Occasionally clients ask the question that most MSP's dread, “If I can run my program internally, why would I pay more to outsource it?” And the reason that MSP's dread this question is because it's true. A typical program that includes an onsite Program Team and Vendor Management System (VMS) will cost a client between 2% - 4% of their program spend. In order to keep costs low, a client could directly partner with a VMS provider and hire a few people to manage their program rather than outsourcing to an MSP.
And it’s not only about cost savings; clients also like that the internal team shares the values of the company, is part of the success story and reports into the same organizational structure. Every MSP can give you examples of clients that have internally managed their program and everything seems to run smoothly, until something eventually goes wrong. Sometimes budgets are cut, the workforce needs to downsize or the program goes stale.
What's Right For Your Program?
It strictly depends on your goals. Here's what you should consider:
What Level Of Expertise Do I Need?
Most Managed Service Providers (MSP’s) are experts at managing programs for clients. Given my job title, you'd expect me to say this, but it's because managing a program is what we do all day long. From onsite program teams to internal support and management contributors, we are consistently looking at ways to improve our client’s programs. Part of what we do on a daily basis includes implementing new technologies and putting compliance strategies in place that improve adoption, and keeping our clients compliant with local, state and federal laws.
To be transparent, it’s not extremely difficult to replicate what we do with an internally managed program, but this is our expertise. We have experience running multiple programs, and we are on the forefront of what to look for each day. If you choose to internally manage your program, lean on this expertise by seeking an MSP to help you build and launch your program so that you can place more focus on business strategies, your workforce and your industry.
What Are My Program Objectives?
Another important factor to consider when determining whether to internally or externally manage your program is your overall program objectives. For instance, one of our clients believes that engaging top talent is a core reason for their success in the service industry. For more than ten years they’ve had a team of program managers and recruiters that run a full scale MSP internally. They even employ technology resources full-time to assist with their VMS, compliance specialists from the legal department and human resource experts who attend conferences and consult with external resources to keep their program compliant and up-to-date.
However, an analysis of their program shows that they spend 3.5% of their total program spend internally to manage their program which is more than they would likely pay an external provider, but it isn’t about cost for them. Their main objective is to ensure they mirror the permanent talent acquisition process that they believe contributes to success in their company. When we consult clients on running programs internally we usually start with one question, "what’s your objective?". Decreasing costs can’t be the only driver or you’ll end up failing or implementing a stale program. Whatever your objective may be, it’s important to think about the ultimate goal of your program and ensure your budgeting accurately to achieve it.
What Kind Of Experience Does My Team Have?
Your MSP should always bring qualified and experienced talent to your program. The people on your team are a major factor affecting the success of your organization. When sourcing talent for your internally managed program, ensure that they have a genuine understanding of the contingent labor industry. It will make the training process easier, and they’ll likely bring some industry related knowledge to help enhance your program.
Once you’ve made a hiring decision, the best practice is to invest in further training as well. This comes in many forms but can include spending time with MSP program teams outside of your company, attending training conferences and providing your workforce with on-the-job training alongside experienced program resources.
What Do I Need In Terms Of Technology, Suppliers, Training, And Reporting?
Some of the other factors you should consider when determining your strategy to internally manage your program are discussed below.
Technology
A VMS is vital to fully support the requisition, time entry, approval and reporting processes for your company. An MSP will implement and configure the VMS (workflows, approvals, nomenclature, integrations, etc.) and be responsible for training, help desk support and maintenance of the tool. They will also ensure best practices are followed and that the configuration achieves your objectives.
In internally run programs most of the work must be completed by your team. The VMS will certainly help implement and configure your tool, but free implementation is limited and they will still rely heavily on your team to make decisions and design the program, which can be challenging if no one on your team has implemented a VMS before. If you choose this route, ensure that you put money in the budget to get support configuring the tool to your program needs, otherwise you’ll find your VMS functionally difficult and managers working outside the process.
Suppliers
MSP’s have large supplier management teams focused on providing consistent supplier vetting, selection and assimilation, as well as centralized supplier management, communications and performance reviews. Your internal program will not need a supplier team, but an effective program will budget for a supplier representative that will handle all inquiries.
This representative should handle all communication and ensure a consistent contractual process is in place. Additionally, they should hold quarterly reviews with your preferred suppliers and ensure program compliance by conducting annual audits and site visits.
Training
Training is easily one of the most overlooked features of externally and internally managed programs. Your MSP should provide training for all users in your program including hiring managers, suppliers, contingent workers, and your PMO Team. The program should include a comprehensive program overview, VMS training, co-employment training and avoidance, IC compliance, cost management, etc.
When considering an internally managed program, ensure that you have developed the training materials for your program and they’re being used regularly in your program. This will mitigate easy mistakes and help with overall program compliance.
Reporting
An additional benefit of utilizing an external MSP is enhanced reporting. Your MSP should provide you with detailed reporting that includes demographic, spend, program management reports and more. These will give you complete visibility and strategic insight into your program. The MSP uses reports from the VMS as well as their own reporting tools to provide quarterly reports.
The MSP should also regularly benchmark your program against your industry, geography and skill sets. An internally managed program needs the same reporting rigor. We always suggest you budget for a part-time or full-time data analyst who can help build the necessary reports needed to manage your program and regularly meet with others in your industry to benchmark.
There’s many components to think about and so much to do in order to effectively design a program. I haven’t covered other key items like program design, change management, communication, bill rate negotiations, billing and invoicing, supplier funded models, cost management, SOW, IC compliance and other important components. As the program sponsor, you will be responsible for the daily operation of the team and inevitable fires that will come up each day.
A major benefit of hiring an MSP is that they will have already developed the processes needed to efficiently run a program, and they will be ready to hit the ground running on day one of the program launch. They’ll have best practices and teams in place to make an immediate impact. You can still be prepared if you chose to internally manage your program; just make sure you seek help externally when necessary, understand and plan your objectives and budget for the key items mentioned above to help ensure a successful outcome.
About the Author: James Simmons has spent over 20 years in the contingent labor industry covering staffing, VMS, MSP and Direct Sourcing. He has held various management positions with large global staffing firms, founded two companies including one focused on Direct Sourcing and has worked in the VMS space for a leading provider.
