The VMS/MSP Saga Continues

I’ve been reading the trail of comments on this Staffing Stream post by Bob Livonius as well as those by Colleen Mills and Sherry Weier with interest and a feeling of déjà vu. Nearly a decade ago much the same discussion and level of emotion was taking place over the introduction of VMS and MSP programs, first in the IT staffing industry and then in commercial staffing. 

In my opinion the story in healthcare staffing will play out along approximately the same lines, with staffing firms slowly moving to acceptance of something that their customers generally want; more transparency and control over a disparate supply base that delivers talent critical to their success. And while Colleen is correct that Staffing Industry Analysts research shows that most staffing firms don’t like VMS or MSP, it is also true that buyers of healthcare staffing are not exactly thrilled with the status quo. Nearly one third (31%) of healthcare staffing buyers gave their suppliers a C grade or lower when asked to rate their suppliers vs. only 18% of buyers in other staffing segments.

In the end, the reality is that customers usually get what they want. It’s clear that VMS systems provide clients with transparency, control and reporting that they need to get a handle on their contingent workforce. MSP programs will come along with those VMS tools as long as the MSPs are able to deliver additional efficiencies and practices whose value exceeds the cost of the MSP and its impact on price. In my estimation the trend in that direction is going to continue for a while in healthcare staffing.

The way this played out in IT staffing may be most similar, as both healthcare staffing and IT staffing operate in high skilled fields with significant talent shortages.  While there was significant resistance to VMS/MSP initially in IT, there is now very widespread adoption.  Interestingly, it does appear that the introduction of VMS and MSP has not hampered the growth of IT staffing, which has been the fastest growing staffing segment in terms of revenue over the past decade, going from $14.3B in 2003 to 24.9B in 2013 by our estimates. This growth has happened while VMS/MSP adoption has been accelerating, so it appears that VMS/MSP adoption if anything doesn’t slow market growth and may actually accelerate it.

My advice to firms that aren’t offering VMS/MSP is to first decide whether to avoid or serve VMS/MSP customers.  If you don’t want to deal with MSP and VMS and can find a niche to defend, then develop a strategy focused on that niche and build out the processes and tools needed to deliver for your clients.  If you can’t or don’t want to avoid clients with VMS/MSP, then the best long run strategy is to find ways to successfully adapt to the new realities.  In some cases pushing back and changing some egregious terms may work, but what I think is likely to be most successful in the long run is for firms to adapt their model to become more efficient and effective in dealing with a more automated, transparent and centralized process. And it is important to think about strategy for dealing with VMS separately from MSP.  In my view, MSP models will likely evolve more over time as clients become more sophisticated and comfortable with centralized, technology driven processes.

At the healthcare staffing summit, October 23-25 in Chicago, I know this will be the subject of much discussion and debate, which I look forward to hearing from a wide variety of industry perspectives. You can join the conversation today by commenting below.


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Bingham Consulting Professionals

Amy Bingham06/20/2013 05:18 pm

Barry, I could not agree more with your stance and in fact I would take it one step further. I work with many staffing firms grappling with the "do we play or not" decision (with MSP/VMS accounts). Some of these same staffing firms have their account executives chasing large account business and attempting to go around the MSP through the back door. This is a strategy that in my opinion is not sustainable because at some point the MSP will identify you as a contributor to their client's rogue spend and you will risk any and all business you have at the account. I think a strategic decision should be made to either play by the rules or elect not to chase large accounts (a near impossibility in the IT space since the majority of IT business is in F 500 firms). Here is the news most firms don't want to hear but will serve them well in the long run: if your strategy is to play in the large account space, not only must you adapt to the MSP/VMS business model and develop an account management strategy for this type of business, you actually have to SELL to the MSP - in some cases, your competitor. While many small to mid-size staffing firms find this suggestion distasteful, those who have adjusted their approaches are finding the payoff can be worth the distaste as they become trusted partners with the MSP and their staff augmentation business grows.

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