Spend Matters welcomes this guest post from Terri Gallagher, president of Gallagher and Consultants.
A satisfied customer is the best business strategy of all. — Michael LeBoeuf
The customer is saying it’s time for changes. Per SIA’s 2015 North American Contingent Buyers Survey, the current Net Promoter Score for MSPs is 2% and has been declining steadily since 2011 at 27%. VMS is in roughly the same boat at 6%, down from 24% in 2011. Albeit, there is some volatility in the NPS methodology, but these ballpark figures indicate a definitive trend.
MSPs started 20 years ago with the major staffing firms; a “2.0” of the vendor on premise (VOP) model, primarily for requisition management. It has evolved to include cost savings, reporting, SOW, global, compliance and vendor management. The VMS players added mobile, agile integration capabilities, SOW and total talent management. Today, however, it is still a strong staffing-based “functional control” approach, and the operations models and resources in these models reflect that. The MSP providers with the biggest market share often have their own staffing arm dominate in the top 10%–15% of overall supplier spend.
The Voice of the Customer
The customer is telling us what she wants:
- To be a strategic business partner
- True vendor neutrality
- Knowledgeable staff in the operations model
- Effective benchmarking and reporting
- To be proactive and provide more best practices
- MSPs and VMSs acknowledge changes are needed.
Some are partnering with technology providers on advanced data and analytics, adding partnerships or integrating with workforce intermediary platforms like OnForce and Upwork. Will the changes be rapid and dramatic enough? Maybe in this new paradigm, it’s time to acknowledge MSPs can’t be all things to all people. There are major gaps.
What is driving these gaps? Our workforce landscape has been turned upside down since the Great Recession, and there is a “new normal” in our workforce landscape. There are social and behavioral changes. People no longer staying at one job forever. Millennials are driving how and where we work. The contingent workforce is at an all-time high due to the appeal of a fluid, flexible workforce in a dynamic and changing environment and more varied with ICs, gig workers, SOW and the human cloud. We are in the middle of a talent war and technology revolution.
We’re heading into a new paradigm of work, maybe the biggest changes since the Industrial Revolution. Technology-based infrastructure will be the key enabler, allowing businesses to procure and consume work in different forms with end-to-end support.
A New Model
To address this new paradigm of work and customer demand, enter the “ecosystem model.” It will go beyond the monolithic MSP/VMS model to become a more loosely coupled network model of advanced expertise, workforce strategy best practices, data and analytics, benchmarking and last but not least state-of-the-art technology, including cloud, mobile and analytics.
The new ecosystem model will address customer identified gaps in a dynamic way. It will go beyond a functional control and procurement-based supply chain model to be an enterprise level agile solution enabler for all talent management and workforce decisioning.
The new MSP/VMS would be made up of a much more transparent, neutral and open ecosystem but still orchestrated centrally. Its model would include one or all of a “menu” of workforce strategy solution and technology providers depending on customer needs. An example could include: a global workforce intermediary, like CXC Global; shared services from any of the big MSP providers, such as contractor lifecycle management; dedicated and highly skilled data and analytics team, not spread across 20 customers; dedicated technology expertise to integrate technology and digital platforms for permanent and temporary talent, including work intermediation platforms (WIPs), HRMS and VMS; and last but not least, change agent and workforce strategy expertise to ensure adoption, minimize negative impacts of change, and manage the evolution of the program.
This ecosystem enables a broader range of staffing, technology and workforce strategy consulting providers to step in to act as the central workforce intermediary, i.e., the “one-stop shop” player responsible for overall customer delivery, performance of the ecosystem participants and KPIs. Customers could also have their in-house solution augmented by “menu type” service offerings; technology, supply chain/cost savings strategy, etc. Ultimately, the end result to the customer is a value-add end to end system, with the right technology provider(s), global partners, data and analytics and workforce strategy expertise. This approach will address advanced data and analytics, enhanced talent in the ops model, and provide best practices across each discipline; technology, operations, workforce strategy.
Change has Already Begun
This ecosystem concept is not new. As Spend Matters' own Andrew Karpie has noted, “There is a growing ecosystem of work intermediation platforms, or WIPs, and the online freelance marketplace, in addition to advances with VMS Providers. Firms need to look at technology not simply as ‘enterprise automation,’but as a strategic, transformational priority.”
It’s about inclusion rather than exclusion; collaboration over competition; quality over quantity. We will need to be the stewards to connect our customers to this ecosystem.
The ecosystem model is already taking shape and being embraced by some. Customers are approaching our company and other similar companies in the space for “unbundled” and “objective” temporary workforce solutions. We are collaborating with, and sharing the business with, these other workforce providers/niche consultants on delivery and strategy.
Staffing Industry Analysts published a report referencing an overarching ecosystem of workforce solutions, with the staffing industry at the core and a “web of talent acquisitions, payroll compliance, consulting, outplacement and training.” This positions the staffing providers, and other players in the talent and technology supply chain, to take a more strategic role in overall workforce solutions strategies. For example, one of the VMS providers, IQNavigator, is building a platform strategy with an ecosystem of talent sources and complementary service solutions providers.
Customers who already have large-scale MSP/VMS programs know changes need to be made but are reluctant, understandably so, to disrupt large scale MSP programs and systems. Positive change always comes with some disruption, but it can be minimized. Maybe it’s a gradual phase and progression to this ecosystem model — integrating components that will address the customer identified gaps, integrating WIP technology, revising operations models to be less transactional and to integrate some of the more advanced talent needed.
At the end of the day, there is no better growth and revenue strategy than one based on customer satisfaction. Market share is mercurial. The real power always lies with the customer.
What are your thoughts?