CWS 3.0: February 5, 2014

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Herding Cats: What MSPs Really Do

While the true origin and actual date of the first managed service provider/vendor management system program is often debated, most industry veterans agree it was approximately 15 years ago. Of course, not everyone welcomed the change — certainly not the staffing suppliers who were riding high and living large during the Internet boom and the lead-up to Y2K. As I reflect on this time and my own experiences at several MSP-VMS companies, I recall a letter that was sent to a client of mine, the operational sponsor of a large healthcare company, from one of its staffing suppliers.

In the letter, the supplier made its case against using a third-party MSP to manage the admin/clerical contingent labor spend at this company. This particular MSP had already been managing the IT spend for a few years and was in the process of expanding to this new category. This staffing supplier cited reasons like reduced quality of workers, greater inefficiencies and increased cost among many reasons why it did not believe that the MSP concept was viable. It even predicted that MSP/VMS solutions were a fading trend that would die in the coming years.

Ironically, this same company has become one of the largest MSP organizations in the world. As the popular saying goes, if you can’t beat ’em, join ’em.

Since its early days, the role of the MSP has evolved beyond an outsourced solution focused on controlling of cost and rationalizing vendors to a more nuanced role, providing a broader range of services across a broader set of geographies and worker classifications. So what is the mission of a modern-day MSP? I submit that its primary function is to herd cats. To bring order to chaos.

In every organization you have competing interests. Often, the desires and needs of the business are pitted against the corporate needs from functions like procurement, human resources, finance and legal. Typically, the business wants high-quality resources quickly with little regard to cost and risk. Meanwhile, the corporate functions want to reduce costs and minimize risks. Additionally, there is an inherent conflict between the company and its suppliers. Suppliers want to maximize profits and the company wants to reduce its costs at the expense of its suppliers. MSPs are bringing order to the chaos by optimizing the four key dimensions of program performance — quality, efficiency, cost and risk —regardless of geography, worker classification or operating model.

A client once told me that she thought that she could staff an internal MSP with one or two people to manage nearly $800 million in spend. I was shocked at her statement, but upon reflection I realized that she really needed an explanation as to what an MSP really does, so that she could wrap her arms around my recommendation that her program office should have around two dozen people. She believed that with a VMS in place there wasn’t a real need for an MSP. The reality is that an MSP can operate without a VMS (albeit inefficiently), but a VMS cannot operate properly without an MSP (either internal or external).

 

The classic Venn diagram overlapping People, Process and Technology is apropos for this discussion. An MSP embodies the People and Process portion while the VMS colors in the Technology bubble. At a very basic level, irrespective of service category, MSP organizations do the following:

  • Police the rules and policies, ensuring compliance from buyers and suppliers
  • Facilitate the end-to-end contingent labor management process
  • Manage and optimize the supply chain
  • Identify and pursue opportunities for continuous improvement in Quality, Efficiency, Cost and Risk

These are all activities that technology cannot do by itself, and they are activities that require skill, knowledge and manpower. Remember, people do what you inspect, not what you expect. Human nature does not change, no matter how much we wish it or try to automate it. 

Steve Knapp is senior associate with Brightfield Strategies, which helps Fortune 500 companies with contingent workforce strategies. He can be reached at sknapp@brightfieldstrategies.com.

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Brightfield Strategies

Steve Knapp 10/02/2014 4:17 pm

Greg - Thank you for your feedback. To be clear, I do not necessarily think that a 3rd part MSP is the correct solution. I fully appreciate the value of an internally run MSP. In fact, some of the best run programs I have ever seen are internally run programs. So no argument there. I just believe that AN MSP is required... whether its internal or external. But I would challenge your disagreement about whether an MSP can operate without a VMS. Trust me, I implemented VMS systems for over 9 years. I fully appreciate and understand their value, but I have also seen world-class programs run on Excel spreadsheets and with Access databases. Sure, they are INCREDIBLY inefficient, but in terms of process, policies, quality of talent, etc. there are examples out there to prove that MSPs can function without VMS systems. Again, I don't recommend it. I would ALWAYS recommend some sort of system to manage the program... but I would never recommend implementing a system without a process and program team in place to manage it. Otherwise, you're just trying to automate chaos... which I don't think is possible.


Southwest Airlines

Greg Muccio 07/02/2014 9:48 am

Steve

I have mixed feelings about your article. I completely agree that you cannnot automate the need for human interaction. We are an internal MSP with a VMS and I tell my team that the tool will not think for itself and that we run the tool, the tool does not run us. However, there are a few areas that I would argue to the end against. The first is that I feel you have overrated the value of a 3rd party MSP. I am obviously pro-internal program, but I would not advice everyone that they need a 3rd party MSP or even one that is so robust. It really depends on what they want to accomplish. I completely disagree with the statement "The reality is that an MSP can operate without a VMS (albeit inefficiently), but a VMS cannot operate properly without an MSP (either internal or external)." As someone that has tried to do this both with and without an MSP (3rd party and internal) and with and without a VMS. The VMS is far more valuable than an MSP. The VMS provides visability which is the first and most crucial step to getting your arms around your contingent workforce. A MSP is utterly useless without that information especially one that is external to the organization and does not have the knowledge or connections within the organization.


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