like you are describing, they are often funded from a variety of different budgets and from different elements within the organization.

Keeping track of that is very daunting. Why do you view this less as a HR task and more of a procurement task? How does that help to bring a unified view of all of these different worker spends?

Hettwer: You raise a good point. There is always the question of who owns the contingent workforce. Is it procurement, HR, or maybe the business unit itself? Or is it maybe another function in the company?

It was important that HR had a big focus on our own employees, with our employer brand, and to make sure that we attract the right talent from the market to deliver to our clients with our brand and across our portfolio.

From our perspective, it was important that HR had a big focus on our own employees, with our employer brand, and to make sure that we attract the right talent from the market to deliver to our clients with our brand and across our portfolio.

Contingent workforce for us was a bit of a minor labor component. We are talking about 6 to 7 percent of the complete population of our delivery capacity globally. Therefore we mostly wanted to address cost and risk. Procurement took the lead and came back with the right problem statement, delivered a solution and created the right business case to get executive approval for the global program. That’s how it evolved. We began this program and now procurement owns it.

But again, it’s a good question. It could also be through a different function. But at Capgemini we evolved it and own it right now.

Gardner: Andreas, it strikes me that you are a better organization in terms of fulfilling your mission and supporting your customers when you can find labor best where it exists rather than where you wish it were. How flexible can you be with a contingent workforce? Is this literally an addressable market that extends all over the world? Has the COVID-19 pandemic opened people’s eyes to the potential for more remote and flexible workforces?

Hettwer: Yes, absolutely. First of all, the contingent workforce has increased in the market. If you look at different research -- and even from the Capgemini Research Institute -- you see that the number of contingent workforce participants has increased over the last few years, starting with North America but also in Europe, and even now in Asia-Pacific and in India.

We needed to address this accordingly with some kind of innovation. We therefore developed a global program to make sure that we gain the best contractors in the market and that we use them recurrently.

Looking to the COVID-19 pandemic, we have seen dramatic changes. Suddenly, more clients are open to remote work. Our own organization has been open to remote work. We at Capgemini were able in a few weeks to have more than 95 percent of our own population working remotely. That helped us to really change this work environment and to have more contractors working remotely. So this is something that we need to address further in the future.

Gardner: Yes, COVID-19 has been a motivator and an eye-opener as organizations go more digital, with the ability to use workers regardless of their location. That will become more prominent, I expect.

Andreas, when we use contingent workforces, what are the benefits? What has it done for you at Capgemini?

Remote work benefits

Hettwer: From our perspective, we have four major categories of benefits. The first one is business impact improvement. It’s about fulfillment, making sure that we have the right talent on board and that we can fulfill the needs of our clients. We can therefore make sure that the clients are happy and that our projects will be delivered on time with the right quality.

The second aspect is cost-optimization. It’s always a very challenging market, and we need to be very competitive. Whenever you need contractors, be it for niche or core capabilities to be embedded in our projects, we need to make sure we do it correctly, with the right pricing, so it’s a win-win situation. When we are competitive in using the right contingent workforce at the right price, then it’s also possible to deliver the best pricing for our client. So cost-optimization was a second big aspect here.


T
hird -- and not a negligible issue -- is risk mitigation. More and more labor laws are coming up right now. And there are many tax-related topics, too. So whenever we can gain more visibility, we can better control our contingent workforce. We can also be sure that risk associated with the use of that labor can be mitigated across markets.

And then the fourth benefit is process efficiency. Bringing in contractors, or services from our suppliers, needs to be seamless -- from getting the right capabilities in, to invoicing, approval, and all what’s necessary. And that must be very efficient, because in an organization like ours, which is global in roughly 50 countries worldwide, we need to have proper, seamless processes end-to-end. Otherwise it’s an administrative burden that you can’t afford.

Gardner: And how about the issue of speed and agility? Oftentimes when it’s a full-time position, it can take months, if not longer, to go through the process of defining the role, hiring, vetting, and onboarding. Is there something about contingent labor that increases the speed and agility when you are satisfying your customers on a project-basis?

Suppliers increase speed-to-hire

Hettwer: Yes, absolutely. And I think this is also the beauty of contractors. You really have the chance to reach out to the market to identify the right contractors on time. And this is also why contractors from time to time come in, because it’s much easier and quicker to get them in, up to the moment until we recruit maybe somebody permanently.

