There’s a powerful change taking shape in the dynamics of modern work. It’s signaled by the digital nature of business, the sharing economy, and the exponential boom of smaller and midsize enterprises. These transformations aren’t lost on Managed Services Providers (MSPs). Some of the most recognizable firms are even reconsidering the term “MSP,” believing it’s no longer indicative of the role. It makes sense. Modern clients want more than cost containment strategies. In response, MSPs must make their transition to next-generation excellence by pursuing a more comprehensive approach to supplier and workforce management. This is where we could see the emergence of MSP 3.0 – a model in which the transactional gives way to the strategic.
Smaller Companies Packing a Bigger Punch
In the summer of 2016, Allegis Global Solutions (AGS) announced the launch of its SIGMA MSP offering. This kind of MSP Lite program caters to small and mid-market companies that spend between $5 million and $50 million on contingent talent. Why is this crucial? Smaller businesses are playing a much bigger part in today’s economy. MSPs such as AGS, Randstad Sourceright, PRO Unlimited and Geometric Results (GRI) understand this. They are creating models that give modest enterprises greater agility and power to innovate through the support of an MSP partner that do more than effectively manage staffing suppliers and contract workers—they are evolving into consultative business partners and strategic advisers.
The signs are everywhere. As Bersin by Deloitte noted in July 2016, the workforce software market is radically reinventing itself. This growing $14-billion industry has reshaped the way we think about talent acquisition, management, engagement, performance, and skills development. And it’s being fueled by the power of smaller players in the space.
Contingent talent have also become more instrumental and visible in smaller companies, particularly entrepreneurial innovation houses. Years ago, the term “contingent worker” made a lot of sense. Gifted contractors began taking on more pivotal roles in their assignments or tackling mission-critical projects. Referring to them as temps seemed to fall short of the services they were providing. However, contingent talent are no longer, as the name implies, a “Plan B.” They are important contributors to the companies they support – and more companies are integrating them into their businesses to spur innovation, fast growth, and competitive advantages.
Rapid expansion is no longer just the goal of companies, it’s a reality. The challenge, as illustrated in a joint study conducted by the Kauffman Foundation and Inc. Magazine, is that more than 66 percent of the companies listed as fast-growing shrunk in size, went out of business, or had been sold within five to eight years. To weather the storm, as William Watterson pointed out in The Next Web, expanding businesses need to have plans in place:
- A near- and long-term growth strategy
- Back-end support systems for delivery and fulfillment
- Financial visibility and forecasting
- Performance metrics
- The right talent
And this is precisely where MSP 3.0 comes into play, as AGS acknowledged: “For MSPs to stay relevant they must evolve from a transactional supplier into a strategic partner and deliver the value that businesses need. In essence, MSPs need to become talent advisors, serving as a strategic arm of the client business.”
Making the situation more urgent is a movement by clients to bring managed services in house. Spend Matters covered the topic last March with a fairly dire assessment:
The managed services provider (MSP) model, which started 20 years ago as the “go-to” for contingent workforce management, is losing relevancy and the voice of the customer is confirming they want changes. Today, clients want a strategic business partner, true vendor neutrality, effective benchmarking and reporting, best practices and expanded supply chain options with digital platforms. They want to go beyond the current MSP “command and control” of cost control, process and visibility.
MSP 3.0: From Outsourced Support to Strategic Business Adviser
By nature, MSPs oversee one of the most vital aspects of any client business -- talent. MSPs have valuable insights, essential data and keen perspectives that can undeniably benefit client managers in mapping out their financial goals for the year. By including MSPs in business growth and planning efforts, clients strengthen the might of their forces in this war for talent.
Client hiring managers are facing a battle across several fronts. They are desperately seeking top talent to fill in-demand positions, yet time seems to conspire against them. Their workloads have become more demanding, they’ve been stretched thinner by lean operations that attempt to curb overhead, and they have fewer people in key positions to perform the work, which is backing up and piling higher. With the dawn of each new year, these same hiring managers must confront a fresh batch of pressing corporate responsibilities, operational goals to attain, internal staff to manage, and increasing pressure to innovate and optimize processes. MSPS -- with their resources, expertise and information -- can become an untapped goldmine for stellar business planning outcomes.
