Why are so many firms abandoning MSPs and taking things in house?

Mon, Jun 04, 2018 @ 01:16 PM / by Jerry Brenholz

Why are so many firms abandoning MSPs and taking things in house_I’ve been in the staffing industry for most of my career, first having a successful technical career followed by a career as a technical consultant looking for project work, and for the past 30 years as the owner of ATR International a staffing firm headquartered in the Silicon Valley. ATR was in business when MSPs first arose, we’ve been and still are an MSP for some of our clients, and we currently work successfully with our clients’ MSPs. I’m not one for bold pronouncements but it seems to me that lately MSPs are increasingly under pressure.

Why do I say this?

Because I’ve been hearing more frequently about companies parting ways with their MSP providers and taking their vendor management programs in house. This doesn’t surprise me. As many companies are realizing, it’s quite possible to run their program in-house less expensively and with better efficiency and results. VMS software and other tools can do the same job with fewer people. There are several global companies with over $1B in spend and they manage their program with just a few people.

Cost saving is only part of the equation. In many cases, companies have found that they get better recruiting results, become more innovative and take ownership of their data without an MSP. The quality of submissions is improved, fill rates go up, and time to fill goes down.

How?

There are things that many MSPs do that actually make it harder to attract the best suppliers and give them the best chance to truly succeed and help the company. Stop doing those and you’ll get better results.

For example, one of the first and most counterproductive things most MSPs do is restrict contact between the staffing firm and hiring managers. This is misguided. Fill rates when management contact is prevented hover at about 2% compared to 20%+ when recruiters are allowed to communicate with hiring managers. Most IT managers want to talk to their recruiters and chafe at this restriction.

Job descriptions are often vague, not specific enough, and often change, sometimes minutes after they are written. The details usually come out most successfully in a conversation. Managers know this and want to talk to the recruiters working for them. Denying contact is denying them the chance to educate the recruiter about their needs. There is no chance to develop good relationships and a real understanding of the nuances of the company. It means we can’t be a true partner bringing solutions to the table.

Another issue? Many MSPs have 50 or 60 suppliers, often in the name of vendor neutrality. But what it really does is slows the process down, floods their managers with resumes, and decreases the opportunities for meaningful placements for their suppliers. Managers don’t want resumes from 50 different resources. That’s simply too many! It also drives away quality staffing firms who don’t want to work under these conditions. There’s little opportunity for success.

MSPs are very focused on rates and score cards. Cost savings are important but simply driving rates down can be counterproductive. The old adage “you get what you pay for” is certainly applicable here. The labor market and compensation packages are volatile, especially in IT; people are not a commodity. Lower rates mean you will have trouble finding the best IT professionals; they command higher salaries. This approach often leaves staffing firms with rates that have a razor’s edge of profit and ample opportunity to lose money. MSPs do not always attract the best firms for this reason.

We’ve made the decision to bow out in these kinds of circumstances

But won’t costs spiral out of control without an MSP? No.

VMS tools can do a lot of the work in terms of controlling costs, measuring KPIs, and creating scorecards. More importantly, companies should trust their managers. You’ve promoted them to this position because they are smart and capable. They have a budget and they are expected to stay within it. Bonus incentives for coming in under budget work better than punitive programs and processes imposed that make it harder to find the people they need to get their work done.

Whether you’re hiring an MSP or bringing a program in-house, what does a good MSP look and act like?

Well, you want one that brings efficiency and consistency to your company without needlessly cutting off contact and communication. You want a provider that truly understands your business and your goals and one that can be proactive and not just reactive. You want an MSP that does more than just manage tools and run reports that you could do yourself. It relieves management of less important, time consuming tasks and leaves them free to concentrate on their core responsibilities. When it comes to managing IT hiring, make sure that they understand how important IT is to the success of the company and that they are structured to support smart contingent hiring, not just cheaper hiring. You want them to add value, not just by saving money but by driving innovation and growth.

MSPs may not be an endangered species but these days they need to prove their worth. The easy stuff has been achieved and companies are looking for more from their providers. A good program provides real value beyond just cost savings.

Next week – how to structure a program for success

Topics: IT staffing and recruiting, hiring, MSP

Jerry Brenholz

Written by Jerry Brenholz

Jerry Brenholz is the President and CEO of ATR International. He is an industry leader and active in many of the leading staffing industry organizations.

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