Should You Manage Your MSP Internally or Bring in an External MSP? | DCR Workforce Blog

Should You Manage Your MSP Internally or Bring in an External MSP?

To manage or not to manage. That is the question. This question needs to be posed and answered by every company that uses contingent workers along with a Vendor Management System (VMS) to manage it. As with everything in life, the answer is – ‘It depends!’ A business has every reason to evaluate the requirements and benefits of both options before making a call.

To properly manage a Managed Service Provider (MSP) internally, a business needs to have an efficient internal team that’s capable of evaluating their supply base on a range of criteria, other than cost alone. An MSP offers much more than mere administrative oversight, which is what an internal team definitely offers. To decide if these benefits can be offered by an external team, or foregone in the interest of keeping the MSP in-house, let’s look at the value an external MSP brings in:

  • An external MSP brings in standardized rates, a disciplined approach to distributing requirements and better scrutiny to each supplier’s performance.
  • An MSP brings expertise, industry knowledge, strategic insights and scalability in the services offered.
  • They also offer consultancy on temporary labor legislation, labor market conditions affecting supply and demand, as well as technological advancements in the VMS space.
  • Their experience in managing contingent workers using a VMS helps the program start without any delay.
  • This in turn helps find top talent, gets positions filled faster, aids in dealing with personnel issues and reduces unplanned attrition, strategically increasing workforce performance. (Consider if your internal team can ramp up quickly enough to oversee a truly blended workforce.)
  • The MSP’s access to an efficient supply base as a talent pipeline ensures quick turnaround times on hiring the required skills at market-based rates as well as reduction in administrative costs associated with billing and other activities.
  • An MSP provides customized services to manage your talent supply chain, bringing strategic insights and innovative risk mitigation measures, including expert consulting on temporary labor legislation, labor market conditions affecting supply and demand and technological advancements in the VMS space.
  • An external MSP frees up the overworked HR personnel to focus on activities of higher value to their company.
  • The supplier’s training and ongoing support as well as feedback mechanism bring in enhancements and resolve issues impacting program goals.
  • An MSP is usually paid a fee based on spend under management and will expand or reduce the size of its team based on your needs, while an internal team will either be understaffed or overstaffed when changes occur.
  • An internal team may not have the ability to stay compliant with the various regulations including worker misclassification and co-employment issues. Any legal costs and charges arising out of noncompliance with worker misclassification regulations and co-employment claims would prove higher when using an internal team, while a well-negotiated contractual agreement with an MSP could offer protection from such concerns.

Companies have the right to have some of their concerns, listed below, answered by the MSP, and more importantly incorporated into the Service Level Agreements of their contract with the MSP. These include:

  • Will an existing supply base of efficient agencies be disrupted by having a new MSP brought in suddenly?
  • Will the MSP be objective in its selection and be vendor-neutral, refusing to be affiliated with any staffing agency?
  • Does the MSP have established connections with not just the major staffing agencies but also the niche agencies, which focus on sourcing candidates with highly specialized skills?
  • Will the MSP track supplier performance on an ongoing basis using established performance parameters and metrics and share the results with you?
  • Will the MSP regularly analyze the data to identify trends and tweak any performance issues before they blow out of proportion?
  • Will the MSP evaluate the available agencies to distinguish the high performers and give them more preference? Can the MSP mentor and aid the suppliers to enhance their performance?
  • Will the MSP identify any coverage gaps and weed out the poor performers if required?
  • Will the MSP provide comparable standards of service at all your locations?
  • Can the MSP track enterprise-wide data using technology to offer, through dashboards and reports, details on the number and cost of contractors on assignment, the performance of every supplier, the status of all open requirements and other critical operational factors.

Remember that if you do decide to bring in an external MSP, you’ll have to arrange the following conditions to facilitate the MSP’s efforts and ensure the best possible results from the program:

  • Ensure that the hiring team has no reservations and resistance to the program.
  • Provide critical business data in a complete manner when sharing any expectations and requirements.
  • Provide clarity on your expectations from each of the roles and responsibilities.
  • Work with the suppliers to remove any resistance to program participation.
  • Ensure that the program is given high importance and does not face any scheduling conflicts with other strategic business initiatives.
  • Identify an executive sponsor to smooth out any issues when the program runs into a roadblock and ensure the success of the program.
  • Encourage the MSP to involve hiring managers in the design of the program and incorporate their inputs and suggestions, and address their concerns.
  • Prohibit your hiring managers to indulge in “rogue spend” claiming that the internal functions failed to understand or meet their needs.

If nearly 70 percent of companies with a Contingent Workforce Management (CWM) program have decided to outsource responsibility to an external MSP, it must be for an extremely beneficial reason. Is now the time to decide if your company should have one too?

The content on this blog is for informational purposes only and cannot be construed as specific legal advice or as a substitute for competent legal advice. They reflect the opinions of DCR Workforce and may not reflect the opinions of any individual attorney. Do contact an attorney for advice specific to your issue or problem.
As the Executive Vice President of Enterprise Solutions at DCR Workforce, Kristin Clewes is responsible for the worldwide delivery of contingent workforce management programs. Her staff of 40 manages 28 MSP programs ranging in total spend from $10 Million to over $350 million.