Organizations that are not leveraging a managed service provider (MSP) and vendor management system (VMS) may be paying too much for contingent talent and are at risk of noncompliance with various labor and benefit laws. They are also likely to have challenges involving time to source quality talent.
Recognizing these issues, a growing number of companies now rely on some form of a managed program. But substantial room for further adoption still exists. The landscape of contingent labor management can prove very confusing, especially for organizations in the initial stages of assessing available options. When assessing the current state of contingent labor programs, consider the following questions:
- What non-employee population should be included in the managed program?
- What is the global reach of the managed program on day one? Future states?
- What engagement types should be in scope?
- What criteria should be used to determine vendor inclusion and exclusion?
- What legal and compliance exposure risks exist?
- Is the war for talent being lost due to failures to adjust to recent market shifts?
- How much is paid to individual workers, and how do these bill rates compare to market rates?
Reasons to Integrate
An integrated MSP and VMS model has many advantages over a disaggregated approach. Cost is certainly important. When dealing with two separate companies, there may be up-front costs involving tasks related to the initial VMS implementation, as well as ongoing costs for feature enhancements or added integrations. Additionally, when a company selects separate VMS and MSP providers, the VMS firm often charges for system enhancements, activation of new functionality (e.g. the SOW module for incorporating Services Procurement in the scope of the contingent workforce program) and implementation of such modules. There are various other factors companies need to consider:
1. Selection process. Developing and managing two separate requests for proposal (RFPs) creates duplicate processes and ratchets up the amount of time required to identify a set of solutions that meet a company’s requirements. Having a one vendor approach consolidates both RFPs, eliminating extra work while facilitating much closer alignment between buyer requirements and the managed program.
2. Implementation. Configuration and implementation of a managed program requires an in-depth understanding of the customer environment and business requirements. Coordination between MSP and VMS organizations during the different phases of the implementation process can be complex. Having one provider responsible for the entire implementation lifecycle helps minimize—or even eliminate—discontinuity and inefficiencies that creep into the process when multiple stakeholders are responsible for different aspects of the deployment.
3. Integrations. VMS integrations with enterprise resource planning, human resources information systems, portfolio and project management, and other systems can quickly unravel with separate MSP and VMS providers, and getting an integration initiative back on track can often prove challenging.
4. The ability of an MSP to execute on service level agreements (SLAs) is normally contingent on the VMS platform delivering corresponding capabilities.
However, if a VMS platform is deficient in a certain area, the MSP might be unable to deliver on the SLA without development work and changes by the VMS. Suddenly, a buyer is ‘standing at the back of the line’ for functionality they thought was either part of the VMS solution or was on the roadmap of capabilities.
5. Cross-pollination. Because MPSs deal with multiple VMS platforms for different client engagements, a disaggregated approach does not have the same level of inter-organizational agility and leverage as an integrated one. Opportunities can be capitalized upon much faster, and problems can be resolved with greater ease under an integrated model.
6. MSPs serve as the ‘feet on the street’ for the VMS. Ideas for new product development, feedback on future capabilities and prototypes, and problem resolution must go through the MSP. When two different parties are involved, the same level of vested interest is simply not commensurate to when the MSP and VMS are the same company.
In addition to these factors, there are other areas of business impact that result from an integrated MSP and VMS model:
- Analytics and business intelligence. Data is only as good as how it is used to achieve business outcomes. Information must be turned into intelligent data and recommendations that make a tangible business difference. With a single- provider approach, the MSP possesses an intimate understanding of the VMS tool and its underlying analytical capabilities.
- Better alignment. Accumulation of inefficiencies and misalignment between the business and technology in a disaggregated approach leads to diminished returns—or execution failure. The interdisciplinary nature of contingent workforce management plays an important role here. Specifically, the need to align the managed program with the priorities of business functions such as HR, finance, legal, procurement, and IT is crucial and best achieved with an integrated model.
As contingent labor grows in importance, so does the pressure to optimize business outcomes. A critical lynchpin in the formula is the alignment of the technology and human elements of the solution. Often ‘less is more’ rings true.
With an integrated MSP and VMS model, the technology and human aspects are intertwined, making it easier for companies to achieve optimal results from their managed contingent labor programs.