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Quote of the Week: MSP pricing

February 18 2013

“MSP pricing, yes, actually pricing is hardly relevant because again MSP is not a profitable model and we don’t think it will ever be a profitable model. The only reason to be there is — and that's also the only contracts we actually pursue — is if we can have a reasonable part of the spend, then we are interested in the MSP. MSP as such as a business model is a cost, not a big cost, but it is a cost and we keep on seeing as such and actually, some actually give it away for free,” Ben Noteboom, CEO of Randstad Holding NV, said in a conference call with analysts last week following Randstad’s announcement of fourth-quarter and full-year earnings.

Noteboom’s comment was in response to a question on MSP pricing from an analyst. 

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ASR

Erik Kooijman 03/04/2013 03:09 am

I agree with Larry, this is a very old school remark.
This only shows Randstad is trying to sell its MSP proposition as an overpriced Mastervendor.

The whole purpose of an MSP is that you serve your customers processes and needs, not your own.

Randstad should also consider that the MSP is often implemented for higher qualified personnel, not only office clerical and light industrial.
And Randstad (nor any other big staffing agency) will be able to fill these positions.

And off course you need to make a profit, but not at the expense of your customers needs.


OnContracting

Pradeep C 02/24/2013 02:14 pm

Its refreshing to hear the truth sometimes. Lets admit it that the goal of an MSP model is to automate, reduce costs and streamline staffing but it doesn't do a good job of addressing soft costs and that you can't really commoditize people like widgets.

The value that staffing companies really provide is understanding people's skills, motivations, experience and helping them find an available opportunity at a potential client at a price that works for the candidate, staffing company and client. This doesn't/can't/won't happen if a staffing company is measured mostly for speed of delivery of resumes, compliance within price range and in hyper competition. Its like expecting a room in a 5 star hotel for the price of a 1 star (even though they both serve the purpose of an overnight stay).

If Randstadt can place a contractor at a client where the candidate is better paid, they make a decent margin and the client is happy, why would he offer that candidate to a client where the opposite is true?


MBO Partners

Jay Lash 02/20/2013 01:16 pm

I have to agree with Larry and although it doesn't surprise me, I wouldn't consider Ben's comment as representative of all MSP's. I have managed hundreds of MSP's since my first with Manpower in the mid-1990's. When we first entered the business, I considered it a lost leader. As these programs have evolved and the true vendor neutral MSP's began to refine these processes and their people developed experience, we started to see a slim profit emerge. At my most recent MSP provider we leveraged shared resources, multiple technologies and a more select supply chain. Then like any well run, transaction based business model, volume adds up to profits. Granted, I think the Supplier-funded MSP pricing model has flaws and isn't the best way to grow the industry, profits are still what should drive the providers. Any other motivation will lead to stagnation or no innovation and ultimately unhappy customers/suppliers.


Vistage

Larry Kihlstadius 02/20/2013 09:33 am

I am a bit amazed that Ben would say this. First off, he is very wrong about profitability. MSP models can be very profitable. They just don't generate large revenue volumes. Makes you wonder what Randstad is doing wrong. This is a very "old school" staffing opinion.

Second, the whole point of MSP is to create a more efficient and effective staffing process. It is not to serve an individual staffing source. So, yes, the large staffing firms mainly entered this market as a "must do" not strategically.


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