MSP 3.0: Dynamic SLAs and Rates

Almost all managed service providers have service-level agreements and rate cards in place to help drive cost savings and efficiencies for their clients. These metrics have historically helped the MSPs quantify the value being delivered to their clients.

Due to the rapid growth of business analytics, there are a number of platforms available that can be leveraged, offering current market benchmark data, predictive analytics, and decision-making support modules. A number of these tools are integrated with relevant applicant tracking systems and vendor management systems, offering data that is based on actual transactions along with market intelligence.

Often, there are certain positions for which it is difficult to source candidates and vice versa — situations where talent can be found easily. There are many reasons that the pendulum swings either way: the rate and length of the assignment, location of the role, availability of the skillset needed, brand value of the client, attractiveness of the project, and so on. This means that we have varying results in terms of the actual performance when related to metrics (i.e., the number of resumes submitted per position, time taken to onboard a candidate, rate, etc.). The MSPs, as part of their responsibilities, focus on making sure that the supplier base’s performance is within the boundaries of the SLAs and try to average things out in that direction.

From a Client and Supplier Perspective…

As a client, the question you should be asking yourself is whether you are getting real value out of the CWP. With advances in computing technology, it’s a not a game of averages leading to zero sum anymore. There is room for improvement in each of the metrics applicable to talent acquisition, and that can easily be tracked through a VMS. Managers have many reasons for hiring contingent workers (e.g., urgent need, short-term assignment, uncertainty to project’s long-term viability, etc.). This means that the dynamics of a role differ case to case and the importance of each requisition varies from project to project and, subsequently, to the organization.

From a supplier’s perspective, the dynamics change based on the requisitions aspect: Does the supplier have experience in hiring for the same role before, are the suppliers’ recruiters geared to identify candidates for the role quickly, will the rate being offered make up for the effort required, or does the supplier happen to have a bench candidate ready to join immediately?

The MSP uses the SLAs and the rate card to bridge the gap between the client and the supplier and everyone hopes that the law of averages works out, given that in most cases the SLAs and rate cards have a range. But is everyone getting the best value possible out of the transaction? Depending on the urgency of the requirement, the SLA for ‘time-to-fill’ might be too late for a manager to meet their needs. In my experience designing, implementing, and managing global MSP programs, I have seen many cases where the MSP is simply unable to expedite requirements due to the pre-decided SLAs. And in the case of a candidate not being available in a certain rate range, the MSP usually has to get a new set of approvals for a higher rate. Along similar lines, there are cases of candidates being available at a lower rate than the rate card, and the supplier then being able to charge a premium for the position.

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So, What’s the Solution?

The answer to this conundrum, I believe, is to have dynamic SLAs and rates in place for every position. Today’s market-leading analytic tools make it easy for the hiring manager to select the SLA and the rate; based on criteria like budget, skill set, or urgency, the manager can define the SLA for the position using a guidance tool. So, ideally, the SLAs and rate around the position will be relevant as they will be grounded on actual data and have realistic boundaries, which can also be double-checked by the MSP before the role is released to the supplier community .

Based on the economic principle of Law of Supply and Demand” when the supply of whatever is traded equals the demand, we achieve a ‘market clearing price’, which is “the price and quantity that equates the quantity demanded and quantity supplied; equates the demand price and supply price; and achieves market equilibrium. In other words, the market is ‘cleared’ of shortages and surpluses.” So specific SLAs and rates selected for every position, based on market intelligence provided by third-party tools, can lead to market equilibrium being achieved for every role as the SLAs and rates for each position will be dynamic and realistic in nature.

This approach also has indirect benefits since the manager can then plan their workforce requirements based on their own resource availability in terms of time and money, rather than depending on SLAs and rates being defined by the MSP. Using third-party analytic platforms, the hiring manager will have the ability to vary the SLAs, till arriving at an SLA/rate combination that meets their requirement.

The suppliers will also receive more feasible SLA/rate combinations to support their strategy for closing the requisition. The MSP will oversee the process to make sure that the requisition variables are realistic while keeping a close eye on the supplier base to make sure that the requisition is getting traction and the client is deriving optimum value from the CWP.


Sameer Srivastava

Sameer Srivastava
Sameer is the VP of business strategy at Workspend, a managed service provider (MSP). He has more than 12 years of experience in designing, implementing and managing multiple MSP programs.

Sameer Srivastava

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