What is SOW in Business? Explanation & Example
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The Project Management Institute (PMI) conducted a study which found that 68% of high-performing companies create formal Statement of Work (SOW) documents. This exercise forms part of their common tasks in project management spaces. Interestingly, the study indicates that these companies are more likely to meet their project goals.
Would you like to do the same? Follow us in the article below as we explore SOW documents, why you should use them, and when is the best time to create them. We also dive into a few of the different types of SOW documents that exist, what they are made of, and how to make one for your project.
We have examples and a no-code solution that integrates directly with Salesforce, our favorite Customer Relationship Management (CRM) platform. So, keep reading until the end to learn about our robust agreement generation software.
Are you ready? Let’s get started with the meaning of SOW in business!
What is a SOW in Business?
A Statement of Work (SOW) is a document used by businesses to define the following project information:
SOWs are commonly used between suppliers and customers because they give the parties involved a clear understanding of the work required and the resources needed to complete a project. These documents set the tone of the supplier’s responsibilities and what customers can expect from the project.
Reasons You Should Have a SOW
Now that we understand what SOW stands for in business terms, let’s examine why we should create them.
- They provide clear information so everyone involved in an agreement knows the project’s scope, timelines, and what will be delivered during the journey.
- When there is a SOW in place, suppliers can avoid project scope creep regarding time, expenses, and resources.
- They essentially help to avoid misunderstandings between suppliers and customers. Nonetheless, disputes may arise, so SOWs often have clauses stating how they will be resolved.
If you want contracts for a long-term business relationship with a customer, we suggest you check out our Master Service Agreement article.
When Do You Need a SOW?
There are many times when a supplier needs a SOW in place. One example is for agreement on project outsourcing. In this case, a company will need to view and approve a SOW document when outsourcing work for specific project tasks. It is definitely a valuable document that explains the following project information:
Types of SOWs
| SOW Type | Explanation |
|---|---|
| Design/Detail SOW | This Statement of Work document details how a team will complete a project. It includes project requirements, a list of deliverables, and the methods the team will employ to get the job done. The information will be explained in great detail so at the end of the day the customer has a product that meets the criteria set out in the Statement of Work document. A Design or Detail Statement of Work document is commonly found in engineering, IT, and construction fields. |
| Level of Effort SOW | This type of SOW document defines a project, but the focus is on time and resources. The people and hours needed to complete tasks are common elements in these types of SOWs. For this reason, they are often used in support and maintenance projects where time and effort are more important than an end delivery or completion of work. A Level of Effort SOW is frequently used by consulting and research teams to support long-term projects. |
| Performance SOW | A Performance SOW focuses on a project’s outcomes, so it will include team objectives, deliverables, and performance standards. In this type of SOW, the contractor decides on the tasks to complete a project. Therefore, a Performance SOW grants a team flexibility on how to complete a project while meeting the agreed-upon goals. Performance SOWs can be used in any situation where the customer is only concerned with the final results of a project. |
Elements of a SOW
Although each Statement of Work document is unique to a project, teams can include some key elements to make the agreement clear to all involved in the venture. Here are a few to align everyone on a project’s life cycle:
Summary
This section of the Statement of Work document gives suppliers and customers an outline of the entire project. Therefore, it will include information about the purpose of starting the project in the first place and the goals that it will achieve by being created. The summary will also incorporate the deliverables a team supplies to the customer.
Approval
In this section of the agreement, readers can find the names of the people responsible for reviewing and approving the Statement of Work. The approval section ensures that all stakeholders of the project have read the terms of the agreement and have approved the start of the project.
Work Breakdown Structure (WBS)
As the name of the title suggests, this section in a SOW document breaks the project down into its tasks, processes, and phases. These chunks of information show contractors and customers every step needed to complete a project.
Final Product
This section states the project’s end deliverables, expected specifications, and standards.
Timelines
A proper timeline should show the project’s schedule, which contains milestones as well as deadlines. If there are any delivery dates scheduled for the project, then they should be listed here, too.
Cost
The cost section of a SOW document contains all the financial requirements and expenses for a project. For example, customers can find the materials, team members’ labor, and other fees for the project in this section.
Work Requirements
There are many custom elements to include in an SOW document, but the last one we want to discuss is work requirements. This section lists the project’s resources and team members’ skills. Additionally, any conditions that need to be met should be mentioned here.
Should the project have technical or legal requirements to be adhered to, they should also be stated under work requirements.
How to Write a SOW
We learned that SOW documents are important tools for clearly communicating project details among various stakeholders. You might want a reference to use when explaining to customers what they can expect from a project. Here is a short step-by-step guide for creating a Statement of Work document on your end:
- First, you need to define the purpose of your project. You can start by listing the project’s objectives.
- Next, you need to chat with all the project stakeholders and gather requirements.
- From your research, you can begin drafting a Statement of Work document starting with a short project summary.
- Then, go into more detail with a Work Breakdown Structure (WBS).
- Now, you should list the final deliverables, like products or services.
- Remember to add your project timelines and state all the costs.
- Add a section that explains the work requirements for the project.
- List the people who will review and approve the Statement of Work document.
- With a complete Statement of Work, it’s now time to share the document with all the relevant stakeholders.
- Make any necessary changes from the reviews to ensure that the Statement of Work document is clear and complete.
- Get approval from all stakeholders by ensuring they sign the Statement of Work document.
Example of a SOW
By creating a Statement of Work document that has a well-organized structure, you get a comprehensive agreement that communicates a project’s requirements and deliverables clearly to all stakeholders. Here is an example of a SOW document that is used by businesses to create a solid foundation for starting projects:
TITAN for Generating SOWs & Other Business Agreements
Statement of Work documents require a lot of project information. Manually creating a SOW document is quite time consuming, especially if teams need to copy paste data from a Customer Relationship Management (CRM) platform like Salesforce. Then, the document needs to be double checked to ensure that information is correct and that it is free from errors before emailing out to a client.
Now imagine that amount of work required per project on the go! These documents can quickly scale and become an administrative nightmare. For this reason, we recommend you generate Statement of Work documents or any business agreement directly from Salesforce.
It’s as easy as clicking a single button when you integrate Titan with Salesforce. Our powerful platform gives you point-and-click tools for automating processes and document generation in Salesforce without code.
Access to No-Code Features for Salesforce
With our no-code tools, teams not only get to generate SOW documents but also deliver them to customers from Salesforce to seamlessly electronically sign and approve projects. When working with Titan, your data has end-to-end security and is compliant with HIPAA, SOC 2, ISO, GDPR, and other leading frameworks, ensuring your Statement of Work documents are protected.
We can help you streamline complex SOW document flows between your teams and customers for lightning fast and supercharged experiences in any industry. If you want to know more about our no-code tools that work perfectly with Salesforce, contact us through one of our social media links below.
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Disclaimer: The comparisons listed in this article are based on information provided by the companies online and online reviews from users. If you found a mistake, please contact us.
