Recently, I was speaking with a senior leader for one of the world’s largest MSP providers, who was excited about the state of the business. “Morale is up and our outlook is strong for the balance of the year,” he said. When I asked what has they’ve done to create such a positive outlook, his deadpan response: “We’ve started to fire clients.”
In a separate conversation, enterprise buyer client lamented the challenge of taking an RFP for an MSP deal to market. He didn’t understand why five of the 10 suppliers invited to participate declined to respond — three of which the company was very interested in seeing.
Two separate conversations, seemingly unrelated, but point to the same dawning reality: The managed services field is maturing. This is a good thing, the pain of that enterprise client notwithstanding.
I’ve often said that to get the best pricing, you need to be the best client. What that usually means for most programs is to focus on the partnership with your providers and less on the transaction. Approaching the supplier-client relationship is one way to create a win-win, where you get the most cost-correct solution — not necessarily the cheapest — and the supplier makes a reasonable and market-appropriate profit commensurate with the value of the services being provided. While this holds true, there are other criteria that mature MSPs consider when evaluating a client opportunity.
Profitability. This goes beyond the aforementioned profits for the MSP. The time has long since passed where MSPs would take on losing business with the promise of future profitability. Some MSPs didn’t even have profit and loss statements at the client level, choosing instead to win the business first and turn a profit later. Many MSPs now are evaluating P&Ls at the client level and finding the profit line is very thin or even a loss, and making a business decision to leave the client.
Fit. Another reason a competent MSP may choose to leave or reject a client is strategic or cultural fit. Why it is important? While some providers are perfectly happy with supporting a transactional client, turning a moderate profit, others are seeking to drive progress and become a strategic resource, which drives innovation and talent optimization. But some clients are unwilling or unable to progress at the same rate, if at all. Many providers see this as a negative, not just for the poor market impression it gives as being a transactional provider, but because of its effect on morale and hiring and developing good talent. If all the MSP is doing is supporting a transactional client, the good program managers and program office personnel will become bored and leave for more interesting opportunities. No one wants to be a commodity.
Unreal. Providers may choose not to bid on an RFP because they don’t believe the opportunity is real. Perhaps they know a supplier is already entrenched at the client company or that the CW program lacks the necessary level of business support. Executive support requires more than a signoff. These mature MSPs want to see a clear understanding and mutual creation of strategy across business lines and departments. Competent suppliers will be looking for the depth and breadth of executive support as opposed to the height.
I will remember these conversations as indicators that we’ve reached a turning point in the field of contingent workforce solutions. They demonstrate that our space has evolved and matured. And while these transitions may be wrenching for some, they portend a more strategic future for the global workforce as a whole.