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Next-Gen MSP: Optimizing Contingent Talent Strategies

Market Analysis

by Nikki Edwards

published on Jan 09, 2019

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Report Overview:

NelsonHall's market analysis of the MSP industry and trends consists of 100 pages.

Who is this Report for:

NelsonHall’s “Next-Gen MSP: Optimizing Contingent Talent Strategies” report is a comprehensive market assessment report designed for:

  • Sourcing managers investigating sourcing developments within managed service programs (MSPs)
  • HR decision makers exploring the benefits and inhibitors of MSPs as evidenced by the clients and vendor capability
  • Vendor marketing, sales and business managers developing strategies to target BPO service opportunities within MSPs
  • Financial analysts and investors specializing in the BPO sector, including MSPs.

Scope of this Report:

The report analyzes the worldwide market for MSP and addresses the following questions:

  • What is the market size and projected growth for the global MSP market by geography?
  • What is the profile of activity in the global MSP market by industry sector?
  • What are the top drivers for adoption of MSPs?
  • What factors are inhibiting successful MSP partnerships with vendors?
  • What combination of service models/services are typically provided within MSP contracts and what new service models/services are being added?
  • What is the current pattern of delivery location used for MSP services and how is this changing?
  • What are the challenges and success factors within MSP?

Key Findings & Highlights:

NelsonHall's market analysis of the MSP industry and trends consists of 100 pages.

The MSP market is becoming as complicated as the RPO market, as organizations seeking MSP services demand more for their money (services and technology/tools) tailored to their specific needs (by geography, industry, skill set, organization size, etc.). In 2018, organizations face a wrath of challenges: the traditional PESTLE factors, with emphasis on social factors (finding and engaging with talent, skills shortages), technological factors (getting access to data, technology, and tools), and economic factors (global economic slowdown, budgetary cuts). These factors, coupled with the pace at which business circumstances can change, are leading more organizations to seek external expertise to help them navigate their business challenges.

Client organizations already embracing MSP are reaping the benefits: receiving support in attracting/retaining contingent talent, being 100% compliant (legally/regulatory), having visibility of all contingent talent (with no rogue or unforeseen spend); saving costs; and having better contingent worker data/insights.

MSP vendors are expected to offer their client organizations an evolving/improved range of services, efficient service delivery and the most appropriate technology/tools to improve the contingent hiring process. 2018 is seeing demand for sourcing expertise, compliance, technology/tools, data/contingent talent insights, and employer branding. With most vendors offering a similar portfolio of services, there is a greater need for MSP vendors to stand out from the crowd, and there are many examples of innovative practice (especially in sourcing and tech/tools).

Major inhibitors to successfully embracing MSP provision include: client organizations driving down cost so much that it damages the viability of MSP offerings and the advantages that MSP services can bring to those organizations, and clients’ resistance to change their approach to contingent hiring to meet candidate desires

Successful MSP requires: thinking outside the box in terms of engaging with and sourcing contingent talent;; educating client organizations of the difference between MSPs focused on cost (usually supplier funded) versus quality (client-funded) and their relative outcomes; MSP vendors to help their client organizations to navigate the legal/regulatory landscape to ensure 100% compliance; and MSP vendors and client organizations to work collaboratively to understand the changing talent acquisition landscape and approach talent acquisition in a new way to ensure quick wins in hiring contingent talent.  

Table of contents:

Table of contents:

