In the realm of contingent workforce management, procurement departments were initially focused on cost reduction as the key objective. The concept of procuring individuals with specialized skills and intellectual capital was treated similarly to procuring any other essential resource. Procurement professionals were accustomed to prioritizing risk, and cost measurement, and they extended this competency to the task of staffing contingent workers.

With the emergence of cloud-based Vendor Management System (VMS) technologies, procurement departments gained access to improved reporting capabilities. They could now provide qualitative information, such as staffing provider performance and compliance, alongside quantitative data on hours, positions, and costs, to executives, managers, HR, and accounting departments. Consequently, there was greater visibility into the management of contingent labor.

While VMS technologies optimized administrative processes and reduced paperwork, both technology providers and clients soon realized that the technology alone did not constitute a complete solution.

Why opt for a Vendor-Neutral Managed Services Provider

VMS technologies are designed to automate administrative processes, such as vendor onboarding, contract management, invoicing, and reporting. They are effective in reducing paperwork, increasing operational efficiency, and providing better visibility into vendor activities. However, it became apparent to both technology providers and their clients that VMS technologies alone were insufficient to overcome certain challenges.

Read more: Advantages and Disadvantages of Hiring an IT Managed Service Provider for Small Businesses

One major challenge is the management of complex multi-party relationships. In many business scenarios, there are multiple vendors involved in delivering a product or service. Coordinating and aligning the efforts of these various parties can be complex and require effective coordination. VMS technologies may help in managing individual vendor relationships, but they may fall short when it comes to facilitating smooth collaboration and interactions among multiple parties.

Another challenge lies in implementing the necessary internal change management processes. Adopting a new technology like a VMS requires organizations to make changes in their existing workflows and practices. This can involve modifying internal processes and aligning the organization’s culture with the new system. Without addressing these internal change management aspects, the full potential of VMS technologies may not be realized, and organizations may struggle to achieve their desired performance goals.

To address these challenges, staffing providers began offering Managed Service Provider (MSP) services. They developed or acquired their own VMS technology tools and introduced centralized programs, acting as a single point of contact for clients. Unlike the traditional Master Vendor Model, these MSPs focused solely on program administration without actively recruiting for available positions or making staffing placements.

However, since many of these MSPs were themselves, staffing providers, concerns arose regarding whether they favored their own affiliated staffing firms over others, potentially to the detriment of the client. To counter this, the “vendor and technology neutral MSP model” emerged. In this model, the MSP provider has no affiliations with any staffing firm and can prioritize the client’s best interests. So, what are the drawbacks of a non-neutral MSP model, and why should organizations consider working with a vendor-neutral MSP? In this blog, Arrant Services explores it all.

Drawbacks of a Non-Neutral MSP Model:

1. Potential Conflict of Interest:

Non-neutral MSPs may have the incentive to direct as much spending as possible toward their own or affiliated staffing services providers. This conflict of interest arises because staffing can generate significant revenue for MSPs compared to being solely a managed services provider. It becomes challenging for clients to determine whether an MSP has been directing requisitions and spending to their network, especially since many large MSPs own or partner with multiple smaller firms. If sourcing lacks competitiveness or colludes with specific vendors, staffing rates can become considerably higher, and the quality of resources may be compromised without access to a diverse and competitive resource pool.

2. Vendor Management and Compliance:

Initially, staffing vendors may be reluctant to support an MSP program, as it necessitates increased competitiveness and accountability on their part. In the presence of a non-neutral MSP, staffing vendors may find further reasons to underperform or not comply with program requirements. Conversely, if an MSP is recognized as truly vendor-neutral, staffing vendors are more likely to actively participate, recognizing the unobstructed opportunity to compete and gain market share.

Why Do Non-Neutral MSPs Still Get Awarded Managed Services Mandates?

One might wonder why many organizations still engage non-neutral MSPs despite the potential drawbacks. Several factors contribute to this phenomenon:

1. Dual Benefits of Master Vendor + MSP:

Some clients prefer this arrangement as it provides the advantages of both the Master Vendor and MSP models, particularly when dealing with high-volume or high-turnover positions where immediate staffing is crucial.

2. Familiarity and Perceived Low Risk:

Many of the largest MSPs are multinational companies with extensive staffing solutions. Transitioning to an MSP service offered by a well-known supplier that is familiar with the client’s business appears less risky to clients.

3. Lack of Awareness:

Often, clients do not realize the significance of MSP vendor neutrality until after committing to a non-neutral MSP. By that point, they are already committed to the arrangement.

The Benefits of a Vendor-Neutral MSP:

1. A Holistic Market Approach:

A vendor-neutral MSP deploys its deep domain knowledge of professional services and staffing procurement, coupled with the best technologies available, to design an optimal MSP program dedicated to the client’s specific requirements. Instead of replacing suppliers with their own, a neutral MSP thoroughly investigates the client’s spending footprint and identifies areas where additional support from staffing vendors may be needed. They recommend suppliers based on their strengths and core competencies, conducting RFPS, coordinating meetings, and running market research to identify the right vendor mix for the client.

2. Ongoing Cost Savings:

The objective visibility provided by a neutral MSP coupled with the VMS technology will allow clients to utilize pricing disparities among suppliers favorably, offering similar services. The neutral MSP enforces geography-specific rate cards, negotiates longevity rate reductions, and imposes caps on supplier markups to help reduce costs. Furthermore, demand management, a significant opportunity for cost savings, is effectively controlled only by a truly neutral MSP, as their focus lies in client satisfaction rather than maximizing spending directly for themselves or their subsidiaries.

3. Competitive and Transparent Processes:

Neutral MSPs customize the entire procure-to-pay process to meet the client’s needs and automate it for efficiency. They provide complete visibility, including their own profit levels, to clients. Every requisition is sourced through a competitive bidding environment within the VMS tool, maximizing savings. Without a contractor base of their own or any subsidiaries, neutral MSPs eliminate conflicts of interest and always prioritize placing the best candidate, rather than one that would increase their own profit. Recommended suppliers and preferred provider programs are designed exclusively with the client’s best interests in mind.

Ready to Explore Further?

If you are seeking a comprehensive understanding of the numerous advantages associated with partnering with a vendor-neutral Managed Service Provider (MSP), we invite you to connect with Arrant Services. As an industry leader, we have developed an innovative MSP model that sets us apart. Notably, we maintain complete independence from staffing vendors, alternative service providers, and technology firms, ensuring an unbiased and impartial approach to delivering exceptional solutions. With our team of seasoned contingent workforce management experts at your disposal, you can rest assured that your organization’s specific goals and aspirations will be taken into account. We are committed to providing strategic solutions that align with your unique requirements, letting you achieve sustainable success. Take the first step towards maximizing your workforce potential by reaching out to Arrant Services today. Our dedicated professionals are eager to address any inquiries you may have and guide you towards unlocking the full potential of a vendor-neutral MSP partnership.