Basking Ridge, N.J.-based Avaya produces a variety of advanced solutions that help many of the largest corporations in the world manage the complexities of their telecommunications. But until recently, Avaya itself did not have a solution in place to optimally manage the temporary labor force that helps produce, deploy and service the call centers, voice messaging, IP telephony and other solutions available from the company.
Avaya spun off from Lucent Technologies in October 2000, and today the $4 billion company is a leading global provider of business communications software, systems and services, employing about 20,000 people in more than 50 countries around the world. In addition to its own labor force, Avaya also uses close to 500 temp workers to fulfill a variety of roles, adding up to an annual spend on non-employee workers ("NEWs") of more than $30 million globally. As of just a few years ago, more than 250 different suppliers were providing temp labor to Avaya. And therein lay the challenge.
"We did not have the knowledge of who was actually working at Avaya, how long they had been here, or whether or not they had the appropriate coverages, such as insurance, in order to do business with us," says Janine Battaglia, global procurement manager at Avaya. "And we had little in the way of a tracking mechanism for managing this type of budget." So when Battaglia took over management of all temporary labor at the company a few years ago, one of her first assignments was to assess Avaya's spend on non-employee workers and identify a solution that would allow the company to better manage this segment of its spend both within the United States and around the globe. "Avaya felt very strongly that we needed to get our arms around not only the spending but also who was working here," Battaglia says.
Battaglia first surveyed managers responsible for sourcing NEWs to understand their diverse requirements, and then she researched various models available in the marketplace to support this spend category. Avaya's goals for the effort included reducing the amount of time that managers had to spend recruiting temp labor, encouraging competitive sourcing of NEWs, consolidating its supply base for temps and achieving cost savings. In addition, the strategy that Battaglia and her team drafted called for identifying and capturing all of the company's spend in this category; implementing best-in-class processes and tools to source and manage temp labor; and increasing compliance across the enterprise with Avaya's temp workforce policies.
With regard to the available tools, Battaglia reviewed options available in the marketplace before focusing on a group of temp labor service providers that potentially could meet the company's requirements. After putting out a request for proposal, Avaya selected a company called ProcureStaff, a division of Volt Information Sciences that offers a Web-based platform for what it calls managed service programs, or MSPs. According to Battaglia, ProcureStaff's core competencies around providing temp labor fit Avaya's requirements, the provider's value proposition won approval from Avaya's finance department and, moreover, ProcureStaff demonstrated a willingness to share in the risks and to be flexible as Avaya moved to the managed service program. "Their whole company philosophy fit the scope of our needs," Battaglia says.
Avaya began working with ProcureStaff in April 2001. As Battaglia explains it in a presentation she gives on the initiative, "ProcureStaff is Avaya's outsourced administrator of 'The NEW Procurement Center,' which is a customized total procurement and payables solution for the sourcing, acquisition and administration of all technical, management and clerical non-employee workers required by Avaya managers." ProcureStaff offers Web-based tools for services requisition management and e-procurement, time-keeping and vendor management — as well as consolidated invoicing, so Avaya receives a single invoice from ProcureStaff for all temps working through the center.
The Honeymoon Period Continues
Since beginning to channel its temp labor spend through the NEW Procurement Center in 2001, Avaya has seen the payback on its work with ProcureStaff ramp up over time. In 2002 and 2003, Battaglia says, the company saw an average 7 percent savings on its average billing rate. But by 2004, the company was already seeing a 29.5 percent reduction in average bill rates. Battaglia credits this jump in savings to the tracking tools available through the ProcureStaff solution, which provides information on all the resources that the company has sourced over a three-year period and which have allowed Avaya to create a baseline for the average price that the company has paid for a given service. With this information, ProcureStaff set up a job library customized for Avaya with 278 unique job titles. "Now each time we source a contractor through the program, we have the backup to know what [bill rate] that person should be coming in at, and that's where we see our savings," explains Battaglia.
As of mid-2004, Avaya had 2,000 managers procuring temp labor for 67 different sites through the center, including at Avaya operations outside the United States in Canada and five European countries (England, Ireland, Belgium, Netherlands and Germany). As a result of the initiative, Battaglia reports that the company had reduced the number of its preferred temp labor suppliers by 73 percent and seen direct sourcing activity drop by 81 percent for the locations up and running with the new center. In addition, the consolidated invoicing has resulted in process savings for accounts payable.
Interestingly, as Avaya has rolled the NEW Procurement Center out to its operations in different countries, the company, at times, has had to adopt new models to accommodate local requirements. In the Netherlands, for example, local laws do not permit a third party to stand between Avaya and a temp labor agency. As a result, in the Dutch market, Avaya has direct engagement relationships with its agency suppliers and pays the vendors directly. Battaglia credits ProcureStaff with assisting Avaya in researching the requirements of the different markets and ensuring that Avaya remains in compliance with all local labor laws.
Perhaps the icing on the cake for Avaya is the fact that the NEWs program has no budget, since it is funded by the suppliers. When the suppliers sign up under their preferred contract to participate in the center, they agree to a fee (typically 2 to 5 percent) for each contractor that they bring to the program (depending on the volume for a program and how many people it takes to run the program), and those fees go to ProcureStaff. "Our purchasing folks have put a lot of hard work into the program," says Battaglia, "but ProcureStaff does assume a certain risk in ensuring performance. So it's a no-brainer."
Taking a Global Approach to Temp Labor
Offshoring became something of a political hot potato during the latest U.S. election cycle, but all the hand-wringing about shipping jobs overseas overlooks the fact that global corporations these days are, well, global, and they employ armies of full-time equivalents and — more importantly, for our purposes here — temporary labor in local markets around the world through their far-flung subsidiaries and operating units.
Optimizing the procurement of temp labor can be a tough challenge within a single country, let alone globally, according to Beerud Sheth, co-founder and vice president of marketing at Sunnyvale, Calif.-based Elance, which provides a solution for managing services procurement. "Typically customers tell us that they have no visibility into, or control over, their services spend, and they realize that they have a global problem."
Sheth says that Elance's clients usually attack this challenge by first focusing on the U.S. market before moving on to other markets in which they are procuring outside services. In this way, these companies can put in place standardized definitions and processes for the different types of services that they buy, achieve savings in one country, and then export those standards (with modifications for local laws and conditions) to other markets in which they operate.
Sean Chou, chief technology officer with Fieldglass, a Chicago-based provider of services procurement solutions, stresses that U.S. companies must be aware of the impact of cultural differences on relationships with temp workers in other countries. The culture in a given country in, say, South Asia may prompt a staff person to always agree with a boss and gloss over any problems in the course of a project. "That's a big shift for American companies and a lot of European companies that are used to their lieutenants and project team members contributing and questioning authority, but still bowing to authority." Software can help mitigate this type of challenge to some extent, by providing tools for capturing commitments and deadlines, Chou says, but companies must also ensure that their executives let workers know that constructive comments are encouraged and will not be viewed as criticism of their boss.
Specialized solutions from providers such as Covendis, Elance, Fieldglass, ICG Commerce, IQNavigator and Taleo include various tools that allow enterprises to gain visibility into their global spend on services, including contract labor. (For the record, enterprise solution providers such as Ariba, Ketera, Oracle, PeopleSoft, Perfect Commerce and SAP also offer different types of services procurement tools.) These specialized solutions typically handle multiple currencies, support local requirements (such as the value-added tax, or VAT, used widely outside the United States) and provide reporting tools that can roll up total spend for a category and then break it down by country or region. Armed with that level of information, enterprises can do the necessary spend analysis required as a first step toward taking a more strategic, and global, approach to worldwide temp labor spending.