Is MSP just a blunt instrument for cost saving?

In today’s economic market organizations are reviewing their supply chains looking for thoughtful ways to mitigate risk and optimize spend across all categories.

For most organizations, contingent labor represents a significant expense. With ongoing economic uncertainty putting pressure on budgets across the board, it's no surprise that many are seeking opportunities to increase quality, improve efficiency, mitigate risk and optimize recruitment supply chain costs. As a result, there’s growing interest in tailored workforce solutions such as managed service programs (MSPs) that offer greater control and visibility over contingent labor.

Is cost savings the main goal when considering an MSP solution?

Not necessarily. While cost savings are certainly one of the key benefits of using a Managed Service Provider (MSP), a well-run program delivers both hard and soft savings across the organization. The more important question is whether a program focused solely on cost reduction can truly succeed in the long term.

In many cases, if cost savings are your primary focus, you may encounter significant challenges. A narrow cost-cutting approach can lead to issues such as:

1. Value for your money

The relationship between time, cost and quality is fixed. Move one of these variables and it impacts the others. That means the market is very efficient at setting appropriate hiring costs and salaries for each skill.

So, if you pay a competitive market rate for contingent workers, you can find skilled support when you need it. However, underpaying contract staff can lead to negative impacts. It may take a long time to find someone with the required skills who is willing to accept lower pay, or you may end up hiring someone quickly with fewer qualifications than required. Saving money in the short term could ultimately impact work quality in the long run.

2. Internal resistance

The individuals responsible for procuring a service are often not its end users. Their primary focus is typically on delivering a set volume of work within strict time and budget constraints. It's uncommon to find a budget holder willing to compromise on quality, as doing so can risk damaging their professional reputation. In some cases, aggressive cost-cutting measures can have unintended consequences that outweigh the savings.

As a result, cost savings are not the highest priority for certain stakeholders. That means when organizations lead with a cost-saving objective, they often face resistance from within the business.

3. Headcount controls and outsourcing

Many organizations still view headcount control as one of the simplest ways to reduce costs. However, this approach often leads to increased reliance on outsourcing which can result in higher per capita expenses due to the premium rates charged by external providers.

What does that mean for your business? If the volume of work doesn’t reduce, then the workforce demand remains constant. If you combine that with headcount controls, then the burden of extra workload is loaded onto other employees.

Achieving cost savings in the right way

So, if you need to make cost savings, what should you do? You can set your MSP on the path to success by focusing on three key topics during the design stage.

1. Engage the right stakeholders

Firstly, talk to those people who use the services of your temporary workers and contractors. Get their views to identify what works well today and what they would like to improve. This way, you create a program that benefits the right people based on their unique needs. The program should be “pulled” by the primary stakeholders – not “pushed” by the secondary stakeholders (Procurement and HR).

2. Have robust change management practices

Recognize that change management needs investment. Remember – cost savings aren’t the most important thing to your primary service users. Focus on creating a message that uses the most relevant benefits for each stakeholder group in any communication.

You can learn more about managing change with our robust Change Management methodology.

3. Make the reasons clear

Lastly, you should focus on the main reason why the organization should embrace the change. If cash control or cost reduction is the main reason, link it to the impact on shareholders or financial results. By clarifying the bigger picture, the whole organization will understand why cost savings are the most important outcome.

What is the key goal when considering an MSP Solution?

From my years of experience, I’ve found that the key goal when considering an MSP solution is risk mitigation. It’s not just about reducing costs, it’s about building a resilient, secure foundation for your business. A strong MSP partner helps shield you from critical risks like cybersecurity threats, IT disruptions, compliance risks, and talent shortages. With consistent support, advanced security, and access to specialized expertise, an MSP becomes more than a vendor, it becomes a strategic ally.

As highlighted by the Canadian Centre for Cyber Security, organizations that lack in-house technical expertise can significantly enhance their resilience and protection against cyber incidents by outsourcing to a Managed Security Service Provider (MSSP). These providers offer services like network security, endpoint protection, and continuous monitoring, all essential for defending against today’s evolving threats.

With the right MSP, you’re not just saving time and resources, you’re gaining peace of mind and the confidence to focus on what your organization does best.

Three steps to MSP success

If you’re considering an MSP solution, there are three simple steps to creating the perfect conditions for success:

• Engage your primary stakeholders now. Failing to get the right people onboard may delay or even derail your efforts later.
• Avoid treating cost savings as a standalone objective. Driving your change program solely to cut contingent labor spend can undermine company-wide adoption and long-term impact.
• Focus on creating a case for change based on tailoring the benefits to each internal stakeholder group.

By following these rules, your managed service program can help deliver significant cost reductions for your organization. 

Learn more about how MSPs can help you control contingent labor spend by contacting our experts.