We interviewed MSP vendor clients in North America, Europe, and Asia Pacific, looking at ~50 specific MSP service criteria. We ascertained importance and satisfaction levels, plus a measure of future importance. Below is a small selection of potential benefits from MSP, showing the levels of importance and satisfaction for each.

MSP Client Importance & Satisfaction Levels

Areas where vendors are underperforming against client expectations include ability to apply Vendor Management System (VMS) technology to streamline and approve processes, improved compliance and risk management, benchmarking ability, and reduced cost of contingent workforce.

Improving compliance and risk mitigation and streamlining and improving processes via VMS technology are the two biggest challenges for MSP vendors, scoring #1 and #2 respectively in current and future importance. While client satisfaction is fairly good at 84% and 78%, it still falls -6% and -10% short of the importance placed on this performance measure (and -14% short in terms of future client importance on both criteria). Our latest research identifies compliance, including local/global compliance to minimize organizational risk (legal, financial, industry-specific, etc.) as one of the top client drivers for companies outsourcing MSP today, and this has become one of the biggest challenges for MSP vendors.

Comments from vendor clients regarding ability to apply VMS technology to streamline/improve processes included:

“We don't dictate the pace on technology, it is for the vendor to do that themselves. If they use technology to support it or not, I don't necessarily mind. As long as the service is being delivered, they could have a thousand people working behind the scenes, or they could be providing it through technology – I don't really mind. There is low visibility, but it is for the vendor to get the balance.”

“They have still got some further improvements to do.”

“We've heard (from the vendor) that when we bring the new Beeline tool in, our efficiency improves 40% because we're doing that much manual labor. So, they need to put up or shut up on that when we get the tool.”

“When we went live in 2010, we launched the VMS, coupled with the vendor as our MSP, so it was done collectively. I think it was important that we were very efficient in leveraging the VMS tool. I would put the onus on the tool, Fieldglass, as much as on the vendor.”

Comments regarding compliance included:

“That will become more important as we continue to get hit with regulatory stuff.”

“That is front and center… that's most important to us. Being in financial services, there is no way that cannot be rated 5 for the future importance.”

Vendors are exceeding client expectations by a healthy margin in the areas of reduced turnover rates; improved ability to support high volumes and better manage resourcing peaks & troughs; application of tools to track worker visibility/value; and reduced time to fill posts. Additional areas where clients gave high satisfaction marks to MSP vendors included:

• Strength of partnership: 90%
• Value for money: 88%
• Diversity management: 86%
• Day-to-day administration/management of contingent workforce: 86%.

In summary, client satisfaction with MSP across a range of service criteria is holding up well, and exceeding expectations well in some cases. However, as continuous improvement is important for clients outsourcing MSP services, it is wise not to become complacent in areas where they are doing well. In the meantime, focusing on those areas showing a significant delta between expectation and performance must be the priority for MSP vendors.

NelsonHall’s NEAT comparative vendor assessments look in detail at vendors’ ‘ability to deliver immediate benefit’ to their clients, and their ‘ability to meet future client requirements, and assist strategic sourcing managers in assessing vendor capability while cutting the time and cost associated with their sourcing projects.

The MSP NEAT shows how MSP vendors are positioned overall in terms of their ability to deliver MSP services, as well as within three distinct market segments (i.e. areas of focus designed to meet specific MSP requirements): these are Strategic Talent Sourcing Focus, Talent Analytics Focus and Multi-Country Focus. The NEAT online tool also enables buy-side organizations to input their own weightings and tailor the MSP dataset to their specific requirements across over 50 individual vendor evaluation criteria. In this way, sourcing managers can configure the NEAT evaluations in accordance with their own priorities and business requirements for service offerings, delivery capability, customer presence, benefits achieved, and other criteria. To find out more, contact Guy Saunders.

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.

KellyOCG is the outsourcing and consulting group of Kelly Services Inc., and represents the largest growth segment of Kelly Services. In 2015, Kelly Services reported revenues of $5,518m, down 0.8% y/y (or up 4.7% in constant currency), while KellyOCG’s revenues were $674m, up ~15% y/y from $587m in 2014 and +16.6% in constant currency. KellyOCG’s operating profit in Q4 2015 was $14m, up 44.3% y/y, while gross profit was $48m, up 13.5% y/y. The largest profit and revenue growth came from MSP followed by RPO.

