“The MSP is having a huge impact on the usage of the VMS. They have been the big drivers in the tool’s adoption and effectiveness.”
Edward Jackson, president and CEO of Provade, an enterprise VMS provider
Not too many years ago, CW workforce programs relied on a vendor on premises or a master supplier model. They "were typically staffing company, field-operated programs,” says Jackson. Today, such programs are vendor-neutral, sold at an executive level, where a managed service provider manages the spend of a large customer. The CW program in these cases could involve hundreds of millions of dollars. And it is those organizations' selling of an effective MSP program that is really driving the usage of vendor management systems.
Large programs need a VMS. Automation, cost savings, tracking and visibility into the temporary workforce, compliance assurance -- the list of benefits of using a VMS are endless. In the past, staffing firms have resisted vendor management systems. In fact, one of the major challenges to the VMS industry's growth has been sluggish business adoption. No longer. Here’s why.
“MSPs have formed lines of business that are revenue generating,” says Jackson. “And the major players in the market have actually created lines of business that do nothing but MSP and have an executive that runs the organization, a P&L, a dedicated sales team, and a quota target,” he says. There is a huge market opportunity and impetus to succeed. As a result, you have an MSP that is strategic, brings a high level of expertise and is extremely capable at execution. And one reason that the usage of VMS is growing is because of those organizations selling the MSP programs.
So customers at their end need to look into how they proceed. If they are going to manage their program in-house, what is the level of investment they are willing to make? How does it compare with having an MSP administer the program? Both scenarios need to be viewed from a return on investment objective.
“One of the things that MSPs bring to the table is that they may fund the implementation and change management and the startup cost to get a program up and running. The MSPs are willing to invest at a loss for the first three to six months before they get the program up and running,” says Jackson. Of course, MSPs are looking at the long-term recurring revenue that comes from supervising a CW program.
Conventionally, MSPs have had a higher rate of success in managing CW programs. When companies implement and manage a CW program on their own -- without an MSP -- there is a difference. “It’s like trying to automate a back-office function as opposed to building a revenue-generating function,” says Jackson. Many of these companies don’t have the required proficiency to manage the program in-house -- that’s not their core competency.
That having been said, there are large companies that are managing their programs in-house successfully. It comes to having the right expertise on board. Many don’t. Numbers indicate that numerous companies prefer to outsource the function. By Staffing Industry Analysts' estimates, total spend in the United States under management through a VMS, an MSP, or both, was $53 billion in 2009. MSP suppliers transacted a total of $34 billion in the United States in 2009. Of this total, $30 billion (88 percent) was in conjunction with a VMS.