An Overview of The Outsourcing Statement of Work

We previously blogged on on the Contents of an Outsourcing RFP, but we didn’t dive into the detail of what goes into a Statement of Work (SOW). Here is a quick guide to get you started writing SOWs for outsourcing services. Your lawyers and consultants will be able to assist you further.

  • Scope - One of the principle purposes of a SOW is to provide both the vendor and the client a high-level description of the work the vendor will provide – and the work the vendor will not provide. Remember, the vendor will be bidding on the work described within the SOW. The better authors avoid ambiguity and uncertainty in a SOW, the less risk vendor will “price” into their bid. Furthermore, it’s important that both parties know what they are supposed to do – a point that becomes incredibly important during discussions on material changes or when there is a contract dispute. I often ask the authors describe the transaction types and customers (internal or external) the transactions support in this section.
  • Business Process - The purpose of describing a business process is to allow vendors to fully understand the work their agents will perform. Descriptions of business processes are generally medium-level, numbered outlines. Every action needn’t be described (leave that to the detailed design documents co-developed by the company and vendor). Swim-lane diagrams are a wonderful manner of clarifying tasks and processes – and they’re even better when each action is cross-referenced and elaborated in a sentence or two beneath each diagram. Be sure to define the service level expectations for each process. Consider quality, turnaround time, and backlog expectations. We’re going to blog an entire article on SLAs soon.Remember to include all processes. Frequently forgotten processes are vendor returns (the transactions vendors return to the company, typically because they are out of scope), exception processes, and reporting.
  • Transaction Volumes - The purpose of describing volumes is to allow vendors to develop accurate capacity and staffing models. Describe the types of transactions and quantify them. Provide annual, monthly, weekly, and daily volumes. Be sure to depict accurately days when transactions are received and when they are not received, including weekends and holidays. All seasonal fluctuations need to be described. In addition, typical transaction processing should be included for each transaction type. You should expect that vendors will improve upon current productivity rates, but it gives them a good benchmark. Finally, describe any year-over-year expectations of transaction increases or decreases.
  • Technology - Technology can be an enormous enabler, but it can also present limitations. Batch windows, system latency, and large high-quality, bandwidth-hogging file transmissions can cause tremendous challenges in an outsourcing relationship. In addition, system stability can be a key issues – especially when its the company’s system that’s hampering a vendor’s productivity [gasp!].Describe every system that will be used and the corresponding desktop PC and bandwidth/connectivity requirements. Provide physical and logical system infrastructure diagrams that show how systems connect. Where interfaces are required, describe the file formats or real-time interfaces. Finally – if systems don’t exist, be sure you say so…Remember, vendors’ capital investments are critical to calculating pricing and setting your implementation time frames. Spend time to get this correct.
  • Responsibilities - I’m not an attorney, but I can’t count the number of times that lawyers have stared dumbfounded at vendor and clients’ writing and asked, “Okay, so who is going to do this?” Contracts and SOWs are the exception to the rule that there is no “I” in “Team”. SOWs should contain no “We” or undefined responsibilities. Each party should know what they are going to do, including who is going to write training manuals, deliver training, provide training facilities, provide systems and PCs, etc. The absolute last thing you want is for either party to say to the other, “I thought you were going to do that.”
  • Contractual Language and Cross-References - SOWs should be subject to contracts, so don’t replicate language in each place, otherwise you’ll just create unintentional conflicts in language. The best example is term of the contract versus term of the SOW, including termination rights. Try to avoid conflicts and just point to the contract, and leverage terms that were defined in the contract. Consult with your lawyer…

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  1. [...] that failure to fully document and understand current-state operations is essential to developing a statement of work suitable for including in an RFP.Furthermore, failure to fully understand the core operation [...]

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