Lately we’ve been fielding a lot of calls from companies that are unhappy with their MSP/VMS provider partners. Usually, the program in question has been in place for three to four years, and they say they’re just not getting the value they were expecting and maybe they can find a better service by firing their current providers. This is by no means an indictment of all providers; in fact, many MSP providers continue to create value for their programs year after year. But there are many programs that do not perform as well as expected.
While these concerns are usually entirely valid and parting ways may very well be the potential solution, I often recommend more introspection before throwing out the baby with the bathwater — because these contracts often fail due to numerous factors beyond the poor performance of the MSP program office.
We at Staffing Industry Analysts often ask what some of the most vexing contingent workforce problems are. In the past, those problems were limited to ones of cost. How can programs save money first and address quality second? This was driven by procurement professionals focused on maximizing the return on investment and squeezing every last vestige of inefficiency from the process. As a result, we saw a rapid rise in the adoption of MSP and VMS solutions as they were helping companies save money. Based on our surveys in the US, we know almost 70% of large companies take advantage of these solutions. In the early years, procurement often negotiated these contracts aggressively, driving the supplier funded rates ever lower, in return MSP providers were forced to reduce program office headcount and service levels to achieve a meaningful level of profitability.
This created a long-term problem for many MSP providers. As these skinny program offices struggled to meet client requirements, they were forced to become transactional support providers as opposed to being the strategic resources many clients were expecting. Compounding this problem is the ever-increasing sophistication of the buying community driving higher expectations from their program office — often moving far beyond the initially agreed upon program scope. Taking all of this into account, it is no surprise that some buyers are dissatisfied with their MSP partners when in truth they were set up to fail from the start.
So what do you do if you are struggling with your partners? I always recommend that you go back to the beginning. What were the driving reasons for the program in the first place? What were the conditions, assumptions and dependencies then — and how have they changed? What about the contract? What are the terms of the agreement and what service levels were agreed upon? After that, you need to do a gap analysis versus the current environment. In my experience, there are usually material and significant differences between the past and present. From there, you need to sit down with your provider partners and review these gaps together. If they are true partners they will work with you to resolve these differences, but a potential outcome could be to part ways. A more likely outcome will be a new working relationship built on realistic expectations and an eye toward future mutual success.