Have you heard the acronym SOW and wondered what that is all about? Well, if you have, then you are in the right place. This article will share insights on “what is SOW in business.” So be ready to learn interesting things about this acronym.
And ensure you read the article to the end.
Meaning of SOW – What is SOW in Business
SOW is an acronym for the term Statement of work.
It refers to a legal document that states the workings of a project.
It defines what would be done to ensure that a project is carried out as expected.
SOW is usually binding between a business and a client/customer.
Usually, it is among the initial documents that are exchanged between a company and its client after they have agreed to work together.
It typically outlines the project’s goals.
It is among the best ways to ensure everyone involved in the project is on the same page regarding project expectations, the scope of work, deadlines, and so on.
This way, both the business and the client/customer can be aligned as they try to reach the goals and completion of the project.
When written properly, an SOW can function as a project management tool and a contract.
A proper SOW would make it easier for all parties to be held accountable and ensure they carry out their side of the bargain.
SOW Vs SoW – What is SOW in Business
Okay, you are confused now and wondering what this article is going on about; let’s break it down now.
Why do people confuse SOW for SoW? Well, it is simple.
SOW, or sometimes SoW or sow, is another acronym in business that stands for ‘scope of work.’
That statement of work and scope of work share the same first letters and get abbreviated the same way does not help the confusion around them.
But while they may be similar, they are not the same.
So, what is scope of work?
Simply put, scope of work typically states a project’s objections and how to measure whether the project reaches its goals.
On the contrary, statement of work is more detailed and covers every area of how the project is meant to work.
The statement of work and scope of work is similar to the point that some people use them interchangeably.
But if you want to be accurate, you cannot do that because a statement of work is more detailed and contains information that a scope of work does not.
The statement of work comprises several sections, and the scope of work is usually one of such sections.
What SOW is Not – What is SOW in Business
Business articles and blog posts often take their time to explain what a statement of work is all about.
However, they sometimes do not explain what statement of work is not.
There are a lot of other concepts that can be confused for SOW, and without these discussions, you may end up confusing these other things for SOW.
So, let’s consider some other terms often confused with SOW.
Service-Level Agreement (SLA)
A service-level agreement defines how to measure the success of an ongoing project.
It sets the success metrics of an ongoing project or service.
It also states the consequences that will come up if the success metrics aren’t attained at the end of the project.
So, let’s say your business hires an SEO expert and asks them for an SLA.
Their SLA can be like this: “We will optimize your website and ensure it ranks on Google 1st SERP. If we fail to achieve this after the agreed period, we will discontinue our service and refund what you have paid”.
Note that this is only an illustration to help you better understand the concept of SLA; SEO experts will likely not make this promise.
Master Service Agreement (MSA)
SOW is not a master service agreement; however, some people may get confused by both of them.
The major difference between SOW and MSA is that SOW focuses on just one project, while MSA is more general.
MSA is used when a business has an open-ended contract with a contractor.
So, when a new project starts, they do not have to make new guidelines for the project; they would use the existing guidelines, the MSA.
This means that MSAs govern the relationships a business has with others.
Importance of SOW – What is SOW in Business
SOWs are very important when it comes to completing a project.
They act as a road map to ensure everyone meets the project’s objectives.
If you are following this article so far, you would already know that this is a major importance of SOW.
But then, several other things make SOW important in business.
Let’s discuss some of them.
Specifies the Details of Each Step
SOWs lay down specific details for every step of the project.
So, every party has a means of confirming critical facts whenever necessary.
Continuous communication is important between your business and other parties involved in the project.
However, it isn’t possible to always contact the other party to clarify a fact.
Reduces the Chances of Conflicts
An SOW maps out every important aspect of a project.
Thanks to this, every party involved in the project can easily clarify anything they need to clarify at any time.
This way, there’s effective communication, and the chances of a misunderstanding or uncertainty that may stall the project’s progress will significantly reduce.
Because everyone involved in the project will always be on the same page, there will be enough clarity to prevent conflicts.
Helps You Stand Out – What is SOW in Business
If your business is pitching a proposal to do a project for another business, then your SOW can help your business stand out from the crowd.
Remember, yours won’t be the only business looking to get the job.
Because your proposed client/customer wants to get the best, they will be cautious when picking a business for the job.
So, you need to stand out as much as possible, and your SOW can help you do this.
It can show your uniqueness and what makes you a better choice than others.
Saves Time – What is SOW in Business
Imagine contacting the other party involved in a project every time you need to clarify something about the project.
That can be quite time-consuming and can also affect productivity and efficiency.
But a good SOW saves time by ensuring you do not always have to contact your client.
Communication will be more efficient, and uncertainty that may waste time and reduce productivity will significantly reduce.
Types of SOW – What is SOW in Business
SOWs can be classified under three main categories.
There are design/detail SOW, level of effort SOW, and performance SOW.
Below, we’ll take a quick look at these different types of SOW.
This way, you will learn their differences, so you can always pick the best type based on the project you want to engage in.
Design/Detail SOW – What is SOW in Business
This type of SOW typically describes the project goals and the tasks/steps needed to reach said goals.
Therefore, a design/detail SOW will include a detailed description of every project stage, best practices, and even the materials you will need to finish the project.
This type of SOW is ideal when working on a tangible project.
Examples of when to use a design/detail SOW are construction and website design/redesign projects.
Level of Effort SOW – What is SOW in Business
This type of SOW is flexible and universal; you can use it for almost all kinds of projects.
