Why Are Clients Moving Away From MSPs to Internally Managed Programs (IMPs) to Optimize Contingent Labor?

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Spend Matters welcomes this guest post from Terri Gallagher, president and CEO of Gallagher and Consultants, and Brandon Moreno, president of EverHive.

Times are changing and clients are becoming more sophisticated and educated regarding options to manage and optimize their contingent workforce.

The managed services provider (MSP) model, which started 20 years ago as the “go-to” for contingent workforce management, is losing relevancy and the voice of the customer is confirming they want changes. Today, clients want a strategic business partner, true vendor neutrality, effective benchmarking and reporting, best practices and expanded supply chain options with digital platforms. They want to go beyond the current MSP “command and control” of cost control, process and visibility.

Internally Managed Programs on the Rise

According to Staffing Industry Analysts, 33% of global companies are using an internally managed program (IMP) model, and that number is on the rise. The reason? Companies are demanding better results from their partners, more strategic talent available on their teams and the potential to turn their program into a profit center.

An Internally Managed Program (IMP) is the contingent workforce management (CWM) approach of the future. It’s based on leveraging the best strategic talent available and incorporating innovative thinking and best practices. What’s driving this trend is the need for a company to truly be agile with its workforce and the technology that supports it. But most of the services performed by MSPs have been reduced to purely tactical, routine tasks: date ranking, mobile enabled alerts, onboarding/off boarding and other tasks that make up the majority of the traditional MSP service offering.

What’s Driving It?

Increasingly, clients have been expecting and demanding other, incremental-value-adding services from MSPs (such as direct sourcing, strategic collaboration, and workforce planning).   In addition, at a time when technology-driven innovation and disruption are seeping into CWM, there also have been expectations that MSPs will have a strategic viewpoint and show that they are executing against it (for example, beginning to engage platform-based sources of talent).

With technology becoming “smarter,” clients are looking to elevate their contingent workforce management solutions and looking outside the traditional MSP model to include more advanced solutions. The IMP methodology enables a more modern “ecosystem approach,“ leveraging in-house expertise and a range of seasoned outside consultants that provide a more advanced level of support, complementing a suite of technology solutions — without constraints on specific partnerships, alliances, or staffing divisions.

Today: IMP Equates to a Client-Managed Ecosystem Approach

An “ecosystem approach” is about integrating operations with partners/allies to deliver on seasoned talent, technology and workforce strategy consulting for optimal delivery. The customer has full control over the dedicated talent they will engage to support their requirements. With the projected workforce to be 47% contingent at the end of 2017 (up from 38% in 2015), the need for experts who understand the space are critical to help organizations to:

  • understand the impacts of a contingent worker program has on an organization
  • assist in leading culture change
  • lead effective program implementations
  • be strategic talent advisors to your hiring teams
  • have the ability to use data analytics to best serve your company

The end result to the customer is a value-add end-to-end solution with custom processes, talent, technology, business analysts and a suite of technology and global partners.

What Kinds of Benefits?

Enterprise organizations want a new approach that will help them integrate their contingent labor into an optimal “fluid workforce,” and technology plays a big role. It is increasingly important to establish the right mix of technology platforms (VMS, digital work intermediation platforms, HR, talent acquisition, procurement and artificial intelligence technologies, etc.) that will expand their talent supply chain, sources and forms of consuming work. An IMP, freed of the constraints of an tactical MSP, is set up to integrate a range of technology providers. And as an added bonus, it’s more cost effective.

Implementing an IMP model reduces cost. Instead of on-going year-over-year fees, there is only a one-time fee to implement an IMP — typically lower than an MSP fee. After year one, your program generates supplier-funded revenue to cover costs for FTE subject matter experts. The organization can implement a 1% program fee, significantly less cost than a traditional MSP, which provides a steady revenue stream while reducing agency fees.

MSPs programs are supplier funded at higher rates and any cost savings measures squeeze the supplier on mark ups, which can have negative impacts on worker quality and supplier relationships. The result? Longer fill times, lower quality of candidates and unhappy hiring managers.

Are You Ready for IMP?

Setting up an internally managed, custom ecosystem of solutions that are nimble and engages the organization to be an active participant is critical to ensuring successful delivery of their contingent workforce program. The IMP model will provide an advanced and innovative central team that is critical to customer delivery and that will ensure high performance of the IMP talent, technology, consultants and global partners and favorable KPIs. Basically, an ecosystem of independent relationships — partnerships, alliances, collaborations to drive more value-added services and addresses customer demand in a dynamic way.

The whole is greater than the sum of the parts. The IMP model enables a higher level of support, engagement and results incorporating solutions that are specific to the organization’s need. The key is a right-fit technology-based infrastructure and access to smart people and strategy to drive speed and innovation.

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