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When is Vendor Neutral Really Neutral?

May 22, 2018 10:48:59 AM

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The term “vendor neutral” is bandied about frequently in the design phase of a managed services program (MSP). The idea being that instead of a prime vendor model wherein one “prime” staffing vendor is engaged to fill all requisitions at pre-negotiated rates, requisitions are instead issued to an array of participating suppliers who issue competitive bids for each position. In theory, a vendor-neutral MSP model is quite successful at keeping bill rates competitive. Yet, in some cases, the neutrality of the MSP may not be as egalitarian as one may think. Here’s some inside information that can help a hiring organization ensure they’re being afforded true neutrality.

It is important to remember that the MSP, acting as an intermediary between the hiring organization and the staffing suppliers participating in the competitive bidding process, generates revenue through the management fee that is assessed on the spend managed via these relationships. So, while the hiring client organization elects the MSP model to shoulder the burden of sourcing and administering talent, it is still very important to be aware of how the MSP operates and to understand how the MSP may be working to optimize its own profits. Because sometimes, an MSP’s operations can diminish the purity of the neutrality they promise. This is especially relevant to client organizations that are interested in curating a larger client referred contingent talent pool.

When seeking to engage a vendor-neutral MSP, nextSource urges hiring organizations to do some investigation of the ownership structure of each MSP provider. While many are pure MSP solution providers pursuing no other lines of business, a number of the largest are subsidiaries of global staffing companies. While this isn’t a disqualifier per se, the hiring organization should be aware of whether the MSP they’re engaging intends to permit its affiliated staffing arm to compete in the bidding against the other suppliers in the program.

If an MSP has a staffing supplier sister company, and they intend to include their sibling in the competitive bidding process, can the program truly be considered fully neutral? To keep honest brokers honest, a hiring organization must make it crystal clear whether they will accept such an arrangement in their vendor neutral MSP.

The relationship between an MSP and its staffing supplier siblings can have a depressive effect on the overall efficacy of this model. Here’s why. Many organizations elect to engage a vendor neutral MSP model instead of the traditional master vendor arrangement for the same reason – because the prime vendor model often struggles to keep suppliers engaged. Similarly, suppliers asked to compete in a supposedly vendor neutral MSP are discouraged when they learn that the MSP has a “horse in the race” even if on paper, the affiliated supplier plays according to the same rules.

If a vendor-neutral MSP is the model best for your workforce management plans, talk to nextSource for help in considering all the dimensions and dynamics at work within the vendors you’re considering for the contract. We’ll help ensure your vendor neutral program is exactly that—neutral.

 

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Topics: Blog, MSP/VMS, Supplier Management, Best Practices

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