Within MSP, KellyOCG has 4,600 registered and active suppliers with $7.2bn total spend under management, which according to NelsonHall, puts KellyOCG among the top tier of global service providers. There are ~232 MSP clients across the Americas, EMEA and Asia Pacific with a 99% client retention rate.

KellyOCG has ~50 RPO clients, including ~14 new clients since January 2015, and in 2015 performed ~47,000 hires in the Americas, EMEA and Asia Pacific. Its longest running RPO client has been with them for ~20 years. A recent trend has been clients starting with project RPO for a specific number of hires and then, once benefits are realized, expanding into full RPO clients. 

Talent Management Consulting

KellyOCG began providing talent management consulting services in Q1 2015. Services are typically provided with RPO and MSP and include:

• Talent Strategy Advisory, which includes: Strategic Workforce Planning, Process Optimization, Business Care Development, Talent Strategy Alignment
• Talent Attraction and Engagement, which includes: Specialized Career Events, Employer Branding, Candidate Experience Measurement, Talent Community Management
• Workforce Governance and Execution, which includes: Program Structure & Governance, Market & Competitive Intelligence, Program Performance Management, Change Leadership
• Talent Counseling, which includes: Career Transition, Outplacement, Executive Coaching, Leadership Development
• Workforce Analytics, which includes: Labor Market Intelligence, Talent Supply Chain Analytics, Business Process Analytics, Predictive Analytics.

Talent Supply Chain (TSC) Analytics

KellyOCG’s TSC Analytics Portal helps to give clients insights to drive change, and focuses on:

• Rate analytics: providing insights on current spend and competitiveness by supplier, geography, and marketplace
• Supplier optimization: providing insights on supply chain attributes of time, cost, and quality
• Order efficiency: providing insights on cycle type, benchmarking on efficiency of the supply chain, and on risk due to aging orders
• Workforce planning: providing insights on percentage breakdown of workforce, trends, alignment to workforce plan, how sourcing aligns and compares, where changes can be made to optimize cost, and where talent pools can be implemented. This includes the ability to view attrition by region, country, state, client, vertical, etc. and also compare how a particular client compared to all other clients. Scatter diagrams can also be used to view tenure and attrition rates for FT and temp workers.

Predictive analytics are also provided, e.g. clients can predict when aging orders are going to cancel, and also predict cycle times, and recommend what can be done to improve performance.

Over the last year, KellyOCG has focused investment on delivering analytics to support its MSP offering and has recently deployed its offering across RPO and is now focused on enriching the data. New clients will have the toolset implemented within 3 to 6 months. All clients get the analytics portal included with the program and can do their own analysis or, if they prefer, can pay extra for help with analysis.

In Summary

In NelsonHall’s latest RPO Market Analysis published last week, we report that the key client drivers for RPO adoption include the ability to improve performance and meet business demands, and clients are looking for providers with broader talent management consulting capability and talent analytics for improved decision making. In this regard, KellyOCG is addressing the right client issues.

Future market needs will include more upfront strategic talent consulting and longer term workforce planning. Service offerings are expected to develop in the areas of consulting services, analytics, and assimilating labor market data, to support better planning and sourcing choices. Increasingly, RPO contracts will be bundled with consulting services as RPO clients expect higher quality and more value.

NelsonHall has just published a comprehensive global RPO Market Analysis report, plus associated RPO vendor profiles, including KellyOCG. For more details, contact Guy Saunders.

• TrueBlue’s acquisition of Aon Hewitt’s RPO business
• The completion of the merger between Pontoon and its sister company, hyphen
• Orion International’s acquisition of Novotus

TrueBlue acquires Aon Hewitt’s RPO business

TrueBlue, via its PeopleScout RPO business, acquired Aon Hewitt’s RPO business and also announced a broader, ongoing relationship to connect PeopleScout’s recruiting services with Aon Hewitt’s assessment, employee engagement and analytics talent services. Prior to the acquisition, PeopleScout had ~1.5k employees and local presence in 14 countries across North America, Europe and Asia Pacific. It provides services to ~70 countries for ~60 RPO clients, six of which have >10k hires per annum each.

