Mid-market adoption of Managed Service Provider (MSP) programs is seeing high growth driven by the increasing need to manage costs, along with greater uptake of the direct hire MSP model (which is more common in mid-market organizations where there is a limited need to use specialist agencies). Here I take a brief look at the launch of a new mid-market MSP offering from Allegis Global Solutions (AGS).

Growth of the Mid-Market

In the direct hire MSP model, the vendor places workers through specialized teams using the client’s brand, with a typical target of achieving ~85% or more direct hires before approaching specialist agencies.

The mid-market (500 – 15,000 employees) grew from 30% market share in 2013 to 37% in 2014, with the small market (<500 employees) growing from 4% in 2013 to 6% in 2014. During this time the large market decreased from 66% to 57% market share.

The top MSP mid-market outsourcing drivers include:

• The need for cost visibility and cost reduction
• Compliance with, and adherence to, increasingly complex regulations
• Quality of hire/better talent with the right cultural fit.  

AGS’ SIGMA MSP launch

AGS launched SIGMA MSP, a standalone contingent workforce management solution, in July 2016.  SIGMA was designed to support companies that traditionally rely on master-supplier relationships for candidate fulfillment, and provides:

• Requisition fulfillment via dedicated supply chain resources
• A preconfigured technology platform to streamline the acquisition, on-boarding, payment, and off-boarding of contingent workers
• Business intelligence via data and reporting through ACUMEN, AGS’ analytics platform, which includes identifying non-employee worker trends
• Faster implementation time than traditional MSP models, due to preselected vendors and the preconfigured technology platform. Estimated deployment is 8-10 weeks depending on complexity, ~50% less time than a standard enterprise solution.

The program is targeted at small to mid-market companies that spend between $5m and $50m annually on contract labor services. As a product, SIGMA represents a deviation from AGS’ traditional offering. It combines the benefits of an MSP program with a vendor-on-premise partner or a preferred supplier.

SIGMA is targeted at companies that are:

• Looking for an MSP solution that can be implemented quickly, but still provides the fundamental MSP service benefits, including increased visibility and control over their contingent workforce resources, spend and compliance
• Not requiring an expansive supply base
• Not requiring overly complex vendor management system integrations or configurations, and are using less IT resources.

NelsonHall forecasts that the global MSP market will reach ~$4.6bn by year-end 2016, by when I expect the mid-market to have grown to ~40% market share, equating to $1.85bn in revenue.

NelsonHall has just commenced its 2016 global MSP project, and a comprehensive market analysis report, along with detailed vendor profiles and a NEAT vendor evaluation will be published in early Q1 2017.