What are the Pros of MSPs?
1. MSPs make sourcing contract workers very efficient by consolidating all the open contract worker requirements at a company and increasing competition.
2. MSPs provide companies a better overview of their non-employee usage and spend which may be distributed and hidden in various POs, projects, SOWs and HR systems.
3. MSPs help companies stay compliant with labor and other regulations (ACA, worker classification, etc.) as they have better knowledge, information and processes than a typical procurement or contingent labor category manager.
4. MSPs help reduce costs from increased competition and as they can benchmark with hundreds of their own clients for market conditions.
5. MSPs keep vendors honest with the threat of kicking out non-performing vendors and bringing in new vendors from other programs.
6. MSPs give smaller or less 'sales heavy' staffing agencies a level playing field as they don't need relationships inside the company to get business.
7. MSPs can be used for pay rolling pre-identified contractors by the client for very low markups.
What are the Cons of MSPs?
1. MSPs oversee the program and are not directly responsible for the candidate quality, rates, candidate selection. If things go wrong, MSPs can lay the fault on the client's difficult needs or the staffing agency's delivery problem and still get paid.
2. MSPs commoditize staffing agencies who are relegated to source and submit candidate resumes from the same job boards based on the same job description that many other agencies are also working on.
3. Staffing agency's margins are squeezed from the increased competition. There are now 10 agencies competing for the same position approaching the same candidates and requiring to hit a target rate.
4. Staffing agencies feel lost as they can't talk to the hiring managers and get no feedback on why their candidates are not making it. They don't get to build relationships with clients to understand their needs better or offer suggestions for improvements. If they do offer suggestions or seek clarifications, the changes or clarifications may benefit their competitors.
5. MSP staffing model works best for low cost providers leveraging offshore models with less regard for quality. High quality staffing providers that put more effort into the search and find better candidates fail in MSPs because they lose out on speed and cost.
6. The MSP's list of vendors is often sub-optimal as the best and highest paid agencies and recruiters would rather work on contract or full-time positions that demand higher quality, higher human interaction, higher pay, and are more profitable with less competition.
7. MSPs consolidate the number of staffing agencies in their MSP program in an effort to give more business to fewer players. The unintended consequence is that the preferred agencies, then create their own sub-MSP because they aren't able to hire all the contractors needed, so they further subcontract down to other agencies. These additional layers add additional risks for the client company. Many preferred vendors flout the no-subcontracting rule creating more risks for the clients.
8. Some MSPs are not vendor-neutral and do staffing themselves. This creates a conflict of interest as MSPs do have some influence in the program.
MSPs learn about a staffing agency's most guarded secrets including its strategy for finding candidates, seeing the candidates with contact details coming through the VMS, strength and weakness of the staffing agency, billing rates, markups, etc. that staffing agencies would never share otherwise. An MSP employee can join a competitor with all this insider knowledge about their competitor creating a breach of confidentiality and anti-competitive issues for the client and staffing agencies in the program.