  • 1. Changing Shape of Managed Service Programs
  • The MSP market is becoming as complex as the RPO market…
  • …as buyside organizations want a plethora of latest services/ tech/tools…
  • …tailored to their individual needs (by skillset, industry, geo and size)
  • The MSP market outlook is more fragmented…
  • …with the emergence of new skillsets, industry sectors, the SMB take up of MSP, and a mix of providers of MSP solutions…making the task of selecting the right vendor difficult for the buyside!
  • 2. Customer Requirements
  • Socio-economic factors continue to challenge organizations in their pursuit of talent…
  • Socio-economic trends
  • Globalization/expansion of MSP
  • …with compliance and access to data major priorities for organizations…
  • Compliance
  • Data
  • …along with digitalization of MSP and candidate experience processes
  • Technology and Tools
  • Getting help to source niche contingent talent is the top overall driver for MSP, followed by compliance, need to improve visibility of contingent talent, cost savings, and need for market insight…
  • …with additional drivers including a need to improve quality of talent and hiring processes
  • Sourcing scarce contingent talent is an issue both in low pay and cyclical sectors and in niche technical skills
  • Driver #1 Sourcing Scarce Contingent Talent
  • Ensuring compliance is becoming more important driven by the emergence of new regulations such as GDPR
  • Driver #2 Ensuring Compliance
  • While additional major drivers include achieving visibility of talent (#3), cost savings (#4), and application of data/analytics (#5)
  • Driver #3 Visibility of Contingent Talent
  • Driver #4 Cost Savings/Cost Efficiencies
  • Driver #5 Data and Analytics
  • The top three most common reasons why an MSP vendor beats the competition in the MSP tendering process are reputation, track record and journey…
  • …followed by expertise in data/technology/tools, price, and niche capability
  • Lorien assisted bank in recruiting IT personnel with ‘agile’ skills
  • Lorien (Impellam Group) – Seeking Agile Talent for a Banking Client
  • Affinity Workforce leveraged one of its own brands in support of locum attraction & retention for healthcare client
  • Affinity Workforce – Developing Candidate Loyalty for a Healthcare Client
  • TAPFIN conducted a comparative market analysis to help a client with its talent plan for a new location
  • TAPFIN – Providing Market Insights for Expansion Plans of a Client
  • Capita Resourcing hired staff under its ‘Employed Resource’ model to support national infrastructure client
  • Capita Resourcing – Rescuing its Infrastructure Client from an Unplanned Crisis
  • HCMWorks assisted telecoms client in implementing new procurement platforms
  • HCMWorks – Evolution of Technology for a telecoms client
  • HCMWorks deploys an electronic procure-to-pay solution to eliminate manual processes for a bank
  • HCMWorks – Procurement Services for a banking client
  • Allegis Global Solutions helped an IT client consolidate the number of MSPs
  • Allegis Global Solutions – Managing Cross-operational Implementations and Multiple MSP Consolidations for a Global IT Client
  • Allegis Global improves multiple SLAs (up to 25%) for light industrial roles in a retail client
  • Allegis Global Solutions – Adjusting Skewed SLAs for New Roles Within a Retail Client
  • KellyOCG assisted a financial services client in becoming 100% compliant
  • KellyOCG – Journey of Compliance Continuous Improvement for a financial services client
  • 3. Market Size and Growth
  • Global MSP spend under management (SUM) is forecast to grow at 6.1% CAAGR for 2018-2022…..
  • …but is being impacted by global economic uncertainty….
  • …and actual SUM continuing to fall short of targeted SUM
  • The 2018 global MSP market is led by the manufacturing industry with 24% SUM share, followed by tech/telco/media (23%) and BFSI (19%)….
  • …each of those having high SUM growth rates, along with high SUM growth in the healthcare sector
  • Integrated models (a mix of other model types) have grown their proportional share in 2018, as vendors flex their channel sourcing mix to find talent…
  • Blended programs (a mix of MSP, SOW, freelancers, etc.) now account for a similar share as standalone MSP programs
  • The SMB segment represents a 56% share of MSP market in 2017/2018, an increase of 8% in 12 months
  • Global economic uncertainty has driven increased emphasis on single-country MSP growth during 2017/2018
  • Global MSP revenues are slowing to an average 4.5% CAAGR for 2018-2022…
  • …as vendors are pressurized to offer more for less
  • 4. Vendor Market Shares
  • TAPFIN, Allegis Global Solutions and Pontoon Solutions lead the global MSP SUM share (~37%)…
  • ..closely challenged by Randstad Sourceright and KellyOCG (representing another 13.7%)
  • The North American market is dominated by TAPFIN and Allegis Global Solutions taking 29% of the SUM market share…
  • …closely followed by Pontoon Solutions and KellyOCG (a further 18.5% SUM market share)
  • In the U.K., Allegis Global Solutions and TAPFIN lead the market in MSP SUM with 24.4% market share…
