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 email@example.com.