The advantages and disadvantages associated with managed service providers

This post was originally published in 2019 and has been refreshed with updated information.

Contingent workers have become an essential part of day-to-day business. This is especially true, given over 80% of large corporations are planning to use flexible workforce arrangements in the near future, according to Gartner. As a result, many organizations utilize managed service providers (MSPs) to help them manage their temporary workforce. But what exactly are MSPs and what advantages and disadvantages do they have?

4 benefits associated with MSPs

Put simply, MSPs handle contingent workforce solutions by sourcing and managing temporary workers. There are multiple benefits associated with MSPs, including:

1. Access to talent
   MSPs use their access to suppliers and expertise in direct sourcing to find niche talent. In addition, MSPs play a vital role in candidate experience by making sure potential employees have a seamless hiring experience from start to finish.
2. Reduction in costs
   MSPs offer cost savings through process efficiencies, increased visibility of spend across an organization, knowledge of market salary rates and economies of scale.
3. Access to cutting-edge technology
   MSPs provide access to the latest tech, such as prescriptive analytics, artificial intelligence (AI), natural language processing and machine learning (ML) to improve the quality and time-to-hire.
   In addition, MSPs leverage vendor management systems (VMS) to automate processes that support the acquisition, management and payment of contingent labor, including requisitions, time management, expense management, approvals, payment and reporting. MSPs then use the metrics gathered by the VMS to conduct regular reviews to ensure staffing agencies are hitting their targets.
4. Improved compliance
   MSPs manage regulatory requirements, centralize requests for contingent labor and reduce non-compliance risks.

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3 limitations to MSPs

Despite the many benefits associated with the traditional MSP model, it’s limited in its ability to support true strategic workforce management because of the following:

1. Lack of an integrated workforce management strategy 
   MSPs are usually managed as a service handled by procurement. As such, some chief human resources officers (CHROs) don’t have insight or control over the employees managed in these programs, which prevents a cohesive total workforce management strategy.
2. Technology and data management limitations
   MSPs tend to focus on the scalability of their clients, which means their data may not specific to your individual needs – not to mention data alignment with your full-time workforce. The lack of an integrated solution across these areas can inhibit an organization’s ability to make decisions about what type of talent to deploy where.
3. Fastest-to-fill hiring model
   The resumes you receive are frequently the most available, not necessarily the most qualified. In this talent market, the focus should be on business-impacting and culturally-additive candidates.  

The lesson

Organizations that require the services of an MSP should make sure they choose a provider that offers transparency and visibility across their entire workforce to drive improved business decisions. A next-generation MSP that delivers an engaging, high-touch and personalized candidate and hiring manager experience will be more productive in this talent landscape than a traditional MSP model. Transparency and visibility across the entire workforce, which drives improved business decisions, and a client-branded recruitment team that leverages the latest, best-in-class technologies will help clients reach their goals.

Read more:

Contingent Talent Solutions

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