And, for sure, we do this through a preferred supplier base, and this is part of the service-level agreements (SLAs) that we negotiate with our preferred supplier base. This is the speed, quality, and the pricing aspect.

We also invested in our Freelancer Gateway by Capgemini. That means we are addressing contractors directly. We have created the possibility for contractors to check the opportunities that we have on the contingent workforce side and apply accordingly.

But we also invested last year in our Freelancer Gateway by Capgemini. That means we are addressing contractors directly. We have created the possibility for contractors to check the opportunities that we have on the contingent workforce side and to apply accordingly to be part of our extended workforce.

This is very beneficial because more contractors don’t want to go through an external third-party; they want to reach out to us directly. And for us it’s a benefit because we can create an external workforce. We want to build a recurring workforce so that we have a relationship with the contractor market and to make sure that the right people work for us regularly.

Gardner: Now, we mentioned that procurement is the force through which you are operating here, and you have been in procurement for many years. Tell us about your procurement background and why you think the procurement legacy and approach to managing processes and costs lends itself to a contingent workforce management.

Total workforce management

Hettwer: I joined Capgemini in 2004, quite a long time ago. Before I had been a consultant for different companies. And, to be honest, during the initial years it was an immature market. The contingent workforce had not really been addressed during this time. We really started from scratch.

Now, in 2020, things have changed completely. We have technologies. We have managed service providers. We have really mature organizations that can help. The technology has evolved dramatically.


For example, for our Freelancer Gateway, we use technology from partners like SAP Fieldglass. We use artificial intelligence (AI) and automation to make this attractive process as easy as possible. The technology can help so much right now; it helps dramatically.

And as HR is on one side focusing on the permanent labor, we are focusing on the contracting side, but we are merging our capabilities through our Capgemini brand. This is exactly where we want to go, and this leads us to total workforce management.

Gardner: How has the SAP portfolio, in particular Fieldglass, helped you get a more repeatable and understandable process and move toward total workforce management?

Hettwer: When we began in 2016, we needed the right technology to support this because we couldn’t do everything manually. We need to have the right solution. And during this time, for sure, we did proper request for proposals (RFPs) and checked the market. SAP Fieldglass convinced us because, first of all, the technology had the right functions about what we wanted. It’s really also an end-to-end solution.

Secondly, we wanted a solution that has a global footprint. If you just come, for example, from North America, you don’t understand how Europe works -- or vice versa. It’s quite difficult. So we said we needed a global footprint with references in the different key regions. This was also why SAP Fieldglass was chosen because of this global footprint and the experience that they had. This really helped us in deploying our global program.

Thirdly, SAP Fieldglass was a strong provider with the right development capabilities because we wanted to be able to evolve. We didn’t want to have just one solution. We knew the technology would evolve and our program would evolve as well. Therefore, we needed to have a partner who can go with this program with us over several years. It’s not just a 12-month exercise, this is really something that needs to evolve.

And lastly, we needed somebody who could help us integrate a cloud-based solution into our IT systems landscape. It’s difficult when you have some cloud solutions and some on-premises solutions, you need to connect them accordingly. And that has worked. These were the reasons we selected SAP Fieldglass and since then we have worked very tightly together, and it works great.

Gardner: It seems like Capgemini is in a great position to be a leader in this field and to innovate because of your emphasis on IT, your understanding of systems, the need for flexibility, and your global footprint. You are an early adopter, but also a bellwether of where things can go with contingent workforce management.

How you have further innovated your Freelancer Gateway and trusted contractor programs?

Replace face-to-face trust

Hettwer: Like many others, we began with the contingent workforce functionality of SAP Fieldglass. This was the main purpose first of all -- to get this done. 

Then we moved to the next topic, which was delivery-based services, but this is more specific to areas where you have bigger spend areas to control. So you have to create governance.

But then we came to the direct-sourcing piece with our Freelancer Gateway to make sure that we use AI and automation to attract contractors directly and make sure that we have the best recurring extended workforce.

As I said, the pandemic was also an accelerator for this, and the use of remote contracting. And this is quite difficult because, remember, when you try to get contractors in, you need to do some interviewing. At a certain moment, people who seem to be good contractors and consultants who want to work for us would come on-site and we would get to know each other and then relationships start.

When you do these things remotely only, you never have a personal interaction with people, it's just video conferences. At a certain moment people need to have access to systems. Otherwise there is uncertainty about their capabilities and the security levels.

