Spend under management in the managed service provider market increased 8% year over year in 2018 to $141 billion, according to research recently released by Staffing Industry Analysts. However, growth has slowed from the 12% growth pace reported in 2017.

The US continues to dominate the global MSP market with 50% market share. But growth remains higher outside the US; the EMEA region showed the greatest increase at 19%.

Overall market growth can be attributed to organic growth within programs, service expansion and net new clients, with 68% of reported net new clients adopting an MSP for the first time.

Buyers may drive the slowdown in MSP growth as they identify alternative ways to solve their contingent workforce issues — for example, running internal programs — according to Jo Matkin, SIA’s global workforce solutions research director and author of the report. But surprisingly, despite the rise in alternative solutions in the marketplace, the industry has yet to see a significant shift in pricing or delivery models.

The five largest MSPs globally each have more than $6 billion of spend under management and represent more than half of the combined spend reported by the 26 participants in this study:

  1. Allegis Global Solutions
  2. KellyOCG
  3. Pontoon
  4. Randstad Sourceright

Industry Focus

Financial services remains the most prevalent industry in the MSP market, with pharma/biotech/medical equipment and manufacturing (including automotive and consumer products) overtaking technology/telecom as the second- and third-largest users by spend.

  • Finance/insurance: 21.0%
  • Pharma/Biotech/Medical Equipment: 16.4%
  • Manufacturing (including automotive and consumer products): 15.9%
  • Technology/telecom: 15.1%
  • Healthcare: 7.9%

Information technology remains the most widely sourced occupational skill within MSP programs with a 29% share of spend, up 4% from 2017.

SOW Largely Untapped

The report also found that SOW/outsourcing spend represented 22% of reported spend under management.

“MSPs will continue to pursue more sophistication in SOW services, as this remains an untapped area of spend,” Matkin said. “MSPs will need to focus on talent solutions, and move away from reliance on traditional agency supply chains to fulfill requirements. I believe the future will be a hybrid of platform and human cloud solutions with a high-touch service proposition led by the MSPs.”

When it comes to SOW, there is still a significant misunderstanding out there among buyers as to what SOW is and more importantly, what it is not, said Peter Reagan, SIA’s senior director of contingent workforce strategies and research. “Many organisations who believe they have SOW incorporated within their program, in fact have staff augmentation workers disguised as SOW incorporated, and limited genuine SOW. Also there is a significant difference between tracking SOW arrangements and full services procurement within a contingent workforce program.”

Spend on global contracts covering three or more geographical regions also continues to increase as organizations expand program coverage, with approximately 30% of reported spend associated with global contracts. But do your homework on depth of service if you are looking for global expansion, Matkin advises buyers. And consider local expertise as well as global reach.

“Many MSPs have presence in multiple countries, but only a handful are offering a full 360-degree solution,” she said.

The full report, “2019 MSP Landscape and differentiators Part 1: Global MSP Landscape,” is available to CWS Council members.