The world has changed overnight. The days of complacency and “status quo” are over. Change is here, now, and is rapidly transforming the way companies think about and use contingent labor.
First, a little history.
30 years ago, ASPs (Application Service Providers) were designed to outsource the management of a wide range functions, often remotely, and generally within the IT vertical. 20 (or so) years ago, the MSP (Managed Service Provider) came onto the scene, under the ASP model, to outsource a broader range of business processes and functions as a bundled service. Each stand up on the platform of reducing cost and risk, while improving quality, efficiency, and vendor control. At that time, these services were revolutionary and companies like IBM, Accenture, and Cognizant stormed into the market, experiencing exponential growth in a short period of time.
Cue the rise of the staffing service MSP, followed by the game–changing technology of the Vendor Management System (VMS). Around 2007, VMS technology burst into the US market and according to Aberdeen Research, 72% of US enterprise level businesses include a vendor management tool within their technology stack. The SIA defines a VMS as:
“an Internet-enabled, often Web-based application that acts as a mechanism for business to manage and procure staffing services – temporary, and, in some cases, permanent placement services – as well as outside contract or contingent labor. Typical features of a VMS application include order distribution, consolidated billing and significant enhancements in reporting capability that outperforms manual systems and processes.”
SIA – VMS Marketplace Profile, 2007
In 2017, Terri Gallagher, President and CEO of Gallagher and Consultants published an article, “Why Are Clients Moving Away from MSP’s to Internally Managed Programs,” where she powerfully states:
“Increasingly, clients have been expecting and demanding other, incremental-value-adding services from MSPs (such as direct sourcing, strategic collaboration, and workforce planning).”
The MSPs have risen to power over the staffing industry and the enterprise supply chain based on a platform of cost reduction, vendor control (“neutrality”), limited accountability for the candidate experience, and constant threat of optimization—a ll while merely maintaining status quo through impersonal transactional relationships and healthy profit margins for the operators. The graphic below shows where the current MSP model contains cost markups from at three layers before the end buyer.
What is the answer to a problem that is rooted in legacy, relationships, and an unwillingness to change? Futurists and Innovators will say the answer lies in technology, traditionalists will suggest we return to working with the business directly, those who hold the lions share of headcount in a respective program will suggest that nothing is wrong.
We believe the answer lies within connecting people in meaningful work. This puts the focus back to the candidate and the experience through their contingent work lifecycle. The change comes from leveraging ridiculously powerful technology, run by skilled people, to create a world class experience for the customer (both the business and the worker).
A Managed Direct Sourcing program provides a higher quality of candidates, at a lower cost, and much faster by leveraging best in class technology and invested people working within a proven process. Implementing a program within the business is risk free, has no up-front costs, and will not immediately disrupt your supply chain. Doing this on your own is expensive, time consuming, and requires an immense amount of persuasion by supply chain leaders to involve TA and HR teams.
The future is now, change is inevitable, so why wait?
- The next generation of contingent workforce programs - June 18, 2020
- The Case for Managed Direct Sourcing - March 31, 2020
- How You Can Tackle Houston’s Labor Shortage Head On - May 28, 2018