Data from recent Staffing Industry Analysts surveys show spend going through vendor management systems (VMS)/managed service programs (MSP) has slowed after rising for several years. The 2012 Staffing Industry Buyer Survey found that the growth of VMS and MSP services had stalled a bit since 2010. While the reason for this was not clearly defined, the report showed that companies with spend in excess of $500 million on contingent labor saw the largest drops in in spend through VMS/MSP over the last year.
Why is this important? The introduction of the VMS and MSP transformed the staffing industry, significantly changing the way the way companies acquired contingent talent. Aggregating suppliers enabled companies to leverage their spend across departments take advantage of volume purchasing, which in turn forced the acquisition of talent in some categories to become a commodity buy while other skill sets remained as more of a high touch transactions at high touch rates.
Centralizing the procurement of contingent work became increasingly popular over an almost 10-year period. The stalling growth may simply be a sign of market saturation as companies of certain spend levels have already engaged VMS and MSP providers. Market saturation could slow growth, but could also open more opportunity as companies with lower levels of spend on contingent labor begin realizing the benefits of using vendor management solutions to manage their contingent workforce.
Several VMS and MSP providers have talked about focusing on solutions that address the unique and sometimes less complex needs of the midsize market. I am interested to see what impact the midmarket will have on the providers in this space. If the measurement is on spend through programs the growth percentages may not be impacted very much, however, if we consider the number of programs, we should expect to see growth.
Other factors that may affect growth of VMS/MSP spend include program maturity and strategic decisions within the company that impact adoption. When CW programs were first developing they typically focused on the low-hanging fruit and included office and clerical temps and IT. Young programs often have holes in the process that allow hiring managers to work around the program and procure talent directly from the suppliers. As the programs mature and holes in the process are filled, program adoption increases. Also, as programs matured, they added other spend categories like light industrial, professional and scientific skill sets that often carry a higher spend.
As decisions around the statement-of-work (SOW) spend category continue to arise, the desire for visibility and transparency of traditional contingent spend should drive companies to make strategic decisions about their workforce management and the planning to acquire talent in a more targeted manner to meet the skill set gaps for the job. The recent trends may show a stall in the growth curve, but my bet is that it is only temporary and as solutions adjust to the size of the companies and providers find ways to deliver more solutions with less complexity, we will see the growth curve change upward again.