We can all agree that Covid-19 has acted as a catalyst for change. The most obvious example is our concept of workplace, with the necessary but largely successful office exodus leading organizations to question the necessity of physical office space. Recent social unrest, too, has created a positive culture shift, with an increased and long-overdue focus on diversity and inclusion encompassing not just employees, but the entire extended workforce.
You may think that contingent workforce program managers might prefer to maintain the status quo with service delivery partners as they navigate these uncharted waters. But events of 2020 appear to have had a catalyzing effect on contingent workforce program relationships, too. Through our conversations with buyers, it is clear that there are plenty of large program owners actively considering a partial or wholesale change in their MSP provider. Following a short-term pause, providers too are reporting an upturn in pipeline opportunities; many involve second- or third-generation programs, in which an incumbent is in-situ.
What are the drivers for change? And why are buyers seeking new partnerships, rather than the arguably simpler pursuit of investing in the existing relationship? Here, I examine three potential factors driving market activity during 2020.
MSP proactivity (or lack thereof). As part of SIA’s annual Global MSP Landscape report, I recently conducted a referencing exercise with more than 70 users of MSP services. While feedback was broadly positive, the more negative comments were almost entirely focused on the reactive nature of the service provision, with a number of participants describing their MSP’s service as reactive and transactional. Just 23% of respondents said their MSP was excellent at recommending innovative or alternative sourcing channels, and only 24% strongly agreed that their MSP demonstrates innovation and shares its strategic direction with the customer.
Time and space. We have spoken with a number of program managers who, following the initial firefighting response to Covid-19, have taken advantage of a more manageable program size to step back and proactively assess whether their existing program partners have the capability to deliver against their future program goals. Those pursuing a CW diversity and inclusion program, for example, will need confidence that their existing partner can deliver on both data and values alignment. Those seeking to incorporate direct sourcing (and there are many!) will need to be confident their supplier can deliver, or at the very least accommodate, this model.
Relationship fatigue. The New York Times recently reported that the number of people seeking a divorce between March and June 2020 was up 34% over the same period in 2019! But what of business relationships? Within MSP businesses, long-term client retention is viewed as both a measure of success and a source of pride. But this situation can also create its own challenges. As contracts are renewed and prices are chipped, a once mutually beneficial relationship can become a chore for both parties. Unless the MSP has managed its cost base in line with price reductions, the client may have moved down its priority list as it seeks more lucrative opportunities, and this will not go unnoticed by the buyer. In 2020, when buyers are under further pressure to do more with less, the opportunity to start afresh with a new provider may become a very appealing prospect.
This article is by no means intended to be a tale of doom and gloom for MSP providers, or to suggest that buyers should be looking elsewhere, but beware complacency, whichever hat you are wearing. In these strange times, good may no longer be good enough. Programs will rightly be demanding more, and MSP providers who are leading the charge on innovation will be the ones reaping the rewards.