MSPs Are Instrumental to Financial Management
The primary motivation for MSPs is to deliver the right talent at the right price and at the right time. Making the program equitable for all parties involved -- the client, the suppliers, and the workers themselves -- is paramount to their success. Leading MSPs balance the need to deliver the best possible talent with fiscal responsibility. They accomplish those objectives using tools such as market rate and people analytics, labor economics reports, rate controls, supplier surveys, and pulling data across all clients through business intelligence systems.
During program implementation, experienced MSPs develop a custom cost-savings measurement plan with their clients. Together, they determine the data to be measured, the sample size, the reporting frequency and the format of the data. The process becomes a comprehensive cost savings analysis in which the MSP reviews pay and invoice rates, supplier markups, various tenure policies, and discounts. The MSP also identifies the risks and countermeasures associated with implementing the various cost savings opportunities.
When budgets are created and overseen at the enterprise level, they can sometimes omit the pivotal input and participation of department hiring managers. However, this input is essential to effective planning and forecasting. Together with MSPs, hiring managers can identify upcoming expenditures or savings opportunities that may have been missed by executives too far removed from the frontline.
MSPs Promote Visibility
The ability to make informed decisions based upon reliable real-world data is vital to the success of business planning. MSPs mandate the program across the enterprise and ensure that all contingent work is being captured in a VMS. This gives clients visibility into all aspects of the program: the overhead, the costs, demand planning and forecasting. The reporting capabilities of the VMS deliver intelligence and analytics that allow MSPs to drill down into market dynamics and then provide that insight to hiring managers.
The datasets MSPs collect contain a trove of information that can be used to forecast demands, usage, and financial considerations for near-term and long-term planning. Through this approach, MSPs collaborate with client hiring managers to ascertain the right number of people being requested, which prevents frivolous or rogue spending -- an instrumental component in creating a meaningful and achievable plan.
MSPs Uncover Market Opportunities
Budget and resource planning require a level of transparency that extends beyond the organization. It’s just as crucial to understand the external factors of the market. MSPs use a variety of methods to compile market rate intelligence:
- Existing data captured in the client’s current HRIS, ERP, VMS, or other database system
- Data mining through internal databases and outside sources for specific labor statistics, cost data, and market dynamics
- Staffing partner data specific to requested job titles and work locations
MSPs combine these data sources to create matrices with recommended rate strategies, and then determine the best rate card to support the hiring manager’s business goals. They review rates regularly to ensure that changes in market demand and statutory costs are captured. By nature of the program design and contractual agreements, MSPs can enforce adherence to these rate card controls across the supplier base.
Solving Challenges with the Human Cloud
MSPs have an obvious opportunity to go from surviving to thriving, but there are challenges. Finding the right talent and supplier partners isn’t as easy as in times past. This is where new marketplace models, connected talent pools, and the Human Cloud can give MSPs a needed boost.
A marketplace platform enables a 360-degree view of each candidate profile, consolidating information from resumes, LinkedIn profiles, online groups, associations, and countless other sources. Advanced algorithms match for skills and experience, while internal teams vet each candidate before sending the best resumes to MSPs – in a matter of hours and days, not weeks.
Every aspect of the ecosystem is catered to capitalize on the sharing economy and the crowd. Talent suppliers, just as the candidates they source, are also crowd-based. With features like automated matching, a fully digitized recruiting process, and a large exchange of independent suppliers, MSPs can realize the full potential of the Human Cloud, surpassing traditional agencies, online recruitment apps, and technology based point solutions whose entire offering is just one of many features inherent in the platform.
This is a topic we’ll be exploring in depth in our forthcoming e-book. So stay tuned for more!