Workforce Transformation Is Transforming the Role of the MSP

Tuesday, February 14, 2017

The global workforce is undergoing transformation. Generational, geographical and economic shifts have forced employers to recast talent sourcing strategies, including those related to contingent talent. The movement away from traditional employment has spurred the growth of freelancing, independent contracting, statement of work (SOW) engagements, crowdsourcing and a gig economy. Automation, in all shapes and forms, will perhaps be the biggest disruptor to the workforce. The ubiquitous presence of technology and its potential to completely transform the composition of the workforce is creating both skill redundancies and demand for new skills to manage and leverage new technologies. As contingent talent becomes more strategic to any organization’s future, managing this increasingly important resource becomes more complicated for managed services providers (MSPs).

Fundamental Shift in the Role of MSPs

As organizations are forced to focus extensively on technology-driven changes to their core business, they will depend even more on external help for anything not core to their business. With contingent talent becoming increasingly critical to the success of any enterprise, buyers are looking to their MSP as an “outsourcing partner” to help achieve strategic objectives. With many buyers entering their second- or third-generation MSP arrangements, low-hanging fruit are long gone. Management of contingent labor and staffing vendors will continue to be at the core of MSP solutions, just as the three Cs of cost reduction, compliance and control (spend visibility) will continue to be key drivers. Buyers, however, are demanding more from their MSP. They are now looking to the next level of benefits, leading to more complex and strategic solutions and a fundamental shift in the MSP industry.

How MSPs Can Serve as Strategic Partners

Cost reduction and greater spend visibility. Buyers are looking beyond the traditional benefits obtained through operational efficiencies and temporary labor spend optimization. The scope of an MSP solution now extends to SOW and independent contractor (IC) spend, which are much bigger in size than traditional temp labor spend. MSPs are increasingly involved in full-lifecycle SOW management rather than just the downstream administrative portion. This more complete spend visibility encompassing the entire contingent spectrum is likely to have a far greater impact on an enterprise’s bottom line.

Workforce planning and demand management. With greater visibility, an MSP offers a holistic view of spend, which supports better demand management and workforce planning through interchangeability of various types of contingent labor. That drives further cost saving. The more strategic benefit is an organization that operates without hiccups because it secures the necessary talent on time, within acceptable cost parameters.

Compliance. While strict adherence to external regulations remains a critical MSP objective, more advanced solutions focus on plugging gaps and leaks through better compliance with internal guidelines and policies. Stricter vigilance minimizes rogue and maverick spend and better manages tail-end spend.

Analytics. As organizations prepare for a shift in the nature of the workforce, next-generation MSPs can provide:

  • Advanced analytics in terms of granular spend visibility
  • Descriptive analytics able to achieve complex root-cause analysis
  • Predictive and prescriptive analytics that offer a look into the future
  • Peer benchmarking capabilities

Consumerism. Providing workers with a B2C experience – essentially the same level of convenience and comfort they are used to in their daily lives – both during the talent acquisition process and later as part of the workforce, will be important value drivers that MSPs will need to provide to their clients.

Delivery model. A quick look at the leverage of centralized delivery centers and offshoring in either recruitment or procurement outsourcing is proof of the vast untapped potential to further reduce costs through higher-level MSP solutions. While offshoring leverage in MSP needs to be intelligently executed through a balanced-shoring approach, there is a huge opportunity to optimize the current MSP delivery models (often still on-site focused), especially for procure-to-pay (P2P) processes. And MSPs themselves need to leverage robotic process automation (RPA) to make their own internal processes, especially transactional ones, more efficient.

Pricing model. There are increasing instances of gain-sharing pricing models in MSP, where a portion of the client’s reduced spend is shared with the MSP. While it is a very good way to appropriately incentivize the MSP, it needs to be carefully structured to avoid bitter debates on causality of the spend reduction. Generally, a strong level of trust between service provider and buyer is helpful here. Going forward, as the partnership relationship strengthens, appropriate pricing models can better align enterprise and MSP objectives.

Get Ready for a Whole New World

A whole new world is emerging for enterprises with respect to talent. As they look to their MSPs to help manage and leverage this talent for strategic advantage, only those service providers making the right investments today will be fully able to help clients tomorrow.

To learn how new buyer expectations are reshaping both the MSP solution set and its associated value proposition, Workforce Logiq invites you to download this special report from Everest Group.

Arkadev (Arko) Basak is a leader in the Business Process Services team at Everest Group and assists clients on topics related to the entire HR and talent services value chain, including permanent and contingent talent acquisition, payroll, benefits, learning, broader talent management, and multi-process HR outsourcing. Arko leads Everest Group’s Recruitment Process Outsourcing (RPO), Managed Service Provider (MSP), and HR Outsourcing (HRO) offerings.

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