You can use this SOW when a contractor works by the hour, so it defines the level of effort for the project (time and materials used or the cost per unit).
This means that the SOW typically outlines the work expectation for delivering the service.
Therefore, the best time to use this kind of SOW is when carrying out a short-term project.
Most project managers prefer the performance-based SOW.
This is because this type of SOW emphasizes the project purpose, resources for the project, and the standard/quality of the service or expected deliverables.
It entails the success metrics for the project.
The performance-based SOW focuses on the requirements for a satisfactory and complete project.
But unlike the detail/design SOW, a performance-based SOW does not give details about the project’s working.
It does not lay down the work steps.
Therefore, it offers the contractors better control over the whole process since they do not have to stick to a particular work guideline or specific steps.
All they have to do is make sure they provide the exact result that they have specified in the SOW.
Things To Include in Your Statement of Work – What is SOW in Business
A good SOW typically contains several parts and sections.
Having good knowledge of these parts will make it easier for you to write a good SOW.
Therefore, below are some of the basic features of SOW.
The introduction gives a rundown of the SOW; it describes general information about the project.
Also, this is the section where you will list all the parties involved in the project.
Here, you will discuss the why of the project.
Simply put, this section describes the project’s purpose.
In this section, you will have to answer essential questions about the project.
Questions like why the project was initiated, what are the goals of the project, what is the project’s mission, and how will every party involve in the project benefit from it?
The Scope of the Project – What is SOW in Business
Earlier in this article, we discussed the difference and similarities between a statement of work and a scope of work.
You learned that the scope of work is usually a section in a well-written statement of work.
You can see now how it fits into the whole thing.
It is where you will list out all the project works.
It will not just stop there; it should also discuss how you will carry out the listed works and how long it’ll take.
This is where you will write about the specifics of all the project’s processes and procedures.
Where the Work Will Be Done – What is SOW in Business
The team working on the project will work at a specific location; it could be on-site, remotely, or in a facility.
So, the SOW needs to contain the location where the project will be executed.
This section is vital if the contract is global; the client and you live in different countries.
A major purpose of SOWs is to remove uncertainties that may lead to misunderstandings and conflict.
Here, you will not only give details for the project execution location but also state the location of the tools, software, and equipment.
Here, you will break down the steps from the scope of work into smaller tasks.
Details are very important in this section.
You need to properly describe every task and ensure you do not skip important ones.
Depending on how lengthy the project is, you may have to divide it into phases.
You also want to have milestones that you will use to track the project’s progress, and you have to include them in the SOW.
Therefore, in this section, you will detail the project start date and the expected finish date.
Also, include the billable hours for the milestones; this will make it easier for you to predict the completion date of the project.
Ensure that you detail everything that concerns the schedule of the project.
Lastly, make sure you do this as specifically as possible.
This is where you will list the deliverables of the project.
Deliverables refer to the services and products the client expects at the end of the project.
You will also highlight when each deliverable is due.
Ensure that you note every important detail of the deliverables, such as size, colour, quantity, and every other relevant information.
Schedule – What is SOW in Business
This section describes the project schedule, such as milestones and resources needed at every stage.
Also, it includes activities like the project kickoff, performance period, development, implementation, review, testing, and so on.
Testing – What is SOW in Business
If the project will have a testing stage, then it has to have its section in the SOW.
This section will list those involved in the testing stage and who would accept the testing process.
It will also list the resources and equipment for the testing.
This section will also include industry quality standards or acceptance criteria if applicable.
Payment Terms – What is SOW Business
You can also include the payment terms for the project if you already have the project budget.
If you have this section in your SOW, it should cover everything about payment.
Especially the payment rate and the mode of payment; will it be upfront, when the project is complete, or overtime?
Some important project factors may not fit into the categories so far.
This is why you need an “others” section where you will discuss all these other important details.
This way, you can rest assured that the SOW covers every aspect of the project.
Examples of things you may add in this section include security issues, travel pay, software or hardware restrictions, post-project support, etc.
Finally, you have the closure section.
It will detail the deliverables delivery, acceptance, and everything else needed to close the contract once it is complete.
Tips on How to Write SOW – What is SOW in Business
If you want to write SOW, follow these tips to make your task easier.
Being specific is very important when writing SOWs; this article has already reiterated this many times.
Ensure no form of ambiguity will cause misinterpretation.
Be specific with dates, costs, deadlines, hours, etc.
Break it Down
Consider breaking it up to make it easier for you to write your SOW.
You can do this by splitting the SOW into 2 main sections.
The overarching stage; is assumptions, milestones, summary, and governance.
It also includes phase breakdown, schedule, approvals, budget data, etc.
The overarching stage will serve as the skeleton plan for the SOW that you would flesh out with the phase breakdown.
Ensure Everything is Clear
Clarity is as essential as being specific and, for the same reason, to avoid misunderstanding.
Avoid buzzwords and flowery language.
If you use technical terms, ensure you have a glossary to define these terms.
This is important because your clients may not understand some technical terms.
If you find it challenging to write your SOW despite how hard you try, then consider getting help.
Do not be shy or embarrassed to ask for help when you need it.
Find someone you know who knows a lot about SOW and get them to give you pointers and other tips to help you.
Conclusion on What is SOW in Business
SOW refers to a legal document that states the workings of a project.
It is a vital document that ensures that every party involved in a project stays on the same page.
It also helps to save time and ensure everything goes according to plan when working on a project.