The Traditional MSP Service Gap by SOWgeek
After 12 years at Capital One and a few years of independent consulting, I joined IQNavigator in 2012 to build and manage their SOW practice. My role afforded me great access to their customers where I saw first hand how they were interacting with and leveraging the SOW functionality within the VMS and how they were engaging SOW management services within the MSP. (This of course was back before IQN sold its MSP portfolio to GRI.) And while there was a good amount of SOW under management - IQN ranked in the top 3 globally for SOW - it still seemed to me that SOW spend was being woefully underserved by our industry.
My past experiences using the Provade system to manage professional services (i.e. SOW spend) and various consulting roles with other companies, as well as supply side firms, told me there was a much larger opportunity that was somehow being missed.
Staffing Industry Analyst Landscape reporting indicated (and still indicates) that the lack of SOW spend under management was an industry wide phenomenon, not an isolated issue with just IQN – the other VMSs and MSPs were also apparently just scratching the surface. Curious about just how little penetration into SOW spend we (the industry) were getting, we conducted a survey and determined the following:
Large and mid-size companies have SOW spend, on average, up to 10 times the amount of temp labor spend being managed in the contingent labor programs.
So why the slow trickle of SOW spend into the industry if it is such a big opportunity for the demand side? And more importantly, as it turns out, why was the SOW spend that was entering our industry bypassing the traditional MSP (staffing managed service providers) in favor of the VMS by a margin greater than 3-to-1?
The pursuit of answers to these questions uncovered a significant structural problem and industry imbalance:
There is a gap between the VMS technology layer and the traditional MSP service layer on the SOW side of the program that does not exist on the temp labor side.
Gap? What gap?
The VMS functionality includes RFx and contract development capabilities pre award, as well as the treasury management functions (invoicing and payments) post award. However, the traditional MSP service layer for SOW is predominantly an administrative function as it is initiated only post award and provides virtually no activity, no value adds pre award. For VMS firms depending on traditional MSP partners to drive their sales and upsells, as well as for client organizations wanting to expand program scope to include more sourcing and contract negotiation activities to support their evolving Services Procurement needs, the MSP service gap with SOW has become a serious problem.
Einstein said “Necessity is the mother of all invention.” In this case necessity for the traditional MSP is relevancy…
The emerging MSP service delivery model, what we call Managed Services Procurement, is indeed proving relevant to the growing Services Procurement demand for more complex program management capabilities, that extend beyond temp labor, and experienced functional support that goes deeper than just administration of SOW spend post award.
Until next time,
SOWgeek for NewDayMSP – Managed Services Procurement for the modern era