But when you do these things remotely only, you never have a personal interaction with people, it’s just video conferences. At a certain moment people need to have access to systems. If you don’t know these people, other than from the interview and the video conferences, there is uncertainty about their capabilities and the security levels.

This is why we needed to do something different, rather than just identifying and validating the contractors and then letting them work remotely. It’s about bringing in a level of trust that we have the proper qualifications and proper experience with people before they can work remotely for us.

And this is exactly something that we are figuring out right now. We are not completely done yet, but this is something that’s on the agenda as part of the “New Normal.”

Gardner: Andreas, when you have that digital, remote relationship rather than a more tactile, human relationship, you have to go on metrics and key performance indicators (KPIs). You need data that’s verifiable and repeatable. And in doing so you develop a greater understanding of your workers, your contingent workers, and the work itself. 

Is there something about going to a data-driven, digital-type of engagement that will pay dividends when it comes to the greater understanding through data-driven and metrics-driven definitions of your process?

Hettwer: Yes. I think it’s a combination of both, right? On the one side you need to have the technology and the right data. But when we started thinking about the new right taxonomy -- to understand and identify certain roles and skills -- it’s very difficult. We created a rate card structure to make this happen, to begin to talk to each other and understand the roles and skills across North America or in China or maybe in India. But we know that there is a bandwidth of skills that can be categorized over there.

So, we needed to have certain technology to help us identify the capabilities of individuals, and on the other side, matching this with the job postings, with the needs that we have.

The technology helps us to make these kinds of matches, and all of this data will drive to even more AI to get proper and quicker matching so that the quality of this matching process will increase. And this is also why, for example, we are focusing on recurrently used contractors because it forms loyalty that will lead to a win-win situation between the external market and our clients. This is exactly where we want to go. 

Gardner: And I certainly understand that building those taxonomies and creating the way in which you would measure the quality of the relationship for both parties is an ongoing process. But so far, just using the contingent workforce management and SAP Fieldglass to this point, tell us a little bit about what you have gotten.

Are there metrics of success, or key indicators that you can point to that demonstrate a return on investment or a rationale for why this makes sense?

Measures of success

Hettwer: Yes. First of all, we needed to have the spend coverage of 85 percent in a reasonable time. It took us some time to get there, but we are right now at the 85 percent. We recently went live in India with fully integrated solutions, and now we are at this level there, too. 

For sure, there are different countries still where we have not full coverage yet, but we do it with a light version of the solution so we at least have the chance to identify individual external workforces.

A second measure that is very important for us is the fulfillment rate. We are now at 80 percent of fulfillment rate on eligible demand. “Eligible” means there is always some kind of demand in the contractor environment that cannot be filled because it’s not needed anymore or it’s maybe that some things change and that means our own people can take care of this one.

So this is why we always say “eligible” demand is something that really needs to be fulfilled and here we are at 80 percent. And I think this is quite good, and we are further ahead of where we were some time ago. 

Another metric is the quality of job postings and aging, because if you have a job posting for contingent workforce that is in your system for 12 months, it just dilutes the KPIs and nobody is working on it anymore anyway.


W
e are right now at a level of below 30 days. That means whenever something is not filled within 30 days, it needs to be rechecked as to whether or not it is still needed, which means we always have proper demand so we can perform better toward our business goals.

Also quite important is time to fill positions; we have decreased this significantly. Currently we are on below 10 days from the job posting until the creation of the work order. So that means whenever there is really high demand for contracting site, we are able to fill this within 10 days. And, as you mentioned earlier, this is much quicker than recruiting people from the external market.

For sure, this will change with the “New Normal” because we have the possibility of a global remote workforce. There will be changes in what we need externally and what needs to be delivered from the internal side, and this is something that will evolve over the next weeks and months.

Gardner: And, of course, a very important measure of success these days is the perception of the customer -- the customer experience. Have you gotten any feedback as to how well your support of contingent labor works from your customers’ vantage point?

Hettwer: Yes, exactly. For sure, everything is client-driven for us. This is most important and there are some environments where you are not allowed to go with an external workforce. Others think more about the delivery-based environment and there we need to make sure that the right teams are available to deliver what we have promised.

There is always the question about if the contingent workforce needs to be engaged, and how can you ensure you select the right people, that you have the right suppliers in place, and that you are able to deliver what you are promising.

