The MSP Staffing Market Sells Deeper Expertise

By Doug Barney

Many think of MSPs as selling purely technical solutions, combining services with support and management. But MSPs these days are called on to do far more and to serve a more sophisticated and demanding audience.

A new report from Everest Group chronicles this maturing of the MSP market and focuses mostly the staffing side of the MSP equation. The managed staffing space has traditionally focused on contingent (a staffing term for temp or contract labor) blue collar-style work. This is all moving upscale to providing and managing IT pros, engineers and other skilled people.

MSPs doing staffing are also getting heavier into offshoring based on client demand, and doing staffing deals that span multiple countries.

Everest, however, sees a lack of vendor skill in meeting these needs, leading to a confused and disrupted market.

The report, Managed Service Provider (MSP) – Mastering the Winds of Changes, clearly “identifies that adoption of MSP is moving beyond traditional drivers of cost, compliance and visibility to include access to critical and scarce talent and integrated workforce planning. This is leading to changes in the composition of job families in MSP. Engineers and IT professionals now constitute the largest job family managed by MSPs.”

Meanwhile this market grew 13-16 percent0 last year, hitting over $60 billion.

One of the big trends in service delivery is centralization, where more and more staffing services are delivered by fewer and fewer vendors, which includes offshore staffing.

“Many MSPs have realized the possibility of servicing a number of low-touch MSP processes from centralized delivery locations, at a lower cost. Considering the significantly higher usage of offshoring/nearshoring in related outsourcing areas such as Procurement Outsourcing (PO), the potential for offshore/nearshore implementation in MSP is very high,” Everest found.

Changes in this market are both challenges and opportunities for providers.

“Fundamental changes in the MSP market have the potential for causing dramatic competitive shifts,” said Rajesh Ranjan, vice president at Everest Group. “Buyers are rapidly embracing new models, with the goal of unlocking new value from MSP. Service providers are grappling with how to add new capabilities and geographic footprint, placing bets on which segments of the market will emerge most quickly to align with their core competencies.”

Hot Staffing Market

The staffing market is heating up, according to research from Staffing Industry Analysts (SIA). The group surveyed 100 MSP and vendor management systems (VMS) vendors and found that “roughly one-third of global temporary staffing labor is managed either by an MSP or run through a VMS.”

And, the use of contingent labor is growing.

“Contingent labor allows corporation’s flexibility in workforce planning as the global economy remains turbulent. Corporations also use contingent labor to “try before they buy” employees. In addition to temporary agency labor, corporations are increasingly incorporating Statement of Work (SOW) arrangements into their contingent workforce programs,” SIA said. “To manage these varied types of resources, corporations use VMS and Managed Service Providers (MSP). Staffing Industry Analysts estimates that spend under management through a VMS, an MSP, or both, is greater than $100 billion globally and growing. This compares to the total market estimate for global temporary agency staffing labor of $327 billion.”

Edited by Blaise McNamee

MSPToday Editor at Large

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