  • …with Capita Resourcing, Geometric Results Inc., Pontoon Solutions, Guidant Global and Alexander Mann Solutions challenging the leaders (with a further 34.5% SUM market share)
  • Continental Europe is dominated by Randstad Sourceright and TAPFIN with a combined ~48% SUM market share…
  • …challenged by ZeroChaos, Pontoon Solutions and KellyOCG (representing another 20.7% SUM market share)
  • TAPFIN and KellyOCG dominate the Middle East/Africa region in SUM market share (~70%), with ZeroChaos, Pontoon Solutions, and talentCRU building up a competitive SUM market share (a further ~18%)
  • TAPFIN and Allegis Global Solutions lead the MSP SUM share in APAC, with 31.8% and 16.9% respectively…
  • …challenged by Randstad Sourceright, Pontoon Solutions and Geometric Results (with a further 13.1% SUM)
  • LATAM is dominated by U.S. headquartered vendors, particularly TAPFIN, KellyOCG, AgileOne and Pontoon Solutions (71% SUM market share)
  • 5. Vendor Offerings and Targeting
  • MSP Models
  • Vendor Neutral (VN)
  • Master Vendor (MV)
  • Direct Sourcing
  • MSP Models
  • Integrated Models
  • MSP and SOW programs still predominate…
  • MSP
  • SOW
  • Freelancers/ICs
  • …but client organizations have more choice in which contingent worker program type to leverage…
  • Blended Program
  • Mini MSP (or other terminology)
  • Administered Programs
  • …with the risk that some MSP vendors could spread themselves too thin
  • Frameworks help determine the MSP journey that client organizations need to take…
  • …with vendors offering different solutions at each maturity stage:
  • The broad range of service offerings from MSP vendors takes an about-turn…
  • …as MSP vendors realize they cannot be experts in everything!
  • MSP vendors show how their short-term solutions can be turned into longer-term initiatives to overcome talent shortages…
  • …while also driving quality in contingent talent
  • MSP Vendor Examples of SLAs/KPIs
  • Outcome-based metrics have a slow adoption rate
  • What a difference a year makes…MSP technology (and the attitude towards using it) has moved on somewhat…
  • MSP vendors’ use of third party technology represents between 70% and 100% depending on platform type…
  • …with MSP vendors enhancing/focused on VMS, FMS, talent clouds/talent platforms, and analytics in 2018…
  • …as well as multifunctional platforms and a select range of new technology
  • Emerging technology/tool focus includes video interviewing, RPA and chatbots, and talent pooling platforms
  • Affinity Workforce leverages technology to enhance candidate loyalty
  • Affinity Workforce – Developing Candidate Loyalty Using the ‘Affinity App’
  • Many vendors operate in the mid-market space, as this market offers the greatest opportunity for vendors to expand their business
  • Larger, established vendors work across many industry sectors, with smaller/newer vendors focusing on industry niches…
  • …ultimately giving more choice to organizations when selecting a vendor to partner with for the long-term to meet their talent needs
  • 6. Vendor Delivery in Managed Service Programs
  • Location and number of MSP delivery hubs
  • Delivery of MSP services is being increasingly tailored for clients…
  • Blended delivery is poised to overtake SSC only delivery
  • Blended MSP delivery has a relatively low proportion of remote (home) worker support, despite the need for clients to flex and scale contingent needs
  • 7. Challenges and Success Factors
  • The #1 key challenge is addressing talent shortages across industries, skillsets, and geographies
  • Talent Shortage
  • Critical success factors for tackling contingent talent shortages include building a compelling employer brand to attract increasingly choosy candidates
  • Critical success factors for talent shortage
  • The #2 challenge is educating organizations about striking a balance between cost and quality to deliver a fit-for-purpose MSP
  • Balancing Cost versus Quality
  • Critical success factors ensuring a balance between cost versus quality
  • Critical success factors for the right balance between cost and quality
  • The #3 challenge is achieving 100% compliance for client organizations
  • Compliance
  • Critical success factors for ensuring 100% compliance include providing quick wins re visibility and costs of hidden talent
  • Critical success factors for ensuring 100% compliance
  • The #4 challenge is educating client organizations of the need to change their culture to enable successful contingent talent attraction
  • Organization culture
  • Critical success factors for ensuring organizational culture change around attracting contingent talent include showcasing client examples of success
  • Critical success factors for ensuring organization culture change around attracting contingent talent
  • Appendix I: Vendors Researched
  • Vendors researched for analysis (vendor interviews)
  • Vendors researched for analysis (secondary research)
  • Appendix II: Abbreviations and Definitions
  • NelsonHall abbreviations
  • NelsonHall definitions

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