As the Market Matures

New research outlines the top five drivers of managed service programs.

By Nikki Edwards

There is no denying that the field of talent acquisition is more exciting today than ever before, with organizations facing a series of complex challenges and needs. Organizations have many considerations when it comes to their talent acquisition processes, including:

• talent shortages;

• the impact of globalization;

• increasing compliance and regulation requirements;

• analysis of big data; and

• advances in consumerism of technology.

Key Drivers of MSP

Recent NelsonHall research on the managed service provider (MSP) market has identified the key drivers for contingent labor management.

  1. Visibility. The social make-up of the workforce is more complex than ever before with a multi-generational mix of baby boomers, Generation X, millennials, and Generation Z. Different generational work preferences has led to statement of work (SOW), independent contractors (ICs), and freelancers being a large part of an MSP offering. This has increased the need for visibility of the workforce. In the past, contingent workers were not considered part of an organization’s total headcount and went under the radar. But with more legal and compliance issues to deal with, organizations need to get their ducks in a row, and this has affected all MSP engagements—not just first-generation contracts. In response to the call for visibility, MSP providers have the tools in place to provide clarity on the contingent workforce. For example:• An organization working with TAPFIN believed it had 10,000 contingent workers, but through the MSP, an additional 5,000 were identified.

    • An organization moved from managing contingent labor through hiring managers to a centralized program through Yoh, bringing visibility and $1.9 million in savings.

  2. Compliance. The new categories of worker have increasingly stringent compliance needs, which has become a growing concern for organizations in recent years. MSP providers have responded well to addressing compliance needs, with 98.3 percent delivering compliance services as part of their standard offerings. Compliance associated with industries such as financial services and pharmaceuticals continues to be in demand, as is basic-level compliance around workplace health and safety. Organizations increasingly feel that they do not have—or are never likely to have—the required level of in-house expertise to be 100 percent compliant. Having an MSP vendor that can leverage a team of experts—via a provider or partnerships—is becoming popular.
  3. Experience of the ‘client journey.’ The MSP market is maturing, dominated by the U.S. and UK, making up nearly 75 percent of the global market. In these countries, many MSP contracts are into second, third, or fourth generations. Organizations are more savvy about what an engagement can offer, so they require a strategic partner for talent acquisition that can continually innovate the program to their benefit. For example:• Randstad Sourceright completed a rollout of an MSP program to 128 locations in five phases, reduced suppliers to 120, and increased fill rate to 95 percent.

    ZeroChaos had an existing RPO relationship with a client, which was extended to incorporate the management of SOW and IC and called for a MSP and a vendor management system . Technology was integrated with an applicant tracking system and the geographic scope expanded into Canada and China.

    As part of a mature market, if an existing MSP partner fails to deliver on the engagement, the organization will actively seek to engage a different provider to fulfill its needs.

    A main component of “the client journey” is talent pooling. Talent pools work across four generations of talent and include focus on several areas. In the U.S., the priority is gender diversity in science, technology, engineering and math (STEM) and returning baby boomers to train the next generation of workers in the financial, energy, and pharmaceutical sectors. In EMEA, the focus is on graduates, apprentices (a new apprenticeship levy comes into effect in the UK in April 2017), and second careers for military leaders. The market has responded to these needs through talent pooling. For example:

    Pontoon has set up a dedicated talent pooling team, to advise clients on attracting, communicating with, and messaging talent.

    Alexander Mann Solutions has developed an integrated resourcing solution that features internal, temporary, and permanent talent pools, accessible via career portals. It is managed by the organization’s recruitment team and Alexander Mann’s RPO/MSP teams. The solution provides advice on internal mobility, employer branding, assessment and selection, vendor management, compliance, supplier performance management, and demand planning. It is supported by reporting, analytics, and business intelligence from the integration of multiple technologies include human capital management systems, customer relationship management tools, and vendor management systems.

  4. Cost savings. This is often most important for a first-generation MSP, in which there are immediate opportunities for cost saving by centrally managing the end-to-end contingent hiring process. For example, an organization saved 20 percent in the first year of an MSP program with Allegis Global Solutions, accounting for $400,000 in rate reductions.For second-generation engagements, an MSP may be extended to include other types of contingent workers (SOW and IC), so the same benefits can be applied, albeit on a concentrated sector of the workforce. An organization added new territories in their MSP engagement with KellyOCG and experienced 130 percent cost savings.

    By the third and fourth generation of an MSP, cost savings become increasingly difficult to maintain, so providers often encourage more direct hiring through self-managed client talent pools or increased offshoring to leverage wage arbitration.

  5. Technology and analytics capabilities. When organizations decide to outsource talent acquisition to an MSP provider for the first time, there is an expectation that suitable technology will be part of the package. Organizations will often seek guidance from the provider on the most suitable technology for their needs. Often, the rollout will be a “vanilla” system that requires the client’s data to be standardized before being transferred to the new system. At second generation or beyond— regardless of whether clients use existing technology or vendor-recommended technology— organizations expect to have access to relevant worker data, wider market data, and insights and analytics on that data. Several analytics platforms were launched in 2016, and many analytics platforms saw significant enhancements among the MSP community in a bid to meet client expectations and remain competitive.As the workforce has changed, the drivers for MSP have followed suit. The organizational needs for managing contingent labor will depend on internal organizational challenges, the level of understanding of the MSP market, the willingness to embrace those challenges at a given point in time, and external challenges, which are evolving at an ever-increasing pace.

Nikki Edwards is principal research analyst for Nelson Hall. See complete findings of the April 2017 MSP Market Analysis at https://research.nelson-hall.com/

Posted May 3, 2017 in Workforce Management

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