by Steve Knapp, Vice President, Consulting
While the true origin and actual date of the first MSP-VMS (Managed Service Provider-Vendor Management System) program is often debated, most industry veterans agree it was approximately 15 years ago. Not everyone, however, welcomed the change – especially not the staffing suppliers who were riding high and living large during the internet boom and the lead up to Y2K. As I reflect on this time and my own experiences at several MSP-VMS companies, I’m reminded of how far the industry has come.
The Threat of MSPs
Take, for example, the letter sent by my client, the operational sponsor of a large healthcare company. In the letter, a temporary labor supplier makes the case against a third-party MSP. They cite reasons like reduced quality of workers, greater inefficiencies, and increased cost amongst many reasons why it did not believe that the MSP concept was viable. It even predicted that MSP-VMS solutions were a fading trend that would die in the coming years.
Ironically, this same company has become one of the largest MSP organizations in the world. As the popular saying goes: If you can’t beat ‘em, join ‘em.
Bringing Order to Chaos
Since those first days, the role of MSPs has evolved. No longer are MSPs just outsourced solutions for controlling cost and rationalizing vendors. They now provide a wider range of services across a broader set of geographies and worker classifications.
What is the mission of a modern-day MSP? I submit that the primary function is to herd cats. To bring order to chaos.
All organizations have competing interests. Often, the desires and needs of the business are pitted against corporate needs from functions like procurement, human resources, finance and legal. Typically the business wants high quality resources quickly, with little regard to cost and risk. Meanwhile, corporate functions want to reduce cost and minimize risk.
Additionally, there is an inherent conflict between suppliers and the company. Suppliers want to maximize profits while the company wants reduce cost at the expense of its suppliers.
MSPs are bringing order to the chaos by optimizing the four key dimensions of program performance – quality, efficiency, cost and risk – regardless of geography, worker classification or operating model.
A client once told me that she could staff an internal MSP with one or two people, managing nearly $800M in spend. I was shocked at her statement and at the assumptions about the scope of work. On the contrary, I recommended that her office have at least two dozen people. She needed an explanation of what an MSP really does to wrap her arms around that recommendation. Her belief was that with a VMS in place there wasn’t a real need for an MSP.
The reality is different. An MSP can operate without a VMS (albeit inefficiently), but a VMS cannot operate properly without an MSP (either internal or external).
The MSP-VMS Venn Diagram
An MSP embodies the people and process, while the VMS colors in the technology bubble. At a very basic level, regardless of service category, MSP organizations do the following:
- Police the rules and policies, ensuring compliance from buyers and suppliers
- Facilitate the end-to-end contingent labor management process
- Manage and optimize the supply chain
- Identify and pursue opportunities for continuous improvement in Quality, Efficiency, Cost and Risk
These are all activities that technology cannot do by itself. They require skill, knowledge and manpower. Remember, people do what you inspect, not what you expect. Human nature does not change, no matter how much we wish it or try to automate it.