Managed Service Providers and Vendor Management and Freelance Management Software, often referred to as MSPs, VMSs and FMSs, are in the spotlight. Increasingly large hiring contracts are being outsourced through hiring programmes, usually selecting an MSP who works with their own or a 'third party' VMS, FMS or software from the hirer itself. However, it is questionable whether the needs of organisations to effectively and efficiently manage the hiring of external resources, and reduce tax and legal risks, are necessarily being met in the right way. The trend of 'direct sourcing' is in fact at odds with how, for example, several MSPs as well as the VMS and FMS work and are paid. In this column, Niels van Berkel of Planet Interim gives his vision, supplemented with an infographic on how to apply direct sourcing. Also by MSP's and within VMS and FMS software.

Selecting an MSP requires time and capacity, but subsequently implementing and activating the hiring programme in an organisation together with the MSP requires an even greater investment in time and resources. After all, the selected MSP should not only select, contract and activate Tier 1 and 2 suppliers, but also select, activate and/or integrate a separate VMS or FMS. Of course, this does not apply to all programmes or MSPs, but there is a chance that a relatively large amount of time and budget will disappear even before a hiring programme has started.

Why almost always involve suppliers when direct sourcing is gaining importance?

Then you still have to start with the actual recruiting and onboarding and neatly escorting the external staff out again. And this at a time when organisations also want to build a bond with (former) temporary colleagues and strive for more transparency and shortening of the chain. Additional intermediate layers with an MSP and various suppliers below it make this an even greater challenge. 

And, why does an MSP almost always use suppliers while direct sourcing is gaining in importance? After all, in almost 100% of cases, several MSPs use a supplier, i.e. a temporary employment agency or recruitment agency, as a result of which a fee of, on average, 15 to 20% is paid for each hire. Plus MSP costs, usually a percentage of the spend on hiring, paid by suppliers to the MSP, if there is a so-called 'supplier funded model'. If this 'supplier funded model' is used, there may be an incentive not to reduce the spend as much as possible and to almost always continue to use suppliers. After all, in this model, the MSPs are paid by suppliers...

"The 'supplier funded model' is at odds with the trend of direct sourcing"

It is therefore not MSPs themselves but the 'supplier funded model' that are at odds with the trend in direct sourcing, where the chain is as short and transparent as possible, where there is no or as little margin stacking and where the lines to the interim market are also short. There are independent direct sourcing and matching tools that, at the request of hiring managers, can immediately provide both reactive, through the placement of assignments, and proactive, through 'talent pooling', recruitment of interim managers and freelance specialists. These tools, such as Planet Interim, work without intermediate layers, virtually without implementation and often without having to pay a fee. A concrete extra saving on the hiring spend of 10 to 15% on average is then easily achievable, apart from all the time and energy that does not need to be spent on setting up a large 'supplier funded' hiring programme. If a specialised partner (a 'broker') subsequently attunes the right contracts to legislation and the needs of the parties, then everything is well and efficiently arranged.

MSP and direct sourcing are not mutually exclusive

Since MSPs can also play a valuable advisory role and they can provide the user with good tools, such as business intelligence, it would be even better if MSPs said goodbye to the supplier-funded model and started to be paid in a different way. Think of a fixed fee for services provided ('pricing'), which benefits transparency, in combination with a fee for goals to be achieved. Not only quantitative targets, such as savings on hiring - a stimulus that direct sourcing embraces - but also qualitative targets, such as customer satisfaction among hiring managers and professionals. These qualitative goals are also easier to achieve if there is less noise on the line and less need to maintain contact with (too) many organisations. After all, direct sourcing tools make direct and personal contact with the most suitable professionals possible more quickly, without intermediate layers and loss of time and margins.

"More transparency, chain shortening and direct sourcing".

Fortunately, there are progressive hirers and MSPs who embrace this vision and who themselves expressly work on more transparency, chain shortening and who give direct sourcing tools a place in their FMS or VMS and thus the 'hiring mix'. Planet Interim seeks to cooperate with these parties.

For those forward-thinking hirers and MSPs, in the infographic below I explain my vision on how to optimally organise the hiring of professionals for a specific assignment. This approach is extremely useful for client-focused parties who are open to a new, more effective, transparent and cost-efficient way of hiring highly-skilled professionals for their clients.