VMS? MSP? Which Solution is Best for Me? Part Three of a Three Part Series | Which Solution Should Be Deployed First?

This is something of a “chicken or the egg” scenario – deciding whether an organization should embark first on a project to implement a vendor management system (VMS) tech platform or engage a Managed Service Provider (MSP) partner. In this third and final installment of the series, after having explored the benefits and challenges of both solutions, we’ll provide some insight on the proper order of operations. MSP first or VMS?

In short, there is no hard and fast rule dictating the “best” order to deploy these two complementary solutions. Making the decision of which comes first for any given organization will rely on the specific answers developed to the numerous questions posed in each of the two previous articles, informed by a healthy dose of an organization’s cultural DNA. Here’s how to approach the decision.

As noted in Parts One and Two, the relative size of the organization does play an outsized role in the decision-making. In general, the larger organizations tend to elect to stand up a VMS first and then, later, an MSP and here’s why. As stated in Part 1, larger companies typically possess greater levels of resources – both in terms of IT support and in terms of existing process, policy and personnel dedicated to workforce management. This means they have the underlying infrastructure needed to successfully determine the correct VMS workflows and configurations. They can more effectively shoulder the burden of standing up a VMS. The larger organization can more effectively field the technology to exert greater visibility and control over contingent workforce management without having to engage an MSP partner. Once implemented, the VMS can provide much more penetrating views into drivers of performance, compliance and a host of other KPIs that the large organization can then use to weigh whether or not an MSP arrangement will bring additional benefit to their operation. A note of caution – there will be much more data available, but internal resources will be needed to analyze it and make it actionable.

Conversely, for the small and medium-sized business (SMB) without the same levels of internal resources, engaging an MSP first can make much more sense. Smaller organizations are frequently more interested in reducing the workloads of internal resources and as such, an MSP can deliver significant value by bringing the expertise necessary to help re-engineer processes and foster strong, effective change management practices that help drive positive results. With more standardized and well controlled workforce management operations guided by an MSP, the SMB organization can then take the next steps toward selecting and standing up the most appropriate VMS solution. In fact, according to Staffing Industry Analysts, MSPs can absorb as much as 62% of the workload associated with deploying a VMS platform. So it makes sense for a lot of SMBs to implement an MSP first and VMS second.

Now for some caveats. The decision of “which comes first” does not adhere in a hard and fast sense to the large company/small company distinction laid out above. There are many variables to consider regardless of the size of the organization. For just one example, consider that a company of any size that aligns bill rates with their suppliers to account for a new VMS fee would then need to renegotiate with the suppliers again 6-12 months later if/when they elected to layer in new MSP services. Is this level of disruption to be avoided or endured? Other considerations lean toward the cultural. Does your culture emphasize internal control? Does the organization embrace technology and self-service models? Is outsourcing part of the strategic plan?

It is clear there are significant complexities behind making this decision for any organization and that is precisely why so many SMBs and enterprise organizations turn to nextSource for expert guidance in laying out the informed pros and cons of both options to arrive at the order of operations that will work best for each specific organization. Are you facing this decision? Talk to us today!

To read more on this subject, turn to nextSource for expert guidance and visit our Managed Service Provider page.

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