In discussions with a broad range of software and services providers in the services procurement world over the past year -- specifically in the contingent labor area -- I've consistently heard a strong point of view from nearly every provider on whether companies are best separating out VMS platforms from MSP services vs. keeping them together. Granted, these points of view are often quite different depending on where an individual provider sits in the market, but they’re all strong nonetheless. In this post, I'll attempt to simplify and share the basic arguments of all the parties involved and leave it up for you to decide who is right.
For those from procurement or finance groups who are new to examining the subject, VMS platforms offer core underlying technology that supports -- or should support -- the entire contingent services lifecycle from upfront candidate vetting to ongoing performance management and contract auditing. MSP services, in comparison, provide the back-office administrative -- and often front-office analytical -- horsepower that sit on top of contingent labor technology platforms to help companies run programs and realize savings results. From a sourcing perspective as a comparison, think about the early days of e-sourcing when FreeMarkets and AT Kearney Procurement solutions, among others, provided both the platform and the service, but made it impossible to separate out the two. Now we can primarily segment the e-sourcing market into three categories: integrated providers, software-only providers, and services only providers. Which is the exact same thing in the contingent world as well, only the players are completely different.
Those providers that argue that you should get both the platform and services together are most likely MSPs with an integrated solution. But in reality, there's only one provider that can claim to be world-class from a platform perspective while also delivering enabling MSP services. And that's IQNavigator (whether or not their services capability is among the leaders, I'll leave that for you to decide in future posts). In addition, even though I have not examined their solution personally, some consider Beeline to have a top notch VMS platform to compliment their services delivery capability. In contrast, most MSPs that offer technology will lead with a solution sales approach and some will even be technology agnostic. "Use our platform or use someone else's," you might hear on occasion. But in general, those providers that think a sole source solution (ala Chimes) is the way to go, will argue that the integration of enabling and administrative services on top of technology delivers better overall results. They'll also argue that it provides a single point of contact and one throat to choke, so to speak.
In contrast, those providers that argue companies should rigorously separate out the platform from services like church from state believe that the underlying technology should support a range of services initiatives -- not just contingent labor. In addition, they'll argue that their technology is process agnostic, meaning that if you switch MSPs (or add a new MSP) they can model any process changes into the application. But perhaps their strongest argument in favor of separating out the two is tied to the whole Chimes debacle. In other words, they'll posit that you should never put all of your contingent labor eggs in a single services basket (or corrupt basket, as the case may be). Fieldglass is by far the best-known provider in this category and has focused much of its business model in the past 18 months on working more closely with MSPs to go to market (Emptoris/Click is a lesser known player in this camp as well).
The final segment of solution providers offer just services (though many have VMS partners or multiple VMS partners that they frequently work with). Based on my limited research into the space so far, I'd say services providers (or MSPs) represent at least 25x (perhaps significantly higher) the revenue of the software segment of the market. In other words, contingent labor procurement solutions are still largely a services-driven game -- albeit one enabled by underlying technology. Does that mean the platform is a commodity? Absolutely not. But it does mean that you're more likely to have your opinion about the platform shaped by an MSP partner than you are to consider an independent technology selection process that considers separating out software from services -- especially if HR is involved.
- Jason Busch