Managed service provider definitions: vendor neutral, master vendor, hybrid

In this article we look at the variations of managed service providers (MSPs), the various service models, defining them and explaining some of their respective complexities and differences.

What is a managed service provider (MSP)?

According to Staffing Industry Analysts (SIA), an MSP is “A company that takes on primary responsibility for managing an organisation’s contingent workforce program.”
Not all companies are the same and this is also true of MSPs. Some are established from recruitment agency routes - to source, employ and manage contingent workers. Others (Comensura would fall in this camp) are established from a procurement-led route – maintaining independence to procure and manage a 3rd party supply chain of recruitment suppliers on a customer’s behalf.

Understanding the capabilities and expertise of MSPs, along with what specialisms you require is essential. Why? Organisations are themselves not one-size-fits-all.

The various permutations of worker and niche role requirements, single or multiple site locations, how hiring decisions are made, and globalisation means that how one company operates will be drastically different to another. And that is even before we get into company preferences on how to engage with suppliers and their contingent workforce!

What is a managed service program?

According to SIA in staffing terms a managed service program is “the coordinated management of a company’s contingent workforce and associated suppliers for the betterment of the company’s operations across four key dimensions: quality, efficiency, cost, and risk. ”**

Essentially, the implementation of a managed service program should create an improved flow and calibre of contingent worker, engaged through processes that streamline efficiency while managing risk and delivering better cost outcomes. In other words, a managed service program should deliver a smarter way to work for an organisation’s temporary labour.

Managed service programs can be delivered in-house or via a 3rd party MSP. A managed service program typically consists of a supply chain, technology to manage the transactional engagement of the supply chain (often referred to as a vendor management system, or VMS) and a team whose role it is to ensure that the whole program runs smoothly via process implementation and liaison with the end client.

Managed service programs are popular. Organisations in the UK entrust a combined total of £19.7bn* of annual contingent labour expenditure under the stewardship of a 3rd party MSP.

The three types of managed service programs

There are, broadly speaking, three different types of managed service programs:

• A vendor neutral model
• A master vendor model
• A hybrid model

As we mentioned previously, these variations have emerged to accommodate the differing needs of organisations across their unique market sectors.

It is important to note that the relative strengths and weaknesses of each of these models should solely be considered in direct correlation to your own organisation’s needs. What works well for one organisation may not work for another.

What’s the difference between each model?

To ensure objectivity in our look at each service model, we have refrained from listing pros and cons of each. Naturally, over the course of time people develop subjective opinions on each. These are usually attributed to the model (neutral vendor, master vendor or hybrid), where these opinions more accurately relate to the actual managed service provider (MSP) delivering the program. Watch out for this.

Even global commentators like SIA can be guilty of bias. So, we have done our best to give you a completely neutral view of the brief ‘facts’ for each service model, to understand their core differences.

Vendor neutral model

As the term suggests, the ‘vendor neutral’ (also known as neutral vendor) service model maintains a complete separation between the MSP and the supply chain (‘vendors’ or ‘suppliers’). SIA’s Lexicon defines vendor neutral as:

“..a model in which a managed services or VMS technology handles its tasks (e.g. order distribution or candidate selection) based on client-defined policies that mandate that all (or a pre-defined set of ) staffing suppliers (vendors) be (a) given an equal opportunity to fill each order, and/or (b) selected for each order based on the same criteria.

Under a vendor-neutral model, a managed services or VMS provider could not, on its own accord, push orders to itself or any other staffing vendor. The presumed advantage of a vendor-neutral model is that the best supplier with the best candidate will fill each position.

The term is sometimes used in a stricter form to refer to an independent managed service provider that is completely autonomous, or semi-autonomous, from the staffing suppliers.”

In the UK, MSPs providing vendor neutral models comprise 32%* of the total annual contingent labour expenditure via 3rd party managed service programs.

The SIA definition doesn’t reflect that choice is given to the customer to configure the model to allow hiring managers to order via a supply chain and/or directly contact an individual supplier(s). Independence from supply, enabling the right route to market and standardisation of supply chain management are key principles of vendor neutral.

Master vendor model

Master vendor service models prioritise supply through a single, primary supplier, one that is (in the vast majority) affiliated to or is the MSP. In instances where the primary supplier has exhausted its own capacity, a second tier of suppliers may be engaged. SIA’s definition is:

“A staffing supplier that takes overall responsibility for providing clients with temporary staff. In a master supplier relationship, all orders will usually go first to the master supplier to either be filled or distributed to secondary suppliers. Sometimes a master supplier will not only provide a significant portion of the temporary staff working at the employer’s site but also manage an organisation’s contingent workforce program.”

In the UK, MSPs providing master vendor models comprise 37%* of the total annual contingent labour expenditure via 3rd party managed service programs.

Hybrid model

As we have discussed, organisations’ requirements vary wildly, which in some cases may require elements of both vendor neutral and master vendor service models to be combined. This is known as the hybrid model. SIA’s definition:

“ A contingent workforce program management strategy that involves blending different sourcing model attributes. Typically, a hybrid program would include elements of vendor-neutral as well as master-supplier programs. For example, a buyer might engage a single provider to act as the sole supplier for its Light Industrial job requisitions while having multiple providers competitively bid on IT positions.”

In the UK, MSPs providing hybrid models comprise 31%* of the total annual contingent labour expenditure via 3rd party managed service programs.

So where do you go from here?

As mentioned previously, MSPs and the models they offer are not one-size-fits-all. A service model that will be a runaway success in one organisation, will fall flat in another.
It is therefore imperative that you understand your own requirements first and objectively assess MSPs and their associated service model on their ability to meet your requirements, being conscious of critical service delivery elements, such as avoiding conflicts of interest for the vendor neutral aspects of the service are delivered.

Want to know more about MSPs and the benefits each model can deliver, and which may be best for your specific requirements? Drop an email to enquiries@comensura.co.uk and we will happy to help.

*Staffing Industry Analysts Global MSP Landscape report 2019.
** http://cwstrategies.staffingindustry.com/the-model-dilemma-how-should-you-manage-your-program/#/