The acquisition expands PeopleScout’s global delivery capabilities, and brings in 650 Aon Hewitt employees based in the U.S., Canada, Asia Pacific, and Europe. In 2014 Aon Hewitt provided RPO services to ~100 clients across 64 countries, supporting nine languages.

In NelsonHall’s 2015 RPO market analysis, PeopleScout was ranked 9th globally by revenue, with Aon Hewitt ranked 5th in global standalone RPO revenues (4th including RPO as part of MPHRO contracts). NelsonHall is in the process of conducting its seventh global RPO market analysis, but even based on 2014 revenue estimates, the combined company would have been ranked number one.

Though not an acquisition of Aon Hewitt’s selection and assessment business, via the broader relationship, PeopleScout will have access to Aon Hewitt’s strengths including in:

• Specialists in selection and assessment, with ~125 employees, including ~30 I/O psychologists, involved in the development, management and administration of tests and assessments
• Aon Hewitt’s proprietary pre-employment assessments and platform, used to assess ~10m candidates annually covering sixteen languages and five continents: North America, South America, Europe, Asia and Africa.

Pontoon and hyphen merger completes

Pontoon and its sister company hyphen completed the merger first announced in October 2015, with hyphen's ~300 U.K. employees joining Pontoon's workforce. The combined brands will operate under the Pontoon name. Pontoon is now the global HR outsourcing brand for Adecco Group. 

The merger consolidates Adecco’s MSP and RPO providers into a single business unit with ~ 1,500 employees, and 150 clients operating in 92 countries. Hyphen, headquartered in London, also has offices in Singapore and Sydney. Pontoon opened its Manila office in 2012, and leverages Krakow as a nearshore center for European languages. Pontoon RPO delivers services to 40 countries in 20 languages and plans to expand across countries in Latin America.

In NelsonHall’s 2015 RPO market analysis, Pontoon was ranked 10th in North America and 5th in Continental Europe. In our 2015 MSP market analysis, Pontoon was ranked 3rd in 2014 global MSP spend under management, 3rd in North America, 2nd in EMEA, 2nd in APAC and 1st in Latin America.

Though NelsonHall had not previously estimated hyphen’s revenues separately, hyphen strengthens the Pontoon brand. Prior MSP contract awards included  Bank of America, Merrill Lynch, Experian, Tesco, Credit Suisse, Lloyds Banking Group, Jaguar Landrover, Prudential and National Grid. Prior RPO contract awards included CGI.

We previously noted that hyphen’s MSP brand in the U.K. competes with the Pontoon brand, with a lack of business alignment, but the merger of the two companies will eliminate the internal competition. In addition, hyphen’s local presence in London, Poland, Singapore and Sydney will strengthen Pontoon’s geographical reach to provide both single-country and multi-country contracts for clients. Multi-country contracts represent ~36% of all RPO contracts, with 6% being global contracts covering three or more regions, and NelsonHall estimates multi-country contracts will represent ~50% of all contracts by 2019. Global MSP contracts account for ~15% of the market, as significant contract expansions and global awards were undertaken in 2014; with another 22% of the market representing multi-region or multi-country contracts. NelsonHall estimates Global MSP contracts will increase in importance and will account for 25% of spend under management by 2019, with another 25% of the market taking the form of multi-region or multi-country contracts.

Orion International acquires Novotus

The third M&A deal in January was Orion International (a specialist in U.S. military recruiter) acquiring Novotus, a provider of RPO and recruiting services. The acquisition will see Novotus leveraging Orion’s sales team and providing a military recruiting offering to its customers, and Orion leveraging Novotus’ RPO capability.

Orion International is headquartered in North Carolina and has five other regional offices in the U.S. Based in Austin, Texas, Novotus expanded to Houston in 2013 to accommodate growth. Houston is used to service RPO, sourcing services, temporary staffing and contingency services along with executive search services.

In the last few years, RPO providers have increasingly focused their recruiting efforts to include military veterans, a subject I’ll be looking at in a future blog.