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The Managed Services Connection -- The Evolving Role of MSPs in Services Procurement

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Managed Services Providers (MSPs) are consulting and outsourcing partners which administer many of the operational aspects of services procurement programs. Aside from contingent labor, where many MSPs got their start, these providers are increasingly branching out to help companies manage broader services spend categories, especially consulting and outsourcing-driven SOW agreements, which represent a growing percentage of their overall involvement in services spend management. In deciding the MSP approach that makes the most sense for your organization and choosing the right MSP partner, Spend Matters recommends taking into account a number of factors in the selection process.

On the most fundamental level, all MSPs should provide transactional management in the area of contracted services (or outcomes), included but limited to the area of cost reduction. In a traditional context, MSPs rarely assume control of policies and overall process management, which both remain under the businesses’ control. They do, however, provide regular reporting updates (e.g., savings, benchmarks, etc.) to procurement, HR and other organizations involved in overall services procurement program management. In certain cases based on company requirements and provider capabilities, MSP scope is evolving to encompass a broader role that looks closer to a true BPO rather than simply a transactional administrator. In these cases, MSPs introduce innovation into the services procurement equation, including methodologies for continuous improvement, cost savings and process efficiency.

Industry trends are showing that more centralized procurement and HR organizations are managing MSP relationships, rather having such partnerships managed at the business line level. Companies often realize the most benefits when procurement and HR collaborate in administering and overseeing their MSP partners. Procurement and HR each bring different strengths to the MSP management process. For example, procurement can introduce contracting and supplier management skill sets to negotiate, structure and define the right MSP relationship from the start—and to more effectively manage the MSP on an ongoing basis, ensuring innovation, continuous improvement and further overall services spend cost reduction. Moreover, procurement is increasingly factoring supply risk management into their services spend contracting equations, and can work with MSPs to fully factor into account a range of risk factors in their contingent and non-contingent services supply chains. In contrast, HR brings a different set of expertise, including overall diversity goals and experience as well as on-boarding processes, employee intangibles and corporate HR practice leadership and resources. In reality, both skill sets are necessary for an effective management process.

Download this Spend Matters Compass Research paper to learn more about the procurement / HR MSP connection as well as other areas factoring into MSP selection including: pricing models and approaches, contingent labor vs. SOW MSP differences, VMS (vendor management system) implications and a shortlist of tier one and tier two MSP providers to consider.