In terms of a contingent workforce, the provision of vendor neutral Managed Service Programmes (MSP) is a favourite topic of mine. Purchasing organisations seem to love the idea, and why wouldn’t they?
Most vendor neutral definitions describe a fair and transparent mechanism that removes the burden of administration, mitigates (or at least spreads) legislative and regulatory risk, provides visibility on expenditure, and enables the existing, trusted, supply-chain to perform at new levels of service excellence, unthreatened by the MSP. The transparency of the model helps to create greater competition amongst the suppliers which in turn helps to facilitate high quality candidates being received.
There is a catch however: the managed service costs money.
It is at this point that a lot of purchasing organisations might lose their appetite for vendor neutrality from their MSP. I would suggest that this is primarily because one of the key requirements of any organisation introducing a managed service is cost neutrality and it’s fair to say that vendor neutrality and cost neutrality do not easily mix.
As an example, End User 1 (EU1) is already super-efficient at negotiating with suppliers and managing contingent worker pay rates. In this case, EU1 must offer a managed service provider economies of scale through exclusivity to achieve a reduced cost of supply as shared savings and/or supplier funding will be unlikely. In this scenario, in most cases, the cost of a vendor neutral programme proves to be prohibitive and a solution more akin to a master vendor is required to ensure the programme is profitable. With the master vendor provider receiving the roles before the rest of the supply chain, the end user can benefit from lower, volume-based margins. The challenge for EU1 becomes one of trust and quality: without comparator candidates from a competitor, can EU1 be certain that they are receiving the best talent the market has to offer?
End User 2 (EU2), on the other hand, has a decentralised approach to managing pay rates and suppliers which, in this case, leaves something to be desired. For EU2, significant cost savings are available which means the MSP has sufficient profit-streams to forego the direct supply channel and the vendor neutral model should work.
Unsurprisingly, more often than not, end users are somewhere between the pre-master vendor (EU1) and pre-vendor neutral (EU2) examples described above, hence the introduction and ongoing evolution of the various hybrid models available in the market today.
Given the correct set of circumstances, vendor neutrality can deliver everything described in my second paragraph PLUS some hard cost savings. But please don’t believe that the model is suitable for all organisations. Even if it is suitable, you can be assured that it comes with its own challenges; particularly in the area of change management and implementation... but that’s a topic for another day.
Written by Simon Blockley
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