It is time to reconsider supplier funding for MSP/VMS
I have never been a fan of supplier funding as I am convinced it is financially a wash as suppliers will always recoup the fees in their rates and mark-ups. Furthermore supplier funding obscures the cost and decreases the ability to control it for the client.
The main driver for supplier funding has often been that client funding makes
the cost more explicit as a separate service that has to be charged back to the business, it is a much easier sell when the MSP/VMS cost are hidden in the bill rates.
The argument that suppliers also benefit from MSP and VMS services is certainly true, however the efficiencies delivered to them will roll back to the clients in a competitive environment through lower bill rates and mark-ups.
New developments in Contingent and Total Workforce strengthen the case for client funding.
The imperative for future CWF/TWF is to cover all non-employee resource channels and workers, including direct sourcing & talent pools, Freelancer Management & Gig platforms, SoW & Outsourced Services. These channels often come with new services and technologies like Managed Direct Sourcing (Livehire), platform sourcing (Fulcrum) and SoW procurement (Zivio, MatrixMM, Deployed) that are not necessarily delivered by the MSP provider.
In the SoW and Outsourced worker space functionality will be used to only track non-employee workers like Profile Worker module in the VMS or other systems like Utmost. This functionality is not tied to a financial turnover, as the contracts themselves are not managed in the VMS and the worker tracking service will be billed as a fee per worker. This makes it even more difficult to charge back these costs to SoW and Outsourcing suppliers that were already reluctant to accept supplier funding.
To ensure that the cost of services and technologies is properly evaluated in WF sourcing decisions these must become explicit and not stay hidden in an obscure supplier funding model.
Furthermore in due course in Total Workforce, the management of employees and non-employees will converge, with private talent pools becoming a hybrid between them. For employees and private talent pools, supplier funding is not an option.
The proliferation and fragmentation of services and technologies used in the CWF management, the convergence with the Employee Workforce and the need to make deliberate sourcing decisions based on transparent cost per channel makes it time to reconsider supplier funding models.