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Holding Managed Services Providers (MSPs) Accountable to a BPO-Based Standard (Part 2)

04/13/2018 By

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In the first post in this series, we explored the changing managed services provider (MSP) ecosystem and suggested what we believe will be a new battle between business process outsourcing (BPO) firms and traditional, often contingent-focused MSPs for the management and program oversight of broader services procurement initiatives for organizations looking for an outsourced services procurement option. We gave three reasons why we believe procurement-centric BPO firms are well positioned to compete for this business:

  • BPOs often bring a more empathetic and better understanding about the impact of services categories on the broader business beyond HR and procurement, including how best to engage senior stakeholders in driving better outcomes
  • The more effective BPOs have built engaging models around subject matter and category expertise including category-specific enabling technology (both are critical to moving beyond initial wave compliance and savings opportunities for services procurement)
  • Many BPOs have a stronger appreciation for the broader solution platform requirements outside of just vendor management system (VMS) enablement for contingent spending

In our view, the more effective BPOs we track are making substantial investments in senior client-facing resources that become effective members of the company procurement team. These individuals often focus on opportunities to drive results that extend far beyond basic sourcing or compliance opportunities. In contrast, MSPs often bring limited subject matter expertise outside of contingent labor or basic SOW-type procurement initiatives.

MSPs typically bring a commendable level of compliance support and back-office efficiency to the procurement function. Some have branched out beyond contingent labor alone in managing SOW and project-based services, ensuring compliance from both co-employment and broader industry/regulatory compliance requirements (e.g., financial services industry requirements). We have even observed specific MSP capabilities in this regard around vendor management programs for services providers, as well.

But generally speaking, outside of contingent labor and more basic SOW-type engagements (especially contingent work reclassified as SOW for compliance reasons), MSPs have failed to deliver the valued-added capabilities that top-performing BPOs routinely bring to clients, including:

  • Services category-specific analytics and reporting (beyond contingent labor)
  • Benchmarking and category-specific measured and reported KPIs for both internal and vendor measurement
  • Senior resources that can engage spend owners on a peer-to-peer basis to foster empathy, respect and ultimately savings and spend capture, based on rapport (i.e., knowing more, and bringing a level of seniority, to a given category than an internal procurement organization has been able to historically)

The second area that we see BPOs having a leg up over MSPs in the broader attempt to capture more of the services management pie is the level of broader category-specific approaches and category-specific enabling technology that they can bring to the table. Marketing spend is an ideal example in this regard. Traditionally, BPOs focused on tackling lower-value marketing spend and, in the best of cases, limited measurement, management and oversight of agencies of record.

But as the procurement outsourcing market has evolved, BPOs are increasingly taking on responsibility for more advanced opportunities to drive savings and value by engaging directly with agencies to tackle the following types of questions and initiatives:

  • How do we quantify the value we are getting for our marketing spend (on both broader campaign levels down to the individual customer click)?
  • Are we examining all types of marketing spend and putting it through a rigorous analytics process (not just higher-level categorization, but print, digital, VOD and others)?
  • How are we evaluating formats in context across channels?
  • Do we have a complete package of our performance and programs that would allow us to more easily change our agency of record, if required?
  • How is our competition performing compared to us (both on absolute and relative dollar bases)?

We are not aware of any MSPs with a track record of answering these types of questions in the marketing spend area, yet numerous (we know at least four) BPOs can engage at this level of granularity or deeper.

The broader question is what level of engagement can a BPO make in a category, and can it answer the fundamental business and philosophical questions that can drive better procurement engagement? In the case of marketing spend, visibility and analytics is at the center of the battleground for better results and better category management. A BPO should have a point of view on this. For example, who is best suited to manage the information flow? An agency of record or a neutral third party? The answer to this question might seem obvious, but the vast majority of customers trust information management to agencies.

Changing this holds the key to enabling the right decisions and the more effective BPOs know this. If a BPO can step in and help customers make more effective and potentially game-changing decisions that elevate the role of procurement, everyone wins, versus an MSP-centric approach that tends to focus on compliance and handling all the proverbial requisition balls tossed over the wall.

As a closing thought, we will share with you one anecdote that illustrates the expertise and solution capabilities required to engage in the marketing area effectively. Consider how, as one industry expert told us, Leo Burnett (a specialist in “old media”) will never tell a client to shift spend to Facebook, and on the other side of the coin, a social agency will never tell a client to shift spend to TV.

Being able to challenge these assumptions is the key. And if a BPO is not equipped to do this with the right team, tools and processes on a category-by-category services basis, we would seriously question their potential efficacy and ability to drive sustainable returns. We hope to learn about MSPs that are doing this, but have yet to see examples outside of the core contingent and foundational SOW/project-based areas.