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What is an MSP and Who Needs One?

Dec 13, 2019 11:00:00 AM


Following our recent articles on “What is an EOR” and “What is an AOR”, it seemed relevant to produce this article to help define another contingent workforce management solution with an acronym name. This time, we’ll examine the general definition of the managed service program (MSP) provider, what MSP solutions are intended to address and what drives the need within an organization for MSP solutions.

An MSP (Managed Service Provider) is a staffing outsourcing solution that brings to its customers, all the personnel, expertise, experience, and infrastructure needed to source, field, manage, and monitor today’s complex external workforce. Today’s leading MSP providers deliver everything a mid-sized organization needs to succeed in managing an array of staffing suppliers and other contingent labor sourcing relationships. With deep expertise in the services supply chain, MSPs are celebrated for their ability to effectively negotiate rates with staffing suppliers to ensure costs stay under tight control. They’re also invaluable for protecting their customers from every changing regulatory mandates like proper worker/independent contractor classification, co-employment rules, healthcare, and benefits administration/reporting, and tax laws.

As to the question about why an organization might want to consider an MSP for contingent workforce sourcing and management, the decision to engaging an MSP can have roots in a number of challenges. For example, in increasing numbers, organizations of all sizes have grown more comfortable fielding a non-employee workforce. Whether temporary staffing, project work, specialized independent contractor engagements, or even freelance/gig workers, the flexibility and cost-efficiency of utilizing contingent workers of all varieties has grown in importance with respect to competitive advantage.

However, the process of sourcing and managing contingent labor is often quite different from those applied in a tradition HR setting. As such, contingent workforce management often represents a daunting challenge to existing HR structures within an organization and often requires additional headcount in HR. Instead of sourcing (and supporting the total cost of) extra HR personnel to address contingent workforce management, many organizations find it more effective to outsource this piece of overall workforce to MSP providers who are readily more experienced in sourcing and onboarding/offboarding of contingent labor types. 

Similarly, for companies with an acute need for in-demand skill sets to perform contract work or limited scope projects (SOW), the MSP represents a more efficient, risk mitigated method for tapping pools of hard-to-source talent and ensuring all compliance is addressed in a satisfactory fashion.

Other organizations that make good candidates for MSP services are those that seek to optimize their workforce by outsourcing all non-core job functions to contingent labor. This strategy ensures that management is able to dedicate managerial focus to the full-time workers who shoulder the main thrust of the organization’s activity. Niche roles, short-term projects, and other specialty functions are executed with greater cost efficiency when not filled with full-time resources. An MSP is very adept at providing competent and dependable management of this type of labor and can help an organization meet staffing spend goals more readily.

For more information on the benefits of MSP services and why they’ve been growing in demand over the last number of years, review this article at our blog titled, ”Why the MSP for External Workforce Management Has Become a Standard Business Practice”. Then reach out to nextSource for a consultation on how they can be effectively utilized to support your own organizational workforce goals.

To read more on this subject, turn to nextSource for expert guidance and visit our Managed Services Provider page.

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Topics: Blog, MSP/VMS, Human Resources, Workforce Management, Supplier Management, Technology, Strategic sourcing.

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