Managed Service Provider (MSP) market

Managed Service Provider (MSP) market

Nowadays, more and more companies are using various forms of outsourcing, which can apply to virtually any area of the business. Supporting a company by carrying out part of its activities externally allows it to diversify risks, achieve the effect of flexibility, reduce the involvement of its own resources, but most importantly allows the company to focus on its core business. What are MSP solutions? Which organisations should bet on such activities?

To be able to effectively manage an entire community of third-party providers, the market offers technology-assisted solutions dedicated to just this type of task. However, focusing on deepening the issue of provider management in the broader HR field, it is worth first explaining what an MSP is. The name is an abbreviation for Managed Service Provider, or "managed services." In the labour market area, it is a tool for strategic management of recruitment and procurement processes centred around a given technology platform enabling procurement cycle management. The solution manages the cycle of acquiring contract employees from the stage when a recruitment need arises, through the implementation of the new person, all the way to the settlement of working time or payment of invoices. The solution provides visibility into spending and control over purchasing strategy in an end to end model, i.e. at every stage of the process.

Why MSP?

Companies using MSP get full control over costs incurred, reduce risks regarding HR irregularities, while gaining an increase in process efficiency and access to unique area-specific knowledge.

The added values of implementing MSP are many, they include:

  • time and process efficiencies – centralised task administration, automated ordering process, accelerated recruitment, program alignment with scale of demand, global oversight of operations, monitoring of service level agreement (SLA) performance, standardisation and simplification of the administrative process,
  • savings – rationalisation of demand, normalisation of rates, consolidated payments, elimination of billing errors, verification of process lengths and order volumes, reduced cost of administration, electronic monitoring of working time and acceptance of billing,
  • improved service quality – ability to measure supplier quality, precise statistics, access to up-to-date information about contractors and the costs they generate, real-time analytics and reporting, a team of experts delegated to a specific program, increased recruiting efficiency, competition based on quality, speed, as well as price,
  • risk minimisation – standard regulations for all partners, management of on- and off-boarding processes, control over the hiring process and documentation, immediate adaptation to changing legal conditions, control of time records and invoice compliance.

So it's safe to say that the MSP provider takes primary responsibility for managing the organisation's temporary and contract worker program.

Focus areas

The pillars of MSP are the elements that make this solution increasingly popular in Poland as well.

They are:

  • recruitment – centralised, automated and simplified process of acquiring employees,
  • analytics – advanced benchmarking tools, expense control and predictive analytics,
  • suppliers – consolidation of suppliers and invoices, a single point of contact and supervision of suppliers,
  • technology – modern VMS (vendor management system), dedicated vendor management systems,
  • regulatory compliance – increased security of employment processes through control over compliance with labour laws and internal company procedures,
  • savings – optimisation programs that reduce employee acquisition costs by up to 20%.

In terms of responsibilities, the project team working with clients on a daily basis is responsible for:

  • monitoring the demand for contract workers,
  • distribution of orders for contract workers to suppliers,
  • managing the recruitment process (neutral, P2P model),
  • onboarding and offboarding of employees,
  • Background check, or verification that a person is who he or she claims to be, is mainly verification of education, employment history, or criminal record
  • assessing the quality of suppliers and recommending potential changes based on the best market knowledge,
  • full control of process compliance with client and supplier procedures,
  • verification and management of the approval process for schedules or time records,
  • verification of invoices and payments,
  • reporting, the ability to provide management information on virtually any stage of the process,
  • supplier support, Hiring Managers' support,
  • training.

Who is MSP for?

The MSP service can actually be used by all companies that choose to have external support to provide employees. There are many reasons to choose this solution, from the perspective of labour market challenges, they are certainly inflation of rates and candidate requirements, the labour shortage that many organisations are facing, migration issues and demographics, talent mismatches between positions, or increasing competition.

In contrast, looking at MSP services from the client side, it is mainly the organisational complexity, the time-varying demand for talent, the lack of process controls and benchmarking tools, the emphasis on cost savings and efficiency, and the growing number of suppliers that should be taken into account.

The part of MSP's services relating to reporting is appreciated especially by executives, who have insight at every stage of the process into operational details such as expenses, number of employees, their turnover, parameters relating to the number of days from the start of recruitment to finding a suitable candidate, segregation of data by business units (cost centres), production areas, cost centres, departments of individual managers or directors, quality of suppliers and efficiency of the process.

It is worth mentioning that the implementation of MSP is also a collaboration based on clearly defined rules for managing the supplier community. Along with the program based on a wide range of data, market rates, transparent distribution rules, regulatory standard, transparency of operations, as well as communication or supplier audits are implemented.

All of this is supported by Vendor Management System (VMS) technology, which is a vendor management system that acts as a business mechanism for managing and acquiring staffing services. Looking at the market, among software vendors, those from SAP-Fieldglass or Beeline are used very often.

Looking at the Polish labour market, one can see that it is not quite ready for this type of solution. It is mainly used by large, multinational companies, and is often an extension of a solution already implemented in other countries. There is also a lack of market reports that show a picture of the market, the share of major players, trends and forecasts relating to this issue. However, year after year, awareness of this service is growing, and with it the number of appreciative clients who choose to implement MSP.

Implementation steps

Looking at the cost side, the billing models used are client funded or supplier funded. In the former, the cost of this service is borne by the client, while in the latter it is borne by the supplier. In addition, he will charge a fee for VMS technology, or vendor management systems. The level of both costs varies depending on the amount of spend under management and, together with allowances, can range from about 2.5% to 1.75%.

The solution requires a complete review of the client's purchasing process, learning the entire Procure To Pay process management cycle and dissecting it down to the smallest detail. The team then models the solution and adapts it to the needs of the organisation, taking into account all its elements.

The next step is to implement the solution, and then move to the operational part. This very moment is crucial, because the VMS tool, the basis of the program, is being configured. The implementation team audits the tool and develops a strategy plan. The next step is the configuration testing and analysis of the systems implementation.

A very important part of MSP implementation is proper communication with both internal and external clients. This underscores the importance of change management and the entire onboarding process for suppliers, for whom this solution can certainly be a novelty compared to their existing relationship with the client. The entire process, depending on the complexity of the cycle, can take from 3 months to even 3 years.

The Polish market continues to grow in every industry, including those related to new technologies. According to the ABSL report, we currently have about 1,700 business service centres in BPO, SSC/GBS, IT and R&D on the Vistula, which seems promising for SME development. The influx of foreign capital and the modernisation of our economy, including the processes implemented, will cause this type of service to be recognised and appreciated by companies operating in our country.


Author: Szymon Rudnicki, Talent Solutions Director at ManpowerGroup.

This article comes from magazine:
FOCUS ON Business #12 September-October (5/2023)

FOCUS ON Business #12 September-October (5/2023) Check the issue