The Challenges of Insourcing a Contingent Workforce Management Program

business team meetingMany companies assume that insourcing a contingent workforce management program is a simple way to cut costs. After all, a mature program has gone through any necessary growing pains and all of the benefits of working with an managed service provider (MSP) have been realized, so their fees seem too high for the services they offer. On the surface, it seems simple for an internal department to take over a contingent workforce management program and keep it running smoothly. However, this transition will bring on a great deal of change within an organization.

When a program is insourced, there tends to be a greater expectation of the new program coordinators, who must provide the same — or better — level of service as the MSP. This is challenging for an internal department that is focused on different goals than an MSP. Where an MSP is seeking opportunities to grow the amount of spend that is flowing through the program, and provides a level of service to encourage additional investment — and internal team will be focused more on program maintenance.

A common assumption is that the service levels of the MSP will be easy to maintain, because the program is well established and all of the potential issues have been addressed. All of the challenges that come with going from a manual to an automated process, from implementing a program where previously there was none, and from creating a formal methodology have been overcome — so maintaining the program from here on out will be easy. Not necessarily — a lot of companies don’t realize the amount of behind-the-scenes work that is being done by their MSP and what it takes for an internal department to step in and maintain the existing level of service.

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An MSP also offers a high level of experience and knowledge that comes from years of working with clients of different sizes across various industries. They have developed a collective intelligence from addressing different needs and facing unique challenges, and this is something that will take time for an internal team to build. An MSP also offers access to supplemental departments, such as contract management and payroll solutions.

It is also common for organizations to overestimate the potential cost savings — and underestimate the potential business disruptions — that come from insourcing a contingent workforce management program. Any cost savings from eliminating the MSP fees could be significantly offset by increases in other expenses and associated workload. For example, if your MSP was providing payroll services as part of your overall contract, it is likely that these rates will change if the rest of the program is insourced. It might be necessary to renegotiate the contract or even change suppliers to keep these costs low. Taking over transaction support and purchase order coordination will create a great deal of additional work for a smaller internal team, as the group shifts its focus from revenue generation and client service to a non-strategic, back-office role.

The transition can also create a shift in dynamics for internal teams. When an organization outsources their contingent workforce management to an MSP, one department becomes the main point of contact and the company begins to see the program as a specific function of that group. The department — or oftentimes a single representative from the group — becomes the mouthpiece for the entire organization and represents the needs of the entire company. When the MSP is removed, that department takes on all of the responsibility for supporting the program and begins to manage requests from throughout the company. Any issues that come along with the transition can no longer be deflected on an outside organization, so the sponsoring department will start to feel some heat. This also leads to a radical change in the relationships between internal departments, including procurement, IT, HR and the C-suite.

Bringing your contingent workforce management program in-house requires serious consideration of whether your organization can maintain the same level of service — or exceed it — when taking over the program, and if it is possible to do so without radical investments or process changes. If you choose to accept this challenge, a fully integrated VMS becomes critical. A standalone solution cannot provide the backbone for an effectively run program. If you choose to insource your contingent workforce management program, you must have a VMS in place that can support your efforts through deep integration with other key business systems. Your system should integrate with financial systems to support PO creation and change order maintenance, with HR systems to streamline on/off-boarding and provide complete BI and analytics to create a complete picture of operations. A comprehensive implementation can help your team focus on maintaining service levels through collaboration and support, and make the transition from an outsourced program to an insourced one much easier.

MORE: To Be or Not To Be … The MSP 

Edward "EJ" Jackson
Edward “EJ” Jackson is president of Provade, which delivers an enterprise-class vendor management system for global workforce spend management.

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  1. [...] Many companies assume that insourcing a contingent workforce management program is a simple way to cut costs. After all, a mature program has gone through any necessary growing pains and all of the benefits of working with an managed service provider (MSP) have been realized, so their fees seem too high for the services they offer.  [...]

  2. [...] Many companies assume that insourcing a contingent workforce management program is a simple way to cut costs.  [...]

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