MSPs Becoming SMPs (Spend Management Programs)


The traditional Managed Service Provider (MSP) for services procurement is evolving away from being a method for managing temporary labor alone. Today’s leading edge MSPs are about managing multiple, different types of services spend. The services as well as the technologies required to successfully manage the emerging tsunami of SOW-based spend are considerably different than those that have up until recently been required to manage temporary labor alone as a spend category. Here’s some perspective on what’s changing and why.

What’s the difference between how an MSP addresses the management of temporary labor and how it addresses the challenges of SOW spend? One key difference exists in the way an MSP approaches requests. Quite simply, the MSP model as applied to temp labor, involves maintaining a catalog of standardized job descriptions. When temp contractors are required, the MSP needs only rely on these standard descriptions as a guideline for proper sourcing. However, when the demand is for an SOW to complete a complex project, the MSP must devise a unique assessment of the unique scope of the project at hand and articulate a highly specific set of requirements for deliverable specific to the project before the MSP can properly begin sourcing the best-suited SOW contractor.

When it comes to the sourcing process, the traditional MSP processes for sourcing temp labor revolve around recruiting to fill the skill sets enunciated in the catalog of standardized job descriptions; something MSPs have grown exceptionally effective at accomplishing. However, when it comes to sourcing an SOW, the MSP must achieve a far more complex sourcing strategy aimed at identifying and engaging a third-party vendor that meets the selection criteria for the underlying requirements. This is a radically different proposition than the simple recruitment process used for temp labor.

Regarding the contract development and negotiation process, again the contrast is clear. Temp labor can be easily acquired and governed by the typical, standard purchase order process in widespread use by MSP providers. For SOW engagements though, the expectation of specific deliverable and service delivery levels require the MSP to achieve a favorable alignment between the selected SOW provider and the underlying requirements of the project. MSPs are also being leveraged to develop a mutually agreeable set of acceptance criteria for deliverable or service level agreements dictating timelines for acceptable, timely delivery of the services being procured.

The skills, methodologies and processes required to support the SOW lifecycle are notably different than those required to recruit and manage temporary labor resources. This difference in methodology is what is behind today’s transition of MSP solutions from their existing, tactical HR function into a more fully mature services spend management function. Perhaps the designation of MSP may give way for a new, more accurate designation of SMP – Spend Management Program.