When we came up with our approach and showcased the suppliers -- the client base was very impressed. We even go out to our clients’ site, explain what we do, and how we do it. We even have clients thinking about how to adopt this contingent workforce management approach internally. So I think this is the best thing, if clients ask us to do similar things for themselves.

Gardner: Of course, those clients would let you know pretty quickly if things weren’t working out and so you have the ability to be reactive and agile as you adjust. It’s a feedback loop.

Before we end, Andreas, let’s look to the future. We mentioned the idea of establishing trust and understanding, the relationship and the qualitative and quantitative value of work, but it seems to me that what we are talking about as contingent workforce expands is really a redefinition of a corporation or a business. The barriers of that business become fuzzy, even permeable.

Do you see the nature of business changing as we look to less of a walled garden and more of an expanding universe of skills?

The future is not fuzzy

Hettwer: Yes, I would say so. As I said, we call it global resourcing or global capabilities, and this is exactly where it will lead. It’s not that everything can be done remotely, but it will increase, and this will give us opportunities -- not only Capgemini – but also more from our contractor side. And this is exactly the right thing to address right now because only when we have the right people in place -- when we have the right contractors in place -- then we can do these kinds of things.

There will always be some deviation, right? As you see, more and more tax regulation will come, more and more labor laws will come in the different countries. And this needs to be addressed. There is a difference between external services and internal services, and this needs to be addressed.

I think it will not be as fuzzy as it looks initially so that you can’t differentiate anymore between an employee and a temporary contractor. It will always be a differentiation there from my perspective because of all these kind of tax, legal, and statutory requirements. But you can do things in a more homogeneous and more aligned way -- and this is exactly what it will lead to.

Gardner: What advice would you share with others who are interested in increasing the amount of contingent workforce utilization and management?

Hettwer: There is so much to learn that I could talk for hours. But the first thing that I have is whenever you want to start some kind of contingent workforce program, think about the pain points in your company.

Is it compliance risk? Is it a cost issue? Is it a fulfillment issue? What are the pain points that you have in your organization and start from there, create, then solutions, and then finally a business case. Because without a business case that is not approved by the senior business you will never succeed. So that is my first recommendation.

Whenever you want to start some kind of contingent workforce program, think about the pain points in your company. Start from there then create solutions and finally a business case. Without as business case approved by the senior management you will never succeed. 

The second one is getting clarity from the executive level about who owns such a program. This links very much to the questions that you had earlier; is it procurement, is it HR, is it somebody from the business? But there needs to be an owner, because otherwise you start a program and then you immediately start fighting about who owns it, right?

The third aspect is, if you want to go in such a global program, what about the governance? You need to have the right stakeholders in place. First of all, to get their buy in, and secondly, it’s about crowd intelligence. You are never the one who has the knowledge about everything. So if you get the right people on board from the different countries, from the different functions, then you will have all the intelligence that you need to create a program.

Then, you need to make sure that you have proper steering committees in place, because there will always be discussions and escalations, so make sure that you don’t get only the approval from the executive committee but also that you have regular decision points where these kinds of things will be discussed and decisions will be taken.

And last, but not least, prioritize. You will never be in the position to have a global program and make sure that in 12 months you have covered the globe; this will not happen. So, prioritize, make sure you start where you have the biggest pain points, you start there because initial success creates demand for deployment and will lead to its acceleration. So get success as quickly as possible in areas where really success is needed, talk about this one and that will help you really to accelerate.

Gardner: Well, very good, I’m afraid we will have to leave it there. You have been listening to a sponsored BriefingsDirect discussion on the growing importance of contingent workforces. And we have learned why managing those workers and services better enables businesses to further leverage external workforces and services to satisfy flexibly their growing skills and IT needs.


So a big thank you to our guest, Andreas Hettwer, Vice President and Group Procurement Category Director at Capgemini. Thank you so much, Andreas.

Hettwer: You are welcome. Thank you very much.

Gardner: And a big thank you as well to our audience for joining this BriefingsDirect digital business innovation discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator throughout this series of SAP-sponsored BriefingsDirect discussions.

Thanks again for listening. Please do come back next time, and feel free to share this information across your IT and business communities.

Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP.

Transcript of a discussion on the growing importance of contingent workforces for businesses around the world to satisfy their skills and information technology needs. Copyright Interarbor Solutions, LLC, 2005-2021. All rights reserved.

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