Another ripple in the pond: Staffing agencies flounder

Last week, Staffing Industry Analysts reported that Austria's largest staffing agency was having liquidity problems (meaning, Oh no! We might not be able to pay our contractors or suppliers!). Sound familiar? That's because it follows closely on the heels of a UK managed services firm who had their funding unexpectedly pulled by their bank after the first of year. Happy New Year, indeed.

I point this out because I believe it's further evidence of what has been, and will continue to be, an issue for buyers of staffing and managed services for the next few years. Your suppliers are not the same companies they were two years ago.

Let me give you a quick example of one particularly vulnerable area that I predict will start to surface in mid-to-large, vendor-neutral procurement programs. The issue will actually be two-fold.

On one hand, the MSP and/or the VMS might be facing funding and support issues. On the other hand, the suppliers might not be in a good position to deliver. Not to focus solely on vendor neutral, but I believe that in this economy, this is one area where the margins and model are already being tested. (More on this in future posts.)

There are other examples, but the issues remain the same. A crucial part of any company's recovery will be based on the talent and skills they have in-house or have to acquire externally. Simply assuming that your very narrow supplier list or your unqualified, unmanaged supplier list will deliver when you need it is not a sound strategy. Yes, I'm talking about that list that's not important right now because you're not really hiring.

So while I'm not predicting the end of the industry or any particular company, what I am saying is that we'll see more of this. Even today, as you read this, back office politics, venture capitalists, and shareholders are quietly influencing the business plans of staffing, managed services, and VMS companies to try to survive another year. Unfortunately, unless you are their largest customer, you probably don't factor heavily in their plans.

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