In today's competitive business environment, HR, talent acquisition and procurement professionals are seeking ways to optimise costs while maintaining high service quality. Managed service programmes offer a strategic solution to achieve these goals, particularly in the realm of recruitment and contingent workforce management.
This blog explores how MSPs can help businesses realise cost savings when considering the management of their non-permanent workforce.
Understanding MSPs and their value proposition
The evolution of recruitment MSPs has been marked by significant advancements from MSP 1.0 to MSP 4.0, as highlighted by the Everest Group and their published paper: MSP 4.0: from contingent workforce management to contingent talent empowerment.
Initially, MSP 1.0 focused on basic contingent workforce management, primarily handling administrative tasks and compliance. With MSP 2.0, the emphasis shifted towards enhancing efficiency through technology and process improvements. MSP 3.0 introduced more strategic elements, such as data analytics and talent pooling, to optimise workforce planning.
The concept of MSP 4.0 represents the latest evolution in managed service provision, focusing on agility, reliability, and dynamic talent management. MSP 4.0 goes beyond traditional contingent workforce management to empower organisations with innovative solutions that drive business outcomes. This model leverages advanced technology, data analytics, and flexible workforce strategies to meet the evolving needs of businesses.
MSP 4.0 is characterised by its ability to adapt to changing market conditions, such as the increasing adoption of statement of work (SoW) management. It emphasises a more integrated approach to talent management, ensuring organisations can quickly scale their workforce up or down in response to demand fluctuations. By adopting MSP 4.0, organisations can achieve greater efficiency, cost savings, and strategic value from their contingent workforce programmes.
How can you realise cost savings?
As business costs continue to rise, especially with the increase in employers National Insurance set to hit the labour market in April this year and rises in the minimum wage, procurement leaders are under increasing pressure to find ways to reduce expenses without compromising on quality or efficiency. This is where MSPs, particularly those aligned with the MSP 4.0 model, come into play.
By leveraging the enhanced capabilities of MSPs, organisations can streamline their recruitment processes, optimise supplier relationships, and implement effective workforce strategies tied to strategic objectives. These actions not only help in managing costs but also enhance overall business performance.
The following key strategies illustrate how MSPs can drive significant cost savings for organisations.
Key strategies for realising cost savings
Leveraging technology
Technology plays a crucial role in enhancing the efficiency and effectiveness of MSP programmes. Advanced vendor management systems (VMS) and AI-powered analytics platforms provide valuable insights into spending trends, workforce utilisation, and future needs. These tools help organisations optimise their recruitment strategies, reduce manual tasks, and improve overall productivity, leading to significant cost savings by:
Triaging requirements for efficient routes to market: A robust triage process will ensure that the correct resource (Temporary, Contractor or SOW) is being procured for your business ensuring maximum efficiency.
Analysing spending trends: Gain insights across departments, suppliers, and managers to identify areas for cost optimisation, reducing unnecessary expenditures.
Predicting future needs: Use forecasting models to anticipate workforce demands and associated costs, allowing for better budget planning and avoiding overstaffing.
Streamlining operations: Automate routine tasks to reduce workloads and improve efficiency, which can decrease the headcount required for service delivery, thus lowering labour costs.
Skills mapping: Identify, assess, and document the skills and knowledge of employees within the organisation. This helps in understanding the current skill set and compares it with the skills required to achieve business objectives. By visualising this information, organisations can quickly identify knowledge gaps where additional training or new hires are needed, preventing costly skill shortages.
Workforce planning: Compare current skills with future needs to anticipate workforce requirements. This proactive approach ensures organisations are prepared for upcoming challenges, keeping them agile and competitive, and avoiding the costs associated with last-minute hiring or training.
Implementing effective sourcing strategies
Effective sourcing strategies are essential for optimising recruitment costs and ensuring access to high-quality talent. Direct sourcing, in particular, can be a highly-efficient approach.
Direct sourcing: This strategy involves engaging talent directly through internal talent pools or online platforms. By building and maintaining a database of pre-qualified candidates, organisations can reduce reliance on external agencies and lower recruitment costs.
Talent pools: Develop and nurture internal talent pools to quickly fill positions with pre-vetted candidates.
Online platforms: Utilise online platforms to access a wide range of skilled professionals for specific projects or roles.
Enhancing programme governance
Effective governance is essential for maximising the value of an MSP. Regularly reviewing and updating service level agreements (SLAs) and programme scope can ensure the solution continues to meet organisational needs.
Update SLAs: Ensure performance metrics remain relevant and aligned with business objectives.
Expand programme scope: Include additional workforce categories, such as SoW contracts, to enhance programme coverage and control.
Optimising supplier strategy
Suppliers are integral to the success of an MSP, but they can also be a significant cost driver. By re-evaluating supplier contracts and fostering competition, organisations can unlock additional savings.
Revisit contract terms: Align contract terms with actual needs to avoid overprescribed requirements that inflate costs.
Encourage competition: Use request for proposals to maximise value from current suppliers or discover better options.
Rebalance location mix: Optimise the mix of onshore, nearshore, and offshore resources for improved cost efficiency.
Exploring alternative workforce models
Alternative workforce models offer cost-effective ways to secure talent while maintaining quality. Reed Talent Solutions provide innovative models like its recruit, train, deploy programme and the tech and digital academy flexi-job apprenticeships to meet diverse workforce needs.
Recruit, train, deploy: This model involves sourcing candidates, providing them with tailored training, and then deploying them to meet specific organisational needs.
Tech and digital academy: Reed is a Department for Education approved Flexi-Job Apprenticeship Agency (FJAA). Powered by our FJAA status, our tech and digital academy, funded by Reed’s apprenticeship levy, enables organisations in England to benefit from tech and digital apprentice talent, while we take care of the administrative and funding aspects of the apprenticeship programme.
Examples of cost savings
According to the Everest Group paper, the cost savings associated with each MSP model (1.0 – 4.0) can be expressed as approximate percentages, reflecting the increasing efficiency and value delivered at each iteration of the service:
MSP 1.0: Basic contingent workforce management typically resulted in cost savings of around five to 10%. These savings were primarily due to rate standardisation and improved invoicing accuracy.
MSP 2.0: With the introduction of technology and process improvements, cost savings increased to approximately 10-15%. Enhanced job classification precision and better supplier management contributed to these savings.
MSP 3.0: The strategic use of data analytics and talent pooling further boosted cost savings to about 15-20%. These advancements allowed for more informed decision-making and optimised workforce planning.
MSP 4.0: Leveraging advanced technologies like AI and machine learning, MSP 4.0 can achieve cost savings of 20-30%. This model not only addresses immediate staffing needs but also empowers organisations to proactively manage and develop their contingent workforce.
MSPs offer a powerful solution for HR and procurement professionals looking to optimise recruitment costs and improve operational efficiency. By leveraging technology, optimising supplier strategies, exploring alternative workforce models, and enhancing programme governance, organisations can unlock significant cost savings.
As the business landscape continues to evolve, partnering with an MSP such as Reed Talent Solutions can provide the strategic advantage needed to stay competitive and achieve long-term success.
If you are planning on reviewing your current solution and would like an assessment of where your current MSP solution ranks against the industry benchmarks, you can get in touch with our experts here.
