Second Generation MSP

As the architect of numerous comprehensive global managed services programs (MSPs), Rhona Driggs understands first-hand the value clients expect to derive from them. She also understands that those expectations are rapidly changing: “Clients today realize MSPs that were put in place five to ten years ago need updating. These first generation MSPs have squeezed their suppliers to the max and reduced providers… but now they need more. A second generation of MSP is expected to solve complete talent acquisition challenges.” Here she explores exactly what those second gen programs may look like, from embedded SOW to self-managed delivery.

Q. What does the term second generation MSP mean to you? Does it primarily refer to the ability to manage different labor models beyond traditional contingent workforce management, such as SOW projects?

A. That’s what it means to us – bringing similar visibility, efficiency and control to SOW, RPO, independent contractors, freelancers, and other emerging talent pools. Talent is a company’s most important asset, no matter how they’re engaged. Giving the client more control over quality in every labor category also gives them more control of their results.

Q. What is the role of MSPs in helping clients manage SOW and other project-based services?

A. For many organizations, SOW spend far surpasses their contingent staffing spend. Our clients are waking up to this spend and looking to place SOW inside an MSP. It makes sense to leverage the strength of the MSP across categories of labor that are often managed with less efficiency and oversight. The value prop is the same: improve quality, increase efficiency, mitigate risk, and improve compliance.

At Volt, I think our clients want SOW incorporated into the MSP because they want to go beyond managing procurement, milestones, and payments. They’re looking for a partner to manage competitive bidding of the SOW, negotiate the contract, and in some cases, even write the contract. Bringing every project under the MSP ensures better visibility and more measurable results.

Q. In addition to visibility, what are the benefits of putting SOW spend under MSP management?

A. The advantages extend across the organization, because every department has their own objectives. Procurement gets consistent rates across similar projects and the data to accurately analyze supplier performance. HR gets assurance that vendors will meet project targets and their resources adhere to client policies. Legal gets assurance that resources are properly vetted and vendors have met all legal requirements. Project managers get less administrative workload and more comprehensive tracking of milestones. All of this, plus more cost control, less administrative overhead, and access to more relevant analytics. Everyone wins.

Q. What different roles do you typically see HR and procurement play in large MSP engagements? What’s the future state? 

A. Typically, Procurement is involved with all things contract-related, and HR or Talent Acquisition focuses on ensuring all resources are compliant and operational efficiencies like time-to-hire metrics and quality are achieved. The challenge we run into sometimes isn’t how these groups work with the MSP, it’s how they work with each other. Both groups have different priorities.

HR has become restless, they have concerns around getting the best talent from the right supplier, and of course shortening the cycle time. Right now demand far exceeds supply, so HR wants an MSP to be focused on the talent, not simply procurement related functions. The HR conversations are about retention, diversity, working smarter and better, they are no longer simply about the number of suppliers, cost savings, and a QBR.

We overcome differences by being transparent, communicating the same message to all stakeholders. The internal stakeholders for contingent staffing may not be the same for SOW projects, so we want everyone on the same page at the same time. Program adoption is critical to the success of the program, and as programs become more complex and incorporate additional categories of spend, I expect the future state will focus on getting internal more stakeholders to the table. Even if a company embraces the value of an MSP, individuals can still resist change. We try to make it clear to everyone involved why the change is good.

Q. After some of the early benchmarks have been met (e.g. cost savings, improved cycle time, etc.), what metrics are smart organizations looking at to determine MSP success? 

A. Most first generation programs have the industry-standard cost, quality, and delivery metrics in place. Where second gen programs are evolving is taking a more strategic deep-dive into quality of the workforce while continuing to drive innovation and efficiency. The industry-standard for measuring contractor quality is through various surveys built into the VMS to assess performance.

However, how does an organization really know they have the most efficient, productive, and cost-effective workforce in place? At Volt, we recently introduced the effective bill-rate or mark-up model. We’re assessing our client’s workforce through a tool that analyzes turnover, productivity, ramp-up, and training time. It shows what a company is really paying for their workforce. The results of this analysis enable us to consult with the client on ways to adjust their workforce strategy to improve delivery metrics and achieve higher quality, all while saving money.

Q. Many MSPs have moved to a centralized service model. Do you think this trend will continue and can providers effectively service customers without having an in-person presence?

A. As our industry’s technology advances, this model is more likely for companies with lower levels of spend who are looking for more operational solutions, though this inherently makes them transactional than strategic. Complex programs require management expertise, and building relationships with stakeholders is essential for understanding their goals and determining the best solution. It’s a more consultative partnership, and as long as the client is getting value from having an onsite, I think it will continue to be the preferred model.

Q. We hear a lot about self-managed MSPs these days. What do businesses underestimate about program management? What strategic value do MSPs bring that an in-house team simply can’t?

A. We find that organizations that self-manage typically believe there are short-term gains available through self-management, without thinking through the long-term challenges. Many organizations underestimate the breadth of knowledge required to be successful. The internal team will need expertise in supplier management, contingent contract management, legal and regulatory compliance, supplier optimization, and an in-depth understanding of how to extract relevant VMS data and convert it into actionable insights. Moreover, the business will need standardized processes for acquisition of contingent labor, the capability to identify and address supplier performance issues, and clear, defined, enforceable policies for contingent resources. As for the strategic value an MSP brings, I think it’s the same list. They bring expertise and experience to each aspect of the program. A good MSP will make it look easy, but it’s not easy.

Q. What do you see as the timeline for adoption of second generation MSPs and what’s in store related to third gen programs?

A. We’re running second generation programs already, and we find that timeline for adoption of second gen is very client specific. It’s tied to the larger goals of the organization. As for third gen programs, I think it’s too early to tell what they’ll look like. Second generation programs across the industry have not yet saturated the market. I expect the characteristics of third generation programs will be driven by enhancements in technology, shifts in the labor market, and how companies respond as these changes impact their business.