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Insourcing vs Outsourcing Your MSP – How Do I Choose What’s Right for My Program?

Young businessman taking a decision with arrows and question mark above his headFrom time to time clients ask the question that most MSP’s dread, “If I can run my program internally, why would I pay more to outsource it?” Why do MSP’s hate this question?  Because it’s true! A typical program that includes an onsite Program Team and Vendor Management System (VMS) will cost a client between 2% - 4% of program spend. And certainly a client could directly partner with a VMS provider and hire a couple of people to manage their program rather than outsource to an MSP in order to save money. And it’s not just the cost savings, clients also like that the internal team shares the values of the company, is part of the success story and reports into the same organizational structure. The thing is, every MSP can give you examples of clients that have internally managed the program and everything seems to run smoothly…until it doesn’t. Sometimes budgets are cut, staff is removed or the program goes stale.

 

So what’s right for your program?

It strictly depends on your goals. Here’s what you should consider:

 

What Level of Expertise Do I Need?

Most Managed Service Providers (MSP’s) are really good at managing programs for clients. Of course you’d expect me to say this given my job title but hear me out.  Managing a program is literally what we do all day long.  From onsite program teams to internal support and management contributors, we are consistently looking at ways to improve our client’s programs. Implementing new technologies and putting compliance strategies in place that improve adoption, keeping our clients compliant with local, state and federal laws and that’s only part of it. Let’s be honest though, we’re not splitting atoms or sending rocket ships into space. It’s not that difficult to replicate what we do with an internally managed program but this is our expertise. We have experience running multiple programs and we are on the forefront of what to look for each day. If you choose to internally manage your program, lean on this expertise by seeking an MSP to help you build and launch your program so that you can focus on business strategies, your employees and your industry.

 

What are My Program Objectives?

Another important factor to consider when determining whether to internally or externally manage your program is your overall program objectives. For instance, one of our clients believes that hiring people is a core reason for their success in the service industry. For more than ten years they’ve had a team of program managers and recruiters that run a full scale MSP internally. They even employ technology resources full-time to assist with their VMS instance as well as compliance specialists from the legal department and human resources who attend conferences and consult with external resources to keep their program compliant and up-to-date. However, an analysis of their program shows that they spend 3.5% of their total program spend internally to manage their program, which is more than they would likely pay an external provider. But it isn’t about cost for them. Their main objective is to ensure they mirror the permanent hiring process that they believe contributes to success in their company. When we consult clients on running programs internally we usually start with one question, what’s your objective? Cost can’t be the only driver or you’ll end up failing or implementing a stale program. Whatever your objective, it’s important to think about the ultimate goal of your program and ensure your budgeting accurately to achieve it.

 

What Kind of Experience Does My Team Have?

Your MSP should always bring qualified and experienced people to your program. As with everything, when the going gets tough the people you have on your team are what really matter. When hiring people for your internally managed program ensure that they come with a good understanding of the contingent labor industry. It will make the training process easier and they’ll bring some industry related knowledge to help enhance your program. Once you’ve made a hiring decision, make sure to invest in further training as well. This comes in all forms but can also include spending time with MSP program teams outside of your company, attending training conferences and providing your workers with on-the-job training alongside experienced program resources.

 

What Do I Need in Terms of Technology, Suppliers, Training, and Reporting?

So what else should you think about when determining your strategy to internally manage your program?

 

Technology

A VMS is definitely needed to fully support the requisition, time entry, approval and reporting processes for your company. An MSP will implement and configure the VMS (workflows, approvals, nomenclature, integrations and everything else) and be responsible for training, help desk support and maintenance of the tool. They will also ensure best practices are followed and that the configuration achieves your objectives. In internally run programs most of the work falls to your team. The VMS will certainly help implement and configure your tool but free implementation comes with a limit and they will still rely heavily on your team to make the choices and design the program and chances are no one on your team will have implemented a VMS before. If you choose this route ensure that you put money in the budget to get support configuring the tool to your program needs, otherwise you’ll find your VMS functionally difficult and managers working outside the process.

 

Suppliers 

MSP’s have large supplier management teams focused on providing consistent supplier vetting, selection and assimilation, as well as centralized supplier management, communications and performance reviews. Your internal program will not need a supplier team but an effective program will budget for a supplier representative that will handle all inquiries, and you will get hundreds of calls and emails a month, as well as ensure a consistent contractual process. This person should also hold quarterly reviews with your preferred suppliers and ensure compliance to the program by conducting annual audits and site visits.

 

Training

Training is easily one of the most overlooked features of externally and internally managed programs. Your MSP should provide training for all users in your program which includes hiring managers, suppliers, contingent workers, and even your PMO Team. The program should include a comprehensive program overview, VMS training, co-employment training and avoidance, IC compliance and cost management, just to name a few. When considering an internally managed program, ensure that you have developed the training materials for your program and make sure they’re used regularly in your program. Doing so will mitigate easy mistakes and help with overall program compliance.

 

Reporting 

Another benefit to utilizing an external MSP is enhanced reporting. Your MSP should provide you with detailed reporting that includes demographic, spend, program management reports and more. These will give you complete visibility and strategic insight into your program. The MSP uses reports from the VMS as well as their own reporting tools to provide reporting quarterly. The MSP should also regularly benchmark your program against your industry, geography and skill sets. An internally managed program needs the same reporting rigor. We always suggest you budget for a part-time or full-time data analyst who can help build the necessary reports needed to manage your program and regularly meet with others in your industry to benchmark.

 

I haven’t covered other key items like program design, change management, communication, bill rate negotiations, billing and invoicing, supplier funded models, cost management, SOW, IC compliance and other important components.  As the program sponsor you will have the daily operation of the team and inevitable fires that will come up each day.  There’s a lot to think about and so much to do in order to effectively design a program. A major benefit of hiring an MSP is that they will have already developed these processes and will be ready to hit the ground running on day one of the program launch. They’ll have best practices and teams in place to make an impact immediately.  You can still be prepared if you chose to internally manage your program though, just make sure you seek help externally when needed, understand and plan for your objectives and budget for the key items mentioned above to help ensure a successful outcome.

MSP Buyer's Guide Outsourcing

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