When enterprises began to consider the value of centralization more than two decades ago, cost savings and risk mitigation were the top two value propositions. As contingent workforce programs implemented VMS technologies and some sort of centralized operations (e.g. fully outsourced MSP, hybrid or internally managed operations), they could commonly guarantee 20% savings based on worker rate savings and aggressive discount strategies.
As the industry has grown and matured, it has become increasingly more difficult for programs to achieve cost savings. SIA’s 2022 “VMS Global Landscape & Differentiators” report measured buyers’ cost savings over the first three years of a VMS implementation and beyond. As the accompanying chart reflects, 80% of buyers experience a zero to 5% cost savings year over year for the first three years. Beyond the minimal cost savings of 5%, there is evidence that savings is difficult to achieve, if not non-existent.
What’s next for savings considerations? Not all cost savings strategies are created equal. Finance departments within the organization have a strong voice to determine what is an ROI and what is not. However, with some solid logic and effort, there is still a large opportunity to drive value based on investments to the organization.
Some sophisticated end users of contingent labor have moved beyond rate card and discount strategies to save money and to show a return on investment for their CW program. They are looking at the following broad categories to show a return on investment for their organization:
Process improvement. When organizations can improve and measure their time to fill or automate interview scheduling as an example, this can be a direct ROI.
Remedial task automation. The use of bots can be a clever way for programs to gain efficiency. We are seeing some use bots to conduct their independent contractor test to ensure they are compliant with laws, regulations, and policies and procedures.
Technology integration. Another common investment organizations are making to help realize more ROI for their CW programs is robust technology integration. Some contingent workforce programs are integrating skills testing/interviewing software to help reduce the number of hours the manager and or the business unit spends conducting an interview. These types of technology integrations can help eliminate candidates whose résumés got them to the interview stage but whose associated skills test do not meet the requirements for the position. Streamlining the interview process and eliminating those individuals who do not have the right skills to do the job can be a huge ROI for the organization.
Overall, the opportunity to realize more ROI is real and possible. For programs solely focused on cost savings through rate card management and discount/rebate strategies, there are other possible ROI drivers available. As an industry, we will continue to push the envelope to explore more of these. When senior leadership within organizations begins to realize ROI opportunities for their program, this will drive big investments that will push the industry upward.