what is an MSP in external workforce management?

MSP stands for “managed services provider” or “managed services program.” It is a highly effective way for employers to manage their flexible external  workforce and gain greater access to highly qualified talent. An MSP provider can deliver a host of benefits, including:
 

• Market intelligence and expertise
• Process efficiencies
• Technology expertise
• Program scalability
• Compliance best practices
• Spend visibility and cost savings
   

The MSP can act as an integral part of your company’s procurement, HR or other human capital functions. It will manage the entire external talent life cycle from request  through invoicing and payment. Using a vendor management system (VMS), the MSP gives you complete visibility into the status of each external worker at your organization and talent supplier performance.

With a rigorously designed and consistent process, an MSP can help you stay compliant with all labor regulations and governance requirements. Your partner can also provide talent intelligence to help you understand skills availability and competitive compensation rates, or help you rationalize your talent supply chain to get the right skills faster. Your program may include innovative contingent recruitment strategies, like direct sourcing, talent marketing and services procurement. 

Companies with a significant amount of flexible talent often lack full visibility of their contingent workforce practices. Hiring managers may source and acquire resources on their own, leaving procurement or HR unaware of who they are and how many workers are coming and going.

If this describes your company, you may be at risk in a number of ways. You need to keep an eye on regulatory adherence, physical and cyber security, high labor costs, fraud and other problems that can occur without the right strategy. 

An MSP can help you:

• Improve access and speed to talent
• Simplify and centralize processes
• Get greater visibility and management over spend
• Improve talent quality
• Create cost efficiencies
• Reduce compliance risks
• Gain agility and scalability with a modular design approach

An MSP is typically administered as part of an organization’s external or contingent workforce program. It may encompass most (if not all) flexible work arrangements, including temporary staffing, independent contractors, freelance and gig workers, payrolled talent and statement of work (SOW) suppliers. The solution is managed by a project management office (PMO) overseen by the service provider. The PMO works in conjunction with the client’s external or contingent workforce team, and depending on your MSP model, may be located on site. 

The MSP provider is responsible for day-to-day management of the program. It will facilitate tasks such as request processing, supply chain management, transactional reporting, analytics and market insights, and more. In conjunction with clients and using teams of talent advisors, providers increasingly work on resource planning and insights to optimize deployment as well.

Two prevailing models currently dominate the market: supplier-funded and client-funded. Under a supplier-funded model, a percentage of invoices billed by a supplier is held back to cover program costs. As a result, there are no direct costs to the client. In markets where mark-up is low, however, some suppliers may be unwilling to participate in such a program or hold back their best talent for other clients.

In a client-funded program, the client pays a fee to their MSP partner. Depending on the agreement, the charge can be fixed or variable. While it may appear more costly, a client-funded model may ultimately be more beneficial because it ensures suppliers deliver a higher quality of talent more quickly.

An MSP often requires that employers have a minimum amount of external labor spend. 
A volume threshold is typically necessary for the program to be self-sufficient.

Here are some important questions you should ask:

1. Does our internal externalworkforce program adequately provide talent access and mitigate risks?
2. Do we have a rigorous process in place for vetting and reviewing talent suppliers?
3. How are we — or aren’t we — ensuring compliance with spend policies?
4. Has our organization deployed a robust vendor management system (VMS) and talent intelligence to gain reporting capabilities and achieve spend visibility?

Internal external workforce programs that lack any of these are likely to benefit from adopting an MSP. Determining your need will depend on your organization’s goals and whether your current internal program can achieve those objectives on budget and on time.

1. MSP is no longer just about cost savings and compliance;it's a strategic enabler of business agility.
2. True value lies in integration: Embedding MSP into workforce and procurement strategies unlocks enterprise-wide impact.
3. A modern MSP builds around outcomes, not transactions, and flexes to meet changing business needs.

• redefining what an MSP program is.
• activate the right talent channels with MSP.
• streamline MSP delivery without sacrificing compliance.
• use insights to fuel MSP and workforce agility.