Redefining The VMS/MSP Business Model
Rewind to 2005 and for a moment try to remember, (if you are old enough like me) what the contingent workforce landscape looked like. The country was coming out of the 911 recession. Companies were cautious not to add to core staff for fear of a rebounding recession. Contingent workers were in high demand. The staffing industry was booming!
A little-known industry had emerged in the late 90’s applying technology to the contingent workforce (Temporary Help) space allowing companies to procure labor, track performance of staffing vendors, and provide a single source invoice for the end client. Though technology usage was on the rise, staffing firms were uncomfortable with this new business model and they were pushing back. Today 78% of Fortune 500 companies utilize such a model.
The technology itself (today 78% of Fortune 500 companies utilize these programs) appeared to be of great value to enterprise clients, but the business model was shaky. This new industry chose to offer the software at no cost to the enterprise client while placing the cost of the technology plus additional operational burdens on the staffing industry. For this reason, many staffing companies chose not to engage with vendor management systems and managed service providers.
These managed service provider and vendor management startups caused friction between the staffing companies and their end clients. They charged staffing vendors as if they were clients but treated them like they were vendors. Today this cost has increased to 3% to 5% of staffing spend. A strange business model indeed!
The model was based on:
- Charging the staffing vendors for the technology instead of the end client.
- They demanded the staffing vendors reduce their pricing to accommodate the additional software expense.
- If the vendor refused they would be replaced with a competitor who would pay.
- Think of it this way – it would be like demanding your CPA cover the cost of quick books!
- They held onto the accounts receivable owed to staffing vendors well past the point the end client had paid for the services rendered.
- You got it - they grew their respective businesses on the cash flow provided by the staffing vendors.
- The startups blocked communication between the staffing vendor and their end clients.
- No longer could staffing vendors communicate directly with their clients.
The Big Bang!
In 2007 one of the leading Vendor Management and Managed Services companies declared bankruptcy. The 100 million plus financial hits to the staffing industry were severe!
The Clarity VMS Revolution:
After living through and surviving the Big Bang, our team set out to redefine the landscape, and create a vendor management and managed services business model based on a simple, focused, and effective platform. The business model would accommodate the wants and needs of the staffing industry and enterprise clients, and the technology would be built from decades of experience in the staffing industry.
Ten years past the Big Bang both staffing providers and enterprise clients have a better choice when it comes to choosing a vendor management and managed services offering. A choice which allows for collaboration, innovation, ease of use, and a positive return on investment.
Let’s face it, vendor management is here to stay, and the technology is rapidly entering the middle market. The Clarity VMS Revolution is focused on taking back control of the processes and management of the most valuable assets in an organization, human capital, and redirecting the day to day management to where it always belonged – in the hands of the end users!