Initially, the introduction of a Managed Service Provider (MSP) was often seen as a hardship by suppliers, disrupting the relationship with a client, accompanied by a loss of margin. But is that perception right? And what’s the current opinion?
A large number of contingent workforce suppliers and freelancers have been surprised with a new MSP programme at one of their clients. Logical, because a vast amount multinationals have implemented an MSP programme since 2009, often supported by local or international managed service providers like Tapfin, Randstad Sourceright, Pontoon or Staffing Management Service.
The first generation MSPs caused a strong resistance among suppliers. They complained about the ‘desastrous effects’ that the introduction of the MSP caused them. Suppliers could no longer approach hiring managers directly and they felt that harmed the quality of their services and candidates. Their margin was also lowered by the supplier funded models (in which suppliers pay for the MSP and VMS out of their margin). On top of that, rationalising of the supplier group also put pressure on their margin. Many suppliers chose – either consciously or unconsciously – to prioritise clients with requests they could fulfill in a traditional manner, with higher margins. Many of them hoped an MSP would be a temporary phenomenon. Apart from some short term savings for the client that implemented the MSP, they saw no winners.
In 2019 MSP programme’s are still being used. Hiring managers and MSP parties have listened to the supplier’s initial complaints and the collaboration between the MSPs and suppliers have now evolved to mature partnerships. An increasingly tighter labour market has certainly contributed to that. Contact between hiring managers and suppliers has been reinstated, though mainly to align relevant factors to find the right talent. MSP and VMS costs have dropped and are integrated in the supplier’s rates, reducing the resistance to supplier funding.
But have suppliers adapted to work successfully with MSPs? The traditional one-on-one process to acquire and fulfill individual requests does not match the reality of an MSP that distributes requests ‘ready-to-go’ to pre-selected suppliers. The traditional added value of personal relationships with hiring managers was brought back to realistic proportions. Quality is now judged on process as well as candidate quality. To a client quick and accurate communication and high ranking of proposed candidates are important indicators in supplier performance when working with an MSP. At the same time, when suppliers organise and align these processes well, it offers them a chance to get an excellent return when supplying via an MSP. More efficient processes can more than compensate the lower margin level.
So in short; a well implemented Managed Service Programme does not only offer benefits to the hiring client. It also gives suppliers the opportunity to increase their market share. It can lead to a partnership based on concrete performance instead of individual perception of the hiring manager. And with more efficient processes it also doesn’t need to lead to loss of margin.
TalentIn can help you develop or update your supplier management strategy, but we can also support you in preparing and evaluating your RFP design and evaluation for outsourced HR solutions. We are happy to discuss this topic more in depth with you. Please visit us at www.talentin.eu , mail us at firstname.lastname@example.org or call us on +31 10 307 54 22.
About the author:
Marc Viëtor is Managing Partner at TalentIn. With more than 25 years in the industry and as former senior executive in Randstad and Randstad Sourceright he has a thorough experience in HR solutions. His broad experience covers sales, solution design, concept and process development, finance and HR in markets around the globe. Marc has worked with many companies on a